“No, Walmart Doesn’t Create Jobs”: Contrary To The Happy Talk, It Actually Kills Them
Because it’s a such a slow news day, and because the DC big box living wage bill is still in the news, I thought I’d write about the Walmart piece I published in Salon.com earlier this week. First, an update on that living wage fight, which I’ve written about before on this site. The bill, which would require Walmart and other big box retailers to pay a minimum wage of $12.50 an hour, passed the DC City Council. It needs the signature of DC Mayor Vincent Gray to become law, but Gray hasn’t received it yet. There have been suggestions that he’s leaning toward a veto and that Council Chairman Phil Mendelson has delayed sending the bill to Gray’s desk because he’s working to shore up support for a veto-proof majority. Walmart has threatened to cancel plans to open new stores in DC if the bill is enacted.
One of the most compelling-seeming arguments that the pro-Walmart forces have been making is that DC should reject the bill and welcome Walmart into the community, because Walmart would create much-needed jobs. So I decided to look at what the research says about Walmart’s impact on employment. Guess what? Contrary to the happy talk, Walmart does not create jobs. Actually, it kills them.
Here’s why: first, at the local level, all Walmart does is put mom-and-pop stores out of business. The overwhelming body of evidence, including the most rigorous peer-reviewed studies, suggests that when Walmart enters a community, the result is a net loss of jobs; at best, it’s a wash. In fact, the biggest, best scholarly study about the impact of Walmart on local employment was done by an economist at University of California at Irvine named David Neumark, who is not exactly a wild-eyed liberal. He’s the kind of economist, actually, who writes anti-minimum wage op-eds for the Wall Street Journal.
The devastating impact Walmart has had on jobs becomes most clear when you go macro, and look at its impact not just locally, but on the national economy. In its relentless quest for low prices, Walmart strong-arms its suppliers to cut labor costs to the bone. What this has meant in practice is that many suppliers have been forced to lay off workers and ship jobs to low-wage countries overseas. Because of Walmart, countless jobs in the U.S. have been lost, mostly in manufacturing.
I’ve been thrilled by the response to my Salon piece — over 5,000 Facebook “likes,” and counting! Thus far, none of the prominent pro-Walmart voices have taken issue with it, because the facts I present are hard to dispute.
Back to the DC controversy: neoliberal pundits and politicians hate the DC living wage bill, because they don’t want to drive Walmart away. The politicians want the photo ops at Walmart openings, where they can boast about bringing “good jobs” — um, well, okay, “jobs,” anyway — into the community.
But when Walmart comes to town, significantly more local retail jobs are destroyed than created. And to the extent Walmart grows and is empowered, even more manufacturing jobs will be lost. If Walmart’s fans understood its anti-worker business model, they would get this. Walmart’s philosophy requires cutting labor costs to a bare minimum, so it makes sense that the company would not only pay workers miserable wages, but also shred as many jobs as possible.
Some of the pro-free market ideologues do grasp this. Here’s Forbes contributor Tim Worstall, for example, with a blog post helpfully entitled: “Of Course Walmart Destroys Retail Jobs: That’s the Darn Point of it All.”
I appreciate the honesty of Worstall and others of his ilk; they celebrate Walmart for its innovation and productivity-enhancing “creative destruction.” Fine. What I don’t appreciate is those pundits who then turn around and claim that Walmart is also going to magically create jobs out of thin air, as so many are doing in the current DC debate (see, for example such gold star hacks as Mona Charen, Star Parker and, inevitably, Fox News).
Let’s be clear: the brave new economic world so many conservatives and neoliberals celebrate necessitates massive job loss. In theory, the gains from productivity brought about by Walmart’s ability to produce more output with less labor inputs are supposed to benefit everyone. But in practice, they’re going almost entirely to the the top, and the economic hit is being taken by those at the bottom. Progressives need to do all they can to change this dynamic. Supporting living wage bills like the one in DC would be a great place to start.
By: Kathleen Geier, Washington Monthly Political Animal, August 10, 2013
“Debunking The Myth”: Doable, Efficient, And Necessary, A Higher Minimum Wage Will Not Reduce Jobs
As fast-food workers strike across the nation, progressives must separate fact from fiction in order to secure a living minimum wage.
Fast-food workers are going on strike from New York to Seattle to demand higher wages, highlighting the never-ending controversy over the consequences of raising the minimum wage. Many news stories seem to suggest that economists have decided a higher minimum wage will cause job loss. However, with more analysis, we undercover the truth: there is no clear link between a higher minimum wage and reduced employment.
