Walmart raising minimum wage, citing tax reform

[hobbsyoyo]

Yeah, really, globalization is just a microcosm for roboticisation. There will be to be solutions created for this coming wave of unemployment, especially for those who continually insist on giving tax breaks to 'the rich' to increase their purchasing power of productive assets.

The problem with moving to an increasingly service-based economy is that productivity is HARD to increase. Really hard. Which means that as the price of productive assets spiral upwards as well as the cost of essentials, the average wage really has no choice but to go downwards ever-increasingly.

Trump fans think that production capacity is the issue. It certainly is for national security reasons, but certainly not for employment reasons. They intuitively know this, which is why they want subsidies and protections.

What do you mean by this?

 

[Lexicus]

The problem with moving to an increasingly service-based economy is that productivity is HARD to increase. Really hard. Which means that as the price of productive assets spiral upwards as well as the cost of essentials, the average wage really has no choice but to go downwards ever-increasingly.

I don't see why the move to a service-based economy should mean that the 'price of productive assets' should spiral upwards. The only 'problem' here is in the idea that 'productivity' should be maximized in the first place. In a service-based economy the concept has little actual meaning.

I'll quote one of my favorite essays on economics at some length:

If you think about it, an ever growing proportion of our labor force is engaged in the “care” services, and the efficiency fairies are trying to reduce the amount of care provided in the name of increasing productivity. Measured as what?

Whenever I hear an economist use the word “efficiency” (or “productivity”), I can guess with near 100% accuracy that he (it usually is a he, as I’ll explain below) hasn’t the slightest idea what he’s talking about. With rare exceptions, he is inappropriately applying an engineering term to an economic process he does not understand.

Return to our little corn model above. If the average worker produces 10 bushels of corn in a 10 hour day, we can measure productivity as a bushel per hour of labor input. It’s pretty simple, and it is a meaningful measure. It makes sense to try to increase average productivity—to increase the efficiency of the use of labor—to get to, say, two bushels per hour of labor input. All things equal, that’s desirable.

But if the only way to get the increased labor efficiency is to chop down all the trees, pollute the water, and destroy the view, then we might pause before concluding that this is really increased productivity. Sure, each labor input to the production process produces more corn, but that is a mismeasure of productivity if it also takes trees and water; further if the view matters to us then we have also mismeasured consumption.

As an example, in the nursing home we've recently had to move my grandmother into, increased 'productivity' means that each employee spends less time doing whatever thing they're doing with each person at the facility. This doesn't really make any sense.

For example, house-cleaning. It's very hard to clean your house in a way that's more efficient than you just doing it yourself. Getting comparative advantage isn't easy, where it's cheaper for you to work more hours so that you can hire the house-cleaner to work for you instead. The more efficient the housecleaner gets, the more time they spend traveling between houses.

Except for services that involve information (which have their own trendlines), gaining comparative advantage in services is HARD. So many of the services we purchase are because we actually cannot afford the time ourselves, and not because it's cheaper to hire a specialist than to do it yourself.

You should look into platform cooperativism. I think it's a way to solve many of these problems.

 

[hobbsyoyo]

I love that example! Thanks for sharing it, I have never seen the problem put so well.

 

[Cassius Critzer]

Corporations do not care what worker productivity increases do to the environment. That is the whole point. They will rape the land just because they can to make another buck and poison the groundwater.

Any theory based upon a genuine prevalence of corporations saying, "Gee that increase in.worker productivity will cause pollution and depletion of natural resources" is flawed. Even the ones who claim to do this, are liars. Many times it harms some other place so they are oblivious or apathetic to the effect.

RNs quit in high numbers because they know that increased patient workload is often violations within the medical center or standards by regulatory agencies. Why? If you make heathcare available to millions more, with no similar increase in personnel ie techs, nurses, physicians then that reduced attention to caring for patients' needs is all they can manage. The government created the problem.

 

[Terxpahseyton]

You can't thrash THE Reagan like that. Oh the horror. All those rich people eventually had to buy bigger houses and bigger boats and you know who got paid to build them?

Or instead - they could have build something for each other, paid by each other. Because their income and not only the income of those rich people would have risen..
Know you were joking, but just spelling it out.
Also, government spending creates jobs, doesn't it? So you not only need to create jobs, but more.

 

[Lexicus]

I love that example! Thanks for sharing it, I have never seen the problem put so well.

Are you referring to something I posted here?

 

[uppi]

Well, because things like travel time and minimum wage gets in the way. For example, house-cleaning. It's very hard to clean your house in a way that's more efficient than you just doing it yourself. Getting comparative advantage isn't easy, where it's cheaper for you to work more hours so that you can hire the house-cleaner to work for you instead. The more efficient the housecleaner gets, the more time they spend traveling between houses.

Except for services that involve information (which have their own trendlines), gaining comparative advantage in services is HARD. So many of the services we purchase are because we actually cannot afford the time ourselves, and not because it's cheaper to hire a specialist than to do it yourself.

