This article completely fails to understand the problem posed by the Walmart and Costco comparison.

As has been reported in many sources, employees at Walmart are often paid so lowly that they have problems buying even the cheap goods on offer at Walmart. The higher paid employees at Costco are better able to purchase goods and services through out the U.S. marketplace, thus providing a larger boost to our economy which so depends on consumer spending. If all employers paid their employees as little as Walmart, then who would be left to cosume in our economy?

In recent decades executive pay has increased at incredible rates. At the same time in the last 8 years, the average workers pay has actually decreased. Walmart and Costco are another excellent example of this. Costco limits the amount their executives can be paid, based on what they pay their employees. By spreading the money around to more employees, it increases the over all purchasing power of the pool of employees.

Compare a situation at Walmart where you may have executives making 1 million a year in compensation, and cashiers making 20 thousand a year. At Costco instead that may be an executive who makes 500 thousand, and cashiers making 40 thousand. The group from Costco has a greater capacity to purchase homes, automobiles and other good and services throughout the marketplace. The group from Walmart has much more limited abilities, the cashiers are all well below the poverty limit and struggle to afford necessities. The fewer number of well paid executives can not make up for the difference in purchasing power, since 1 executive is not likely to purchase the 20 automobiles or homes that employees would if the money were more evenly distributed.

Is there any surprise that as more companies are paying their employees less that debt has increased at a phenomenal rate? But we can not depend on long term consumer spending based around debt. When those bills come due, we see massive shifts in consumer spending, as we are now seeing in various industries such as automotive sales.

Henry Ford made one excellent contribution along with his invention of the assembly line. He also understood the need to pay his employees enough money so that they could afford the same cars they were manufacturing. At the time this was a revolutionary idea that helped to form a middle class. Compare that to now when many companies want to pay their employees less money, or out source the work to other countries. These same companies often still depend on American consumers to buy their goods, but in order for that to happen those workers need to be able to afford those same goods. So this leads to our current situation where for example many U.S. auto manufacturers sell 80-90% of their cars in the U.S., but continue to pay less and send more jobs over seas, shrinking the pool of those who can afford their cars.

So what this article completely fails to discuss is that as more companies imitate Walmart and pay their employees as little as possible, this is reducing the ability of Americans to purchase the goods and services our economy depends on. More than 60% of our economy is based on consumer spending, but if companies will no longer pay their employees enough to be able to consume, the entire system breaks down.

Shifting the majority of the money and wealth in this country to a comparative few, those who represent the executives or wealthy, does not equate to the same purchasing ability of a healthy middle class. And since so many of these same companies depend on the U.S. economy to function, they are only harming themselves in the long run.

The problem is that it is difficult for one company to pay good wages and remain competitive, even if it is in their long term interest. This is a weakness in the free market system and can only be corrected by regulation.

That's probably true in some cases, but I bet not in all. I used to work for a small business, which claimed it couldn't afford to give raises. However, I'm the one who did the books, and raises would have been doable had not lots of money been pissed away on various side projects. Anyway, they could at least make the gesture of removing the huge gap between what execs make and what regular workers make. Then the general public (as well as Wall Street) might be willing to cut them some slack when they claim than they can't afford to pay higher wages or give benefits.

I have never understood why those who hold a "let the poor sink as long as I can get rich" sort of view of economics do not realized that in a consumer based economy like we have a healthy middle class is pretty much necessary. If there's no one who can buy what you're selling, how the hell do you plan to get rich?

Dear Citizen Plain,

Great comments, I couldn’t agree with you more!

I would like to add that the tone of the article made me uncomfortable. It seemed to speak of human beings as if they were disembodied things.

The trend towards the impoverishment, and thus the elimination, of the middle class and the out of bound enrichment of the 5% of the population who are already ridiculously wealthy is quite frightening for the long term. What sort of society are we creating?

PS. I too think Barbara Eichenreich is great!

In reference to Walmart's higher profit margin, I think this is more of a case of maximizing profit over the short term at the expense of long term viability. Walmart's business model is predicated on growth, constantly opening new stores in order to maximize the amount of goods sold and for other reasons. In addition, Walmart is a rabid cost cutter (well, at the store level and logistics), which enables them to cut prices while maximizing their profit margins. Unfortunately, the quality of employees has gone way down since Sam was around; This is due to the company's disdain for its lower level workers. Walmart is turning into a contract company where the only people who are considered "real" are those that work at corporate and everyone else is disposable. I've been in Walmart in several states, it's not a store I've liked shopping in. In some of the stores, I swear I go through the doors and I can smell the depression the workers are feeling. I've seen workers walk away in order to not have to help a customer or, when they have no choice, seen their shoulders slump as they turn and face the customer to help them. It's like watching Auschwitz survivors in a retail setting. If there is one overriding vibe coming from the workers in most of the walmart stores (and this is usually from the middle aged workers and older), it's "They don't pay me enough to care about what I do." or "I don't want to be here."

So, this is the corporate culture that Walmart has embraced. Maximizing efficiency and profits, lower costs, all at the expense of its workers. In order to maximize shareholder returns (not a bad thing in and of itself) and providing more than generous compensation to its executives. This is a company that focuses on processes and system improvements because they know that their compensation isn't good enough to an adequate workforce in terms of quality. The problem is that work processes don't mean much if you don't have a work force trained enough and motivated enough to follow them and I think, eventually, the lack of such a work force will bite Walmart in the ass. Especially since there is a theoretical limit as to how much you can improve specific portions of your operation. When the times comes that Walmart has to change its business model, then they will be staring straight in the face of the reputation they have earned as poor employers and they'll have no one to blame but themselves.

Katie:

~1% of the taxpayers have seen the greatest benefit from the 2001/2003/2006 tax cuts. While your 5% number is accurate, within that 5%, which starts at ~$250,000, the benefits were skewed heavily towards the 1% of the taxpayers making >$500,000. Pres. Bush managed to do what even Hoover could not do. Through his tax policies, he skewed the outcome just enough so as 5% of the taxpayers benefited (with the one exception mentioned) where as 95% lost ground in terms of income. Under Hoover, everyone suffered equally. Another Bush first and this time beating out Hoover.

I read that taxes have actually gone up on the 5% to 2% but dropped so much on the top 1% that the average shows all have lower taxes.

This is a love/hate topic. Another interesting/simpler way to look at this, is that Walmart actually needs more companies like Costco who are willing to pay their employees a better wage so that they can in turn spend more money at places like Walmart.

But to take that a step farther, if Walmart paid its employees more, it wouldn't need the other companies to do it for them. Same thing as I said above about needing a healthy middle class to keep the economy chugging along. Why would they rely on other businesses to do it for them when they could probably do it themselves? That way they'd at least be able to maintain control of the situation. Although maybe a really healthy economy isn't in Walmart's best interest anyway. Think about it, people don't shop at Walmart (especially for stuff like clothes and shoes) because they want to, they do it because they have to. And the more people who are broke, the more people there are who have to shop at Walmart.