John Schmitt, a Senior Economist at the Center for Economic and Policy Research, reported in February 2013 that multiple meta-studies (studies that use statistical techniques to analyze a large number of separate studies) found that for both older and current studies alike, there is no statistical significance in the effect of an increased minimum wage. Put plainly, if the effect is not statistically significant, then there is no proven effect— increases in the minimum wage do not cause job loss.
Accordingly, a few weeks ago, over 100 economists at organizations ranging from the Center for American Progress to Boston University signed a petition in support of increasing the minimum wage. They present current research from well-established organizations such as the National Bureau of Economic Research that shows there are no negative employment effects from minimum wage increases. This includes the most comprehensive data available, based on the increasingly accurate testing that has occurred as more and more states increase minimum wage levels. Even more importantly, this recent series of studies uses cutting-edge econometric techniques to control for extraneous variables such as economic downturns and geographic effects. When economists do that, they find that minimum wage increases do not reduce employment.
Logically, this makes a lot of sense. A higher minimum wage is a win-win situation economically: Employees have more money to be consumers and are more productive, while businesses wind up reducing costs in the long run, since they won’t have to spend as much money hiring and training new workers (by analyzing data from five separate studies, economists representing the Political Economy Research Institute found that McDonald’s could easily make up for the costs of a higher minimum wage with a mere five-cent price increase on Big Macs). It’s just as Henry Ford realized—when he paid his workers more, they became part of his customer base, making his company even more profitable. Increasing the customer base and expanding customer pockets helps stimulate the entire economy, badly needed in the current recession.
So if we have no evidence linking high wages to job loss, our next question is: Are higher wages needed as a poverty reduction tool?
Currently, the 2013 federal poverty guidelines stipulate $23,550 for a family of four as poverty level. A $7.25 minimum wage currently nets the protesting fast-food workers $15,080 a year if the workers are lucky enough to work 40 hours a week. In a typical household with two parents and two children, parents who make $7.25 an hour earn far below the living wage of $13.55, according to an MIT wage calculator. The numbers become even starker when you separate out true living expenses: food, medical care, housing, transportation, and other needed expenses add up to a required $37,540 annual income before taxes, which is notably different from the poverty guidelines that the U.S. Department of Health & Human Services set. Even if the two parents worked 40 hours a week for 52 weeks, they would only earn $30,160 in total, significantly below the resources they need to live. Moreover, these estimates are only for a typical nuclear family. The struggle that single-income families, large families, or families living in high-cost cities go through is exponentially higher.
The buying power of the minimum wage has steadily been waning due to the effects of inflation for the past 40 years. When prices increase, a worker’s paycheck buys less and less. To put it in perspective, we look to another brief by John Schmitt: If minimum wage had continued to match productivity growth, it would have been $21.72 per hour in 2012. If we only adjust for the cost of living, a minimum wage pegged to inflation would be $10.52.
A huge bulk of evidence makes the case that increasing the minimum wage is a doable, efficient, and necessary change for the economy. This change needs to happen now. We as Americans have a moral obligation to make sure that other Americans who are working hard to support themselves and their families are able to make a living.
By: Emily Chong, The National Memo, August 8, 2013
“Purifying The Republican Party”: The Destructive Rise Of The No-Government Conservatives
Nine months after a decisive loss in the 2012 elections, the battle for the soul of the Republican Party—or whatever’s left of it—has begun.
I’m not talking about a battle between moderates and conservatives. The conservatives won that fight a long time ago. Our children may never believe that moderate Republicans once roamed the Earth, advocating policies that would limit carbon pollution and invest in scientific research, reform our schools and build new roads, promote national service, reduce the influence of money in politics, and require individuals who can afford health insurance to take responsibility for buying it. Soon enough, these politicians will exist only in the minds of ’90s-era pundits and Aaron Sorkin’s writing staff.
The conservatives have finally purified the Republican Party, dispatching moderate infidels in primary after primary, demanding fealty to their agenda of huge tax cuts and drastically lower spending. They have used their sizable numbers in Congress to help realize that agenda, with periodic assists from a president who has always been more fiscally responsible than his enemies would admit.
Today the tax burden on the vast majority of families is lower than it’s been in decades. Domestic spending outside of Medicare and Medicaid is the lowest it’s been in more than half a century. A public sector that has grown under the last four presidents has significantly contracted under Barack Obama. And deficits are falling at the fastest pace in 60 years.