But if I couldn't afford the time, it would be "cheaper" for me to hire a house-cleaner. The unit of measurement just isn't money anymore, but time. Time that could be spent on things that are more important to me. And if the productivity of the house-cleaner increases, I could use the reduced price to pay for other time-saving services.

I would consider travel time as part of the productivity. If the productivity is limited by travel time, then this has to be the focus on efforts for further improvement. After all, the travel time between houses is by no means fixed and could be improved either by technology or better organization.

The situation is different with services for which social interaction is part of (or entirely) the service itself. For example, the productivity of child care is hard to improve: The only way to reduce the effort would also reduce the social interaction of the care taker with the child, which I would consider a degradation of the service quality.

 

[Birdjaguar]

But if I couldn't afford the time, it would be "cheaper" for me to hire a house-cleaner. The unit of measurement just isn't money anymore, but time. Time that could be spent on things that are more important to me. And if the productivity of the house-cleaner increases, I could use the reduced price to pay for other time-saving services.

I would consider travel time as part of the productivity. If the productivity is limited by travel time, then this has to be the focus on efforts for further improvement. After all, the travel time between houses is by no means fixed and could be improved either by technology or better organization.

The situation is different with services for which social interaction is part of (or entirely) the service itself. For example, the productivity of child care is hard to improve: The only way to reduce the effort would also reduce the social interaction of the care taker with the child, which I would consider a degradation of the service quality.

When Fed Ex was young and expanding, travel time between customer pick ups was a huge issue given the very tight deadlines needed to make the evening flights to Memphis. Their approach to the problem was to seek out new customers that were next door to or nearby existing customers. Driver efficiency increased and travel time was reduced until they could afford more trucks and expanded area coverage for pick ups.

 

[hobbsyoyo]

Are you referring to something I posted here?

Yes the embedded italicized snippet had a great example in it

 

[Lexicus]

Oh okay. I would actually like to hear you talk more about that, if you feel like it.

 

[hobbsyoyo]

Oh okay. I would actually like to hear you talk more about that, if you feel like it.

Quite honestly, I have nothing worth while to add to it. It's a great example and really framed the question of social utility vis a vis resource utilization and productivity in an intuitive and concrete way.

 

[civvver]

Car manufacturing of the 80's was over $20/hour in Detroit. Today it is $10/hour in Alabama.
Robots actually helping bring back jobs to the US? (and China isn't as cheap as it used to be)

https://www.recode.net/2017/5/26/15...-us-increase-robot-sales-reshoring-offshoring

A lot of that has to do with policy. Alabama has been a right to work state since the 50s. Michigan just passed this legislation 5 years ago.

The name is deceptive, right to work. What it really means is employers can circumvent the unions by hiring people who don't want to be in the union and thus degrades the union's negotiating leverage. Unions get a horrible rap these days but were a huge part of the wage increases the us worker enjoyed in the three decades after WWII.

Yeah, really, globalization is just a microcosm for roboticisation. There will be to be solutions created for this coming wave of unemployment, especially for those who continually insist on giving tax breaks to 'the rich' to increase their purchasing power of productive assets.

The problem with moving to an increasingly service-based economy is that productivity is HARD to increase. Really hard. Which means that as the price of productive assets spiral upwards as well as the cost of essentials, the average wage really has no choice but to go downwards ever-increasingly.

Trump fans think that production capacity is the issue. It certainly is for national security reasons, but certainly not for employment reasons. They intuitively know this, which is why they want subsidies and protections.

I don't understand why difficulties increasing productivity would increase the costs of productive assets or why they would depress wages. What's the correlation?

 

[hobbsyoyo]

Agreed with @civvver - the states have begun engaging in a race to the bottom with wages. They seem to not care about the quality of the jobs they can attract so long as they can steal them from other states.

 

[Sommerswerd]

I may be late to this party but I think its worth mentioning that at the same time that they announced raises that they were attributing to the tax cut... they also announced numerous store closings and massive layoffs. So I find their attribution of raises to the tax cut to be highly dubious, and most likely an attempt to get positive PR from conservatives in the face of layoffs and store closings.

NEW YORK (Reuters) - Walmart on Thursday said it will raise entry-level wages for U.S. hourly employees to $11 an hour in February as it benefits from last month’s major corporate tax cut and on the same day said it will shut stores and lay off thousands of workers.

I don't know if this has been pointed out already (I did a quick skim and then search of the thread and didn't find anything).

 

[Lexicus]

I don't understand why difficulties increasing productivity would increase the costs of productive assets or why they would depress wages. What's the correlation?

Indeed, difficulties in increasing productivity ought in many cases to be correlated with the opposite trend. Difficulty increasing productivity suggests that an industry is already highly capital-intensive, but the proliferation of capital should actually lower its price, not raise it. This is the basic reason why Adam Smith and Marx both thought that capitalism would lead to socialism.

 

[Bamspeedy]

I may be late to this party but I think its worth mentioning that at the same time that they announced raises that they were attributing to the tax cut... they also announced numerous store closings and massive layoffs. So I find their attribution of raises to the tax cut to be highly dubious, and most likely an attempt to get positive PR from conservatives in the face of layoffs and store closings.



