Dean Baker | Everyday Low Wages at Walmart: Brought to You by Government Policy

There is a large and growing movement to pressure Walmart to raise its workers’ wages. This has taken the form of direct action by workers, efforts to pass higher minimum wage or living wage laws, and implicit threats of consumer boycotts if Walmart does not raise wages and benefits.

This drive is encouraging, and often inspiring, as many workers have bravely risked their jobs and their livelihoods to try to get a better deal for themselves and their co-workers. But an important part of the story is missing in the way it usually gets presented.

The standard story is that Walmart workers, left to the mercy of the market, are unable to earn a high enough wage to support themselves and their families. There have been numerous accounts of Walmart workers being forced to turn to food stamps and other forms of government support to make ends meet. It is extremely difficult for a single person to survive on a Walmart wage. There is no way that a typical Walmart worker could support one or two children without help from the government.

In this picture, the government is the helping hand that allows Walmart workers to make ends meet despite the bad cards dealt to them by the market and Walmart’s stingy wage policy. The problem with this story is that the cards were not just dealt out randomly; there was a rigged deck.

People with better alternatives don’t go to work for Walmart at eight or nine dollars an hour. And a main reason that Walmart workers don’t have better alternatives is that we have run economic policy in a way that doesn’t give them better alternatives.

Part of this story is our trade policy. We have made a decision to expose our manufacturing workers to competition with low-paid workers in the developing world. This had the predictable effect of reducing the number of jobs in manufacturing and putting downward pressure on the wages of the jobs that remain in the sector.

We also have a policy of having an over-valued dollar, which is the basis of our trade deficit of $500 billion a year (@ 3 percent of GDP). This trade deficit costs us roughly 4.2 million jobs directly and another 2.1 million indirectly, for a total of 6.3 million jobs. A disproportionate share of these jobs would be relatively high paying jobs in manufacturing, which many Walmart workers would likely grab in a minute.

And our budget policy also has the effect of constraining demand, reducing GDP and stifling job growth. This point is worth emphasizing. We talk about stimulus as a conscious policy to boost growth and create jobs. While this is true, it often leaves the implication that the budget policy we pursue when we are not deliberately trying to stimulate the economy is somehow natural.

This is absurd. People like Paul Ryan and Max Baucus are setting tax and spending policy; it is not handed down to us by the gods or nature. If we are stuck with an economy that is operating well below its potential, with tens of millions of people unemployed or underemployed, this is due to the fact that we have a budget policy that does not create enough demand in the economy. Whether our budgeteers thought through the consequences of their policy or not doesn’t really matter. They gave us budgets that were inconsistent with full employment.

High unemployment not only reduces the number of job openings, it puts downward pressure on the wages of workers with jobs. This is especially true for workers at the bottom end of the wage distribution. The link between low unemployment and wage growth for low-paid workers is a main point of my new book with Jared Bernstein, Getting Back to Full Employment. We show that while low levels of unemployment benefit all workers, the largest gains in terms of wages and hours go to those at the bottom.

This means that when Congress decides to give us a budget that unnecessarily raises the unemployment rate, it is also deciding to put downward pressure on the wages of low-paid workers. This is a policy decision to redistribute income upward, even if the people in Congress have no clue what they are doing.

This is important background. The folks pushing for the higher pay at Walmart and other chains of low-paying stores and fast food operations are not just asking for a helping hand. They are demanding that we end a government policy that has the effect of redistributing income to the large shareholders at Walmart and other members of the one percent.