Alan Reynolds

"The High Cost of Low Prices" is the revealing title of a polemical documentary in which some of Wal-Mart's disgruntled former employees (rather than current employees) and competitors (rather than customers) vent paranoid complaints and expose their ignorance. The absurdity of the title gives away the plot. Would anyone pay to see a movie about "The Low Cost of High Prices"?
 
Wal-Mart recently sponsored a Washington, D.C., conference about the firm's "economic impact." Public relations stunts that rely on groveling and capitulating invariably backfire, and this was no exception. The press unfairly dismissed favorable evidence as something bought and paid for, then promptly zeroed-in on a critical paper by David Neumark and/or two of his research associates at the Public Policy Institute of California.

 What is this really all about? Anyone who works at Wal-Mart is free to quit that job and search for better pay or benefits somewhere else. Consumers are free to shop elsewhere. On the day of the Wal-Mart conference, in fact, same-store sales were reported to have grown much faster at Target and Costco.

 The real complaint of Wal-Mart critics is not with middlemen we call "managers," but with the company's tightfisted customers and the company's stubbornly loyal employees, who refuse to pay tribute to the United Food and Commercial Workers Unions (aka "Wake-Up Wal-Mart").

 The unions picked a technologically obsolescent target. I check myself out at Home Depot and two supermarkets, but those self-checkout machines don't pay union dues, either. When I buy and sell on eBay, no unions are involved.

 Employers don't pay wages -- consumers do. The "high cost of low prices" means what it says -- that Wal-Mart offers too many bargains and does not gouge consumers nearly enough. If only Wal-Mart could be compelled to charge much higher prices -- like Neiman-Marcus or Bloomingdales -- then the company would never threaten those poor little "mom and pop" stores like K-Mart and Kroger. With higher prices, Wal-Mart could supposedly hire just as many Americans as it does (1.2 million), yet offer better wages and benefits.

 The dollar value of a retail employee's sales-per-hour is indeed likely to be much larger at Tiffany than Wal-Mart. Sales-per-hour are also larger at Costco, where people wait in line to buy giant TVs, diamond jewelry, expensive wine and notoriously big packages. But families with modest incomes sometimes prefer to make small, simple purchases at low prices. These are the consumers Wal-Mart critics love to hate.


Alan Reynolds

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