Winning the Class War - Part II

The War Against Wages
By PAUL KRUGMAN
Published: 6 October 2006

"... after-tax corporate profits have more than doubled, because workers’ productivity is up, but their wages aren’t — and because companies have dealt with rising health insurance premiums by denying insurance to ever more workers.

"If you want to see how the war against wages is being fought, and what it’s doing to working Americans and their families, consider the latest news from Wal-Mart. an internal Wal-Mart memo conceded that 46 percent of its workers’ children were either on Medicaid or lacked health insurance. Nonetheless, the memo expressed concern that wages and benefits were rising, in part “because we pay an associate more in salary and benefits as his or her tenure increases.”

"The problem from the company’s point of view, then, is that its workers are too loyal; it wants cheap labor that doesn’t hang around too long, but not enough workers quit before acquiring the right to higher wages and benefits. Among the policy changes the memo suggested to deal with this problem was a shift to hiring more part-time workers, which “will lower Wal-Mart’s health care enrollment.”

"And the strategy is being put into effect. “Investment analysts and store managers,” reports The New York Times, “say Wal-Mart executives have told them the company wants to transform its work force to 40 percent part-time from 20 percent.” Another leaked Wal-Mart memo describes a plan to impose wage caps, so that long-term employees won’t get raises. And the company is taking other steps to keep workers from staying too long: in some stores, according to workers, “managers have suddenly barred older employees with back or leg problems from sitting on stools.”
Read full article.

One might think that all the stores could remain competitive by being just as mean (cheap) as Wal-Mart, and that way they could survive, but anyone thinking that be willing to see all workers removed from the class of people that buy things (low wages may mean food, but not rent) and they would need "safety net" services like food stamps, medical care at the emergency room (suggested by president George W. Bush), and HUD housing; lots of services when they are paying almost no taxes. So if everyone socializes all their labor costs, there are no taxes to pay those costs. The second reason that low wages all around will not work is that a manger who is making a living wage can tell a worker that the "company" can not afford to pay a wage that respects his/her work, but mom and pop operations actually have to see and work with the people that they are denying a living wage, and being decent people, they can not be as rude as Wal-Mart,so they pay a bit more, and, in the fullness of time, are pushed over a cliff by the Wal-Marts of the world.

Krugman covers this in his blog, if Wal-Mart pays 40% of its workers minimum wage, and another company pays (just) 15% of its workers the minimum wage, Wal-Mart will have lower labor costs (even if the cost to the taxpayer is much higher) and Wall-Mart wins, pays less in taxes and then benefits have to be cut. It is a win-win for Wal-Mart and lose-lose for those in this country who do not want to see us turn into another India with a huge untouchable class.