Finding a balance between pay and low prices

(This article was written by US secretary of labor from 1993 to 1997. He is the author of Reason: Why Liberals will win the battle for America. Copy write: New York Times Syndicate)

By Robert Reich

Bowing to intense pressure from neighborhood and labor groups, a real estate developer has just given up plans to include a Wal-Mart store in a mall in Queens, thereby blocking Wal-Mart's plan to open its first store in New York City. In the eyes of Wal0Mart's detractors, the chain embodies the worst kind of economic exploitation: It pays its 1.2 million American workers an average of only US $9.68 an hour, does not provide most of them with health insurance, keeps out unions and has a checkered history on labor law.

But isn't Wal-Mart really being punished for our sins? After all, it is not as if it created the world's largest retailer by putting a gun to our heads and forcing us to shop there. Instead, Wal- Mart has lured customers with low prices.

Wal-Mart may have perfected this technique, but you can find it almost everywhere these days. Corporations are in fierce competition to get and keep customers, so they pass the bulk of their cost cuts through to consumers as lower prices. Products are made in China at a fraction of the cost of making them here, and American consumers get great deals. Back- office work, along with computer programming and data crunching, is ‘’off shored’’ to India, so our dollars go even further.

Meanwhile, we pressure companies to give us even better bargains.

The fact is, today’s economy offers us a Faustian bargain: it can give consumers deals because it hammers workers and communities.

We can blame big corporations, but we are mostly making this bargain with ourselves. The easier it is for us to get great deals, the stronger the downward pressure on wages and benefits. Last year, the real wages of hourly workers, who make up about 80% of the workforce, dropped for the first time in more than a decade. The easier it is for us to find better professional services, the harder professionals have to hustle to attract and keep client. The more efficiently we can buy products worldwide, the more stress we put on our own communities.

But we are not just consumers. We are also workers and citizens. How do we strike the right balance? To claim that people should not go to Wal-Mart or look for cut-rate airfares or services or shop on the Internet is paternalistic tripe. No one is a better judge of what people want than they themselves.

The problem is, the choices we make in the market do not fully reflect our values as workers or as citizens. I did not want our community bookstore in Cambridge, Massachusetts, to close (as it did) yet I still bought books from Amazon.com. We may not see the larger bargain when our own job is not directly affected. I do not like what is happening to airline workers, but I still try for the cheapest fare I can get.

The only way for the workers or citizens in us to trump the consumers in us is through laws and regulations that make our purchases a social choice as well as a personal one.

A requirement that companies with more than 50 employees offer their workers affordable health insurance, for example, might increase slightly the price of their goods and services. My inner consumer will not like that very much, but the worker in me thinks it a fair price to pay. Same with a rise in the minimum wage or a change in labor laws making it easier for employees to negotiate better terms.

I would not go so far as to re-regulate the airline industry or hobble free trade with China and India, but I would like the government to offer wage insurance to ease the pain of sudden losses of pay. And I would support labor standards that make trade agreements a bit fairer.

These provisions might end up costing me some money, but the citizen in me thinks they are worth the price. You might think differently, but as a nation we are not even having this sort of discussion. Instead, our debates about economic change take place between two warring camps: Those who want the best consumer deals, and those who want to preserve jobs and communities much as they are. Indeed finding ways to soften the blows, compensate the losers or slow the pace of change- so the consumers in us can enjoy lower prices and better products without wreaking too much damage on us in our role as workers- we go to battle.
I do not know if Wal- Mart will ever make it into New York. I do know that New Yorkers, like most other American, want the great deals that can be had in a globalising high-tech economy. Yet the prices on sales tags do not reflect the full prices we have to pay as workers and citizens. A sensible public debate would focus on how to make that total price as low as possible.



Published in Straits Times, march 1st, 2005