I don't know if this has been pointed out already (I did a quick skim and then search of the thread and didn't find anything).

It was pointed out early in the thread, and I added some comments about it later. This year focused on closing Sam's Club stores. Two years ago it was regular walmart stores and supercenters.

Is it not possible the company can be saving lots of money AND getting rid of it's least profitable (or money draining) stores? One way to make a profit is to 'trim the fat'. If these stores were profitable they wouldn't be closing. You can blame it on Amazon (and other online retailers), more than any president or congress and the economy as a whole.

Walmart has been on a 'investing in our associates' for a couple of years now, with the increase in paid time off and the raise up to $10/hour minimum last year, so this year is more of the same, inceasing the minimum to $11/hour. Whether it was already planned or Trump's plan added to the bonus/raise this year you can debate. My opinion is the raise was already planned, the bonuses were extra because of Trump. Their tax debt was decrease by 1/3, they can give some of it back (and over the next few years Walmart and other corporations will still enjoy the tax cut but that doesn't mean the associates will get bonuses every year).

 

[metalhead]

It's cheap PR. They're just buttering Trump up for regulatory favors down the road. Secret's out on how to play him, soon everyone will have their hand in the till.

 

[Sommerswerd]

It was pointed out early in the thread, and I added some comments about it later. This year focused on closing Sam's Club stores. Two years ago it was regular walmart stores and supercenters.

Is it not possible the company can be saving lots of money AND getting rid of it's least profitable (or money draining) stores? One way to make a profit is to 'trim the fat'. If these stores were profitable they wouldn't be closing. You can blame it on Amazon (and other online retailers), more than any president or congress and the economy as a whole.

Walmart has been on a 'investing in our associates' for a couple of years now, with the increase in paid time off and the raise up to $10/hour minimum last year, so this year is more of the same, inceasing the minimum to $11/hour. Whether it was already planned or Trump's plan added to the bonus/raise this year you can debate. My opinion is the raise was already planned, the bonuses were extra because of Trump. Their tax debt was decrease by 1/3, they can give some of it back (and over the next few years Walmart and other corporations will still enjoy the tax cut but that doesn't mean the associates will get bonuses every year).

This is changing the subject... Walmart said they raised wages because of the tax cuts. First of all, that's hogwash, because they haven't benefitted from the tax cuts yet. No one has, cause they haven't been implemented yet. But putting aside that obvious farce, even if they want to say they're giving raises against anticipated future benefits from the tax cuts... that would be a lie too... because the reason they can afford to raise wages for their remaining employees, is because they're firing a ton of employees and closing a bunch of stores. That's where the money for the raises is coming from, not from any anticipated gains from tax cuts.

If I have ten guys and I pay em' $10 apiece... then I fire one of them... well now I can give the nine left a raise to $11 and keep $1 for myself. Then I can claim "I increased wages!" and "I increased profits!" at the same time. That's all they did. "Tax cuts" had nothing to do with it. They're saying it did so that Trump/Republicans can say "This proves tax cuts work and Walmart should get more tax cuts!"

 

[Bamspeedy]

If I have ten guys and I pay em' $10 apiece... then I fire one of them... well now I can give the nine left a raise to $11 and keep $1 for myself. Then I can claim "I increased wages!" and "I increased profits!" at the same time. That's all they did. "Tax cuts" had nothing to do with it. They're saying it did so that Trump/Republicans can say "This proves tax cuts work and Walmart should get more tax cuts!"

If that worker was earning the company money (or was essential) it doesn't make any sense to get rid of him. If he costs the company more than he produces (like a store that is losing money) it is better for the company and the rest of the employees that store is closed. No company opens stores to lose money, except in some situations like getting people to know about your company (brand exposure).

Walmart paid 7.1 billion in taxes in 2010. Based on the new tax rate they would have paid I guessing under 5 billion? Saving 2 billion dollars, yeah, they can afford to give out less than a billion in bonuses and raises so Trump's tax cut most certainly had something to do with it.
An average sam's club has 175 workers, say they are all full-time*, making $25k a year. 63 closed down, that's 275 million a year.
*That's unlikely, I just find a stat that says the average is 175, I would assume that is part time and full time, so to count them all as full time is being very generous.

Walmart said the wage increases will cost $300 million, and the bonuses will cost $400 million.

I think the tax cut saving them over 2 billion dollars is more likely to fund the wage hikes and bonuses than the closing of stores.

This 'portfolio review' also caused them to close many stores a couple years ago.

So what has Amazon given it's employees with the billions they've saved?

 

[Zkribbler]

... If you make healthcare available to millions more, with no similar increase in personnel ie techs, nurses, physicians then that reduced attention to caring for patients' needs is all they can manage. The government created the problem.

Wait...the government provides funding for more patients, healthcare providers turn their backs on this additional revenue by refusing to adequately staff, and its somehow the goverment's fault?