re: EBC Book #1 - Economics in One Lesson by Henry Hazlitt

quote:

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But if those with the lowest profit margins are driven out of business, supply would go down relative to demand and prices at the surviving firms would necessarily go up in response. Net-net, the consumer is no better off and all you've accomplished is shifting profits from less efficient firms (e.g. moms and pops) to more efficient firms (e.g. the Wal-Marts that the left is supposed to hate). If the large firms are more efficient because they use less labor, you're effectively reducing the number of jobs even though you're increasing the average wage of the jobs that remain.

That is, you're robbing local Peter to pay corporate Paul and you're also robbing worker Peter (no more job) to pay worker Paul (higher wage).

I had this exact conversation with my lefty sister recently, and her response was that Wal-Mart should simply make due with lower profits. Wouldn't that make other firms more competitive? And what if those other firms are just as greedy (or greedier) than Wal-Mart used to be?

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Additionally, profits accumulated by Wal-Mart would then be used to grow, build more stores, thereby increasing the need for more workers. As the demand for workers grows, in theory, the wages for said workers will increase. The biggest problem is the whole "skilled vs unskilled" labor, but even this can be solved by growth.

Case in point, I live in a fairly burgeoning city right now. Growth has been very good, and you can't go to a restaurant anymore that doesn't have a need for more waiters and waitresses. I was talking with a couple of the owners and was asking them about their concerns in the business and every single person said labor. They couldn't find enough quality labor (not skilled), but quality labor, so they are resorting to marketing higher wages, flexibility, and higher average take home (inclusive of tips). After speaking with some of the staff at my local watering hole, many were now leaving the current job to take other jobs that were offering more money and flexibility. Funny how that works huh?