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Sunday, October 16, 2005

Would More Be Hurt If....

I just went grocery shopping, at Super Wal-Mart, and realized, I spent about $20 dollars less there than I do at my normal grocery store. Since I live alone, I spend about $60 per week at my normal grocery store, if I don't buy any meat (I usually buy large packages about once a month). Today I spent $41.50 at Wal Mart.

That got me to thinking, if a single guy can save $20 a week on groceries there, a family of four can probably save double that. So that got me onto the thought of unions wanting to raise the wages of Wal-Mart workers (already averaging over double minimum wage).

The big question is, would it hurt more people than it helped to do that? Unions like to advertise the assumption that the only thing that will change if they get into a business is your wages going up, but anyone who knows anything knows that's a false assumption. Yes, wages, and benefits probably will rise. But in an industry like retail, where margins aren't very wide, something has to be cut. (Wal-Mart runs about a 4% after expense margin, which isn't huge. )

The way a company has to deal with wage and benefit increases is pretty basic, either cut the number of workers to offset the added costs, or raise prices. So look at the two scenarios, if Wal-Mart were to increase wages and benefits by 20% for their workers, you could expect to see a loss of jobs equal to that, to offset it. So are those who lose their jobs better off? Other retailers actually pay less than Wal-Mart, but because they arne't as large aren't the target of unions. So those displaced workers would probably take a pay cut staying in the same sector.

The other way to recoup the losses is through higher prices, but who does that hurt? The other working stiffs who are shopping there because they can afford it. While some would love to see Wal-Mart lose business, once again, that loss will be reflected in cost cutting, and the easiest way to do that is to lay off workers. Again, the same folks the union is trying to help would be the first to go.

As an example of this scenario, I once worked as a government liason on a $30 million dollar construction contract. The company providing the laborers was forced by politics to use union workers, who averages (hold on to your hat) $24.00 per hour! In talking to their manager I found that the company had two branches, one that used union workers, one that used non-union. The non-union guys made $18.75 per hour, and paid $1.25/hr for full coverage health care (company picked up the rest) and were in a 401(k) with a 5% match from the company, and 2% paid by the company even if the worker didn't contribute.

They hadn't laid anyone off from that end of the company in over 17 years. On the union side they had two permanant managers and two foreman who were permanent. The rest of their workers were hired on a per job basis from the union hall, then laid off as soon as the job was done.

When I talked to one of the guys he told me he averaged about 7 months of work per year, but wouldn't take the pay cut to work for the non-union side. He was evidently a laborer because he couldn't do math. 7 months at $24.00 and hour meant he was taking home less than he would working twelve at $18.75!

So, what do you think would it hurt more people by raising prices on the working people who shop there, and the jobs it would likely cost for the current workers, or should those folks just have to suck it up?

1Comments:

Blogger meesterjoneser said...

We had 44 members of my son's NYARNG company return from Iraq in March.

Two of them worked for Wal-Mart when deployed.

Both of their families received a full paycheck every single week from Wal Mart while Daddy was deployed.

One other soldier worked for Tyco Pharmaceutical, who did the same.
Another for Bryer's Ice Cream plant. They did the same.

Hooah to all above companies.
It's the right and patriotic thing to do.

Regards,

Pd

6:07 PM  

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