Conservatives remain unsatisfied. They want more tax cuts. More spending cuts. And I’m picking up signals that they’re not entirely thrilled with the Affordable Care Act.
But here, a new divide has emerged within the Republican Party. On one side are the traditional small-government conservatives, who have a rough acquaintance with the rules of politics and basic math. They may want to reduce the size of government further, but they also want to preserve the institutions of government, understanding that a functional democracy is necessary to provide for the common defense, promote a common prosperity, and tackle problems we can only solve together, as a nation.
These are Republicans like Chris Christie, who has witnessed the vital importance of robust federal aid in the wake of a terrible storm. These are Republicans like Jeb Bush, who has tried to reform public education without completely dismantling it. These are Republicans like John McCain, Lindsey Graham, and the handful of senators who have sought compromise with Democrats over issues such as immigration reform and finally ended the historically exceptional blockade of perfectly qualified executive-branch nominees so that the president can fill the jobs his administration is required to perform.
None of these actions have endeared the small-government conservatives to their rivals for power, the no-government conservatives. No-government conservatives take their inspiration from Grover Norquist’s famous quote that government should be shrunk to a size where it can be drowned in a bathtub. These Republicans, who make up most of the House and a healthy portion of the Senate, are on an uncompromising mission to abolish most government services, benefits, regulations, and taxes.
The goals of no-government conservatives are not primarily economic. They will propose more tax cuts in times of surplus and times of deficit. They care little when the nonpartisan experts and economists at the Congressional Budget Office say sequestration will cost up to 1.6 million jobs next year, or that immigration reform will boost our GDP, or that Obamacare will reduce the debt over time. No-government conservatives are not compelled by the evidence that temporary benefits such as food stamps and unemployment insurance put money in the pockets of those most likely to spend it at local businesses that will grow and create jobs as a result. Their only jobs agenda, their only growth agenda, their only deficit agenda is eliminating government, no matter how many people it helps or how big a boost it provides the economy.
Nor are the goals of no-government conservatives primarily political. They have advisers, they can read polls, and most of them probably know that shutting down the government or forcing a default would be, among other catastrophes, highly unpopular. They realize that rampant hostage-taking and filibuster-abuse are the chief contributors to the obstruction and gridlock that Americans of both parties hate.
They just don’t care. Jonathan Chait has written about the recent embrace of “procedural extremism” among many congressional Republicans, who have “evolved from being politically shrewd proponents of radical policy changes to a gang of saboteurs who would rather stop government from functioning at all.”
But for no-government conservatives, this has been their primary policy goal all along. Their fundamental philosophy is purely ideological—the idea that since government can’t do everything, it should do nothing. So as long as the public continues to see Washington as a dysfunctional circus of petty children, the conservative philosophy of government is vindicated. That is also precisely why no-government conservatives view the successful implementation of Obamacare as an existential threat—because it would prove that limited government intervention in the market can still be an effective force for good. It is why some Republicans are threatening a shutdown unless Obama agrees to defund the Affordable Care Act—a step they know can’t even be achieved through the annual budget process.
In 2016, Sens. Rand Paul and Ted Cruz seem to be the most likely champions of no-government conservatism, with Marco Rubio engaged in a delicate balancing act between purity and sanity. Whether Republican activists will still embrace traditional conservatives like Chris Christie, Jeb Bush, and others remains to be seen. But of one thing I am certain: while the single-minded pursuit of a no-government ideology may bring Republicans a fanatical sense of purpose, it will not bring them the 270 electoral votes needed to take back the White House, nor will it help our recovery gain the speed and strength it needs. The sooner the party faithful realize this, the better off the country will be.
By: Jon Favreau, The Daily Beast, July 30, 2013
“A One Trick Pony”: The Tea Party’s Unhealthy Obsession
Bipartisanship is a four letter word to the tea party zealots in Congress.
This week, Congressional Republicans dismissed President Obama’s proposal for corporate tax cuts out of hand. Last year, the president proposed the American Jobs Act, which House Republicans didn’t even consider despite the inclusion of tax cuts for businesses that hired new employees.
The president generously proposes and the House GOP caucus automatically disposes. Corporate tax cuts are the holy grail of the Republican Party, so the GOP’s resistance to the president’s proposals makes me think that House Republicans would automatically reject any proposal from the White House. I’m sure that Republicans would even find a reason to reject a plan initiated by Obama to build a memorial on the capital mall dedicated to conservative hero Ronald Reagan.
The president has given up on congressional Republicans, but he hasn’t given up on the American people.
In a series of speeches and proposals, Obama has discussed the urgent need to invest in projects that will put Americans back to work and rebuild our sagging infrastructure of bridges, water systems and transportation. The president has also explicitly denounced the politics of austerity as a road to prosperity. The sequester budget cuts have already slowed the economic recovery and the additional cuts that the tea party wants will reverse the fragile economic recovery.
The president has said that House Budget Committee Chairman Paul Ryan’s package of budget cuts, his so called Path to Prosperity, is really the path to austerity, which runs directly into the road of recession. Besides austerity, the only thing that congressional Republicans have to offer is the repeal of the Affordable Care Act, which would, in turn, repeal the new restrictions against predatory health insurance company rip offs.
The public worries about jobs and the economy. Congressional Republicans have not only rejected the president’s constructive economic proposals, but they have an unhealthy obsession with destroying the progress created with the passage of the Affordable Care Act. House Republicans have voted 38 times to repeal the new health care reform law. Now, Tea Party zealots like Senator Ted Cruz, R-Texas, want to force repeal of the law with the threat of a government shutdown.
The GOP would be a lot better off if it would bet the farm on a key economic issue. Playing chicken with a government shutdown to repeal Obamacare is a risky wager. Voting 38 times against the health care law makes it seem like the GOP is a one trick pony racing in the wrong direction.
The president is also trying to move his own party away from the politics of austerity. Democrats can’t beat Republicans in a battle of green eyeshades. Eyeshades have their uses, but mostly they limit vision.
The Grand Old Party’s obsession with the Affordable Care Act not only ignores the public concern about the economy, but it has created an internal Republic party crisis. This week, Cruz laid into Republicans who don’t want to play a game of chicken with ACA repeal and a government shutdown. The battle between the Tea Party radicals and establishment Republicans will be prime time TV for the next few months.
Gridlock has the economy in a headlock. Hopefully President Obama can use his bully pulpit to move Republicans off the dime.
By: Brad Bannon, U. S. News and World Report, August 1, 2013
“The Nature Of His Public Service”: John Boehner’s Plan To Hurt The Country On Purpose
Sequestration cuts, we learned yesterday, continue to undermine the U.S. economy severely, and are quickly losing support of the congressional Republicans who pushed for the policy in the first place. As the GOP budget strategy unravels, House Appropriations Committee Chairman Hal Rogers (R-Ky.) said yesterday the sequester is “unrealistic,” “ill-conceived,” and a policy that “must be brought to an end.”
For now, House Speaker John Boehner (R-Ohio) doesn’t give a darn.
Speaker John A. Boehner came before the mics on Thursday, and he made one thing clear: The sequester is here to stay until the White House gets serious about spending cuts.
“Sequestration is going to remain in effect until the president agrees to cuts and reforms that will allow us to remove it,” the Ohio Republican said to reporters in his weekly news conference. “The president insisted on the sequester none of us wanted, none of us like it, there are smarter ways to cut spending.”
It’s frightening how little Boehner understands about this policy. He’s the Speaker of the House, for goodness sake.
First, the president didn’t “insist on the sequester.” That’s just crazy.
Second, if “none of us” want this stupid policy, it’s within Boehner’s power to stop the cuts that are hurting the country on purpose. For reasons that only make sense to him, the Speaker refuses.
Third, Boehner’s argument is that he’ll stop deliberately undermining the country when Obama “agrees to cuts and reforms.” But Obama has already approved $1.5 trillion in spending cuts, and offered Republicans even more. So far, GOP officials have offered no comparable concessions.
And finally, there’s the problem Boehner doesn’t like to talk about: he has no alternative.
In effect, he’s saying, “When Obama agrees to make me happy, I’ll agree to end the pain.” And what would make Boehner happy? He won’t say — Obama is supposed to just offer Republican goodies, in the hopes that the House Speaker will eventually say he’s satisfied and turn off the policy that’s hurting the country on purpose.
Maybe Boehner should take a moment to consider how he defines the nature of “public service.” Does he seriously believe he’s acting in the nation’s best interests by pushing a policy both parties hate and is clearly undermining economic growth and job creation?
By: Steve Benen, The Maddow Blog, August 1, 2013
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