I just saw an idiotic post on Facebook calling the Walton family (owners of Walmart) “greedy”, because they’re “the richest family in the US, and pay their employees starvation wages.”

For one thing, the statement is simply not true. Walmart doesn’t only employ people as cashiers, stockers, cleaners, and other low-skill positions which only qualify for low wages; the company also employs personnel in facility management, area or district management, and many other areas that require workers to possess education, developed skill sets, and substantial work experience—such as IT, marketing & advertising, purchasing & inventory control, distribution, market research, etc. And those Walmart employees, obviously, are paid substantially higher salaries than the low- or non-skilled laborers, most likely corporate salaries that are competitive with similar positions within any other company in the U.S.

But for some reason, only the lowest-paid positions—those which require little to no skill or experience, those for which the least experienced and least educated workers (which also typically means the most impoverished) can qualify—are pointed to as being paid “starvation wages,” and the company—the largest private employer in the world—is demonized for the evil and heartless practice of hiring millions of poor, unskilled, uneducated people.

But the fact is, Walmart does not pay their unskilled laborers “starvation wages,” but rather market-induced wages. You see, employers don’t establish wages; the market does, through the infallible economic law of supply and demand. Millions of people are qualified (supply) to do the unskilled work required by Walmart (demand), so the cost of said labor is relatively low.

It’s really pretty simple: when supply exceeds demand, prices decline; when demand exceeds supply, prices increase. The law of supply and demand applies to the cost of labor, as it does to any other good or service.

A really illustrative example of this reality concerns the wages of teachers, the idea being that “our children are important, educating our children is important, our children are our future, and their education is SO important, our teachers should be paid more than they are.”

It’s a noble idea, but problematic—because wages are not determined by the importance of the work, but by the law of supply and demand. There are millions of people qualified to teach (supply), more than enough to fill the available teaching jobs (demand), so in a free market, an equilibrium is reached whereby the wages settle in at a level that keeps the positions filled without either over-paying the teachers or under-staffing the schools. According the the National Educational Association, in the 2012/2013 season the national average starting salary for teachers was $36,141; so, since there are millions of people who are qualified to teach, if one of them doesn’t want to accept the job for $36k/year, it will likely be easy to find another who will.

So it’s not that employers are screwing teachers and teachers should make more, it’s that the market dictates the wages through the law of supply and demand. As long as there is an abundance of qualified teachers, the price for those teachers will remain right where it is, regardless of how “important” their work is perceived to be. If the supply of qualified teachers was to suddenly diminish, then the value of those teachers would rise in the marketplace, and teachers would be paid higher wages.

On the other extreme of the supply/demand ratio, we have extraordinary people with an extremely rare level of talent or skill—such as, say, Michael Jordan. Arguably the best basketball player in the world, he was paid millions of dollars simply because very few people—if any at all—could play basketball anywhere near as well as he could. The NBA—and professional sports in general—typically pay extremely high wages to their workers, simply because the supply of workers who can perform to the level demanded by those industries is extremely low, in relation to the overall populace.

As for the state-mandated minimum wage that employers must pay for unskilled labor, if the state was not meddling in the economy and creating artificial costs (in other words, in a free-market society), the wage for unskilled labor could conceivably—and properly—be lower than it currently is, simply because the rate of unemployment is so high right now. In a free society, wages would be allowed to fluctuate with the supply and demand of labor in relation to jobs; if the pool of available jobs vastly exceeds the pool of available labor, then wages increase as employers bid against each other for qualified workers. On the other hand, if the pool of available labor vastly exceeds the pool of available jobs (such as we see today), then the wages should decline, as the workers bid against one another for the available jobs.

But when the state has set an arbitrary mandated minimum wage, and there’s a downturn in the economy during which unemployment rises, the market-induced reduction in wages per worker must stop, by law, at the mandated minimum rate—and from that point on, the difference is made up via unemployment. So instead of having ten workers being paid $5/hr, we have six workers being paid $8/hr, and 4 workers who are now unemployed. This is why minimum wage laws actually hurt the poorest workers; those with the lowest skill and least experience—i.e., the lowest in value, therefore the lowest income earners—lose their jobs altogether…reinforcing the fact that the true minimum wage is ZERO.

A state-mandated minimum wage doesn’t actually increase wages, it simply re-distributes wages between fewer workers. Some of them make more, some of them make less. A lot less.

And before you go off saying that allowing the minimum wage to decline in tandem with a declining overall economy is terrible and heartless, realize that if a person in unemployed (making $0), and has a family to feed—suddenly, mopping floors or stocking shelves at $5/hr seems pretty good, as compared to not mopping floors or not stocking shelves at $0/hr. And since it’s a human right for one to enter into contract under one’s own terms, then if an unemployed person elects to accept a job at a lower rate than the state mandates the employer pay, they have every right to do so. When the state steps in and mandates higher-than-market rates—thus making it illegal for people to work, even if they are willing to accept a lower rate of pay—then those people instead remain unemployed. Worse, they end up on the public dole—and sometimes get trapped there for life.

As for Walmart specifically, before bad-mouthing the success of the company, we should look at exactly why it has become the success that it has. Why do millions upon millions of people shop at Walmart? Simple: they get lower prices there than they typically find at other retailers. Walmart, through their bulk-purchasing policies and low-frills facilities, caters to low-income people, enabling them to purchase more at their stores than they could elsewhere, given their limited resources. So in reality, Walmart is actually helping low-income people by enabling them to stretch their purchasing power. And in a free-market economy, those companies which serve the most people in the best way generally become the most successful. That’s the beauty of Capitalism, which is rooted in liberty and protected private property rights: fortunes are made through service and voluntary exchange with the masses, rather than through extortion and exploitation of the masses. 

This is aptly described in an article by Dan Sanchez, entitled The 99 and the 1, published in The Free Market by Ludwig von Mises Institute:

“In the new order there was still a 99% and a 1%. But the 99% of this period lived better than the 1% of times past. And the chief way to ascend to the 1% was to become a successful capitalist-entrepreneur: to strive to serve the 99% (the masses of consumers) better than one’s competitors.

In the old order, most would-be one-percenters, in order to get ahead in life, would have had to apply their smarts and ambition to become conquerors, rulers, and government administrators, and in those roles to exploit the masses. In the new order, under what Mises called the “consumer sovereignty” of the market, their capabilities were turned toward providing for the masses of sovereign consumers.

The masters became servants: wealthy servants, but servants nonetheless.”

The fact is that companies such as Walmart and McDonald’s have done such an outstanding job of serving people—especially low-income people—they have achieved phenomenal success, becoming the top two employers in the world, behind the US and Chinese military.

A digression: Many years ago, I managed a video rental store (back in the days of VHS, believe it or not). The owner liked to locate the stores near low-income neighborhoods, because renting movies was one of the cheapest forms of entertainment around, so business was always steady in those areas. And, whenever the economy slowed even further, our business actually picked up, as people would elect to rent a movie and stay home rather than going out, which was much more expensive. I would imagine the same is true for companies such as Walmart and McDonald’s, who also cater to the low-income masses; when the economy tanks—as it has, badly, in the US—these companies would necessarily prosper, as more people enter the ranks of the impoverished and are more inclined to patronize those outlets rather than the higher-quaility and thus more expensive outlets they may prefer. So I think it’s telling that in an era when military spending is at an all-time high—seeing as excessive military spending impoverishes societies domestically, and military deployment/engagement impoverishes societies abroad—that companies such as Walmart and McDonald’s have risen to the height of success…is it any wonder why?

But back to the subject matter at hand.

Realize: if the state wasn’t meddling in people’s business and the economy in the first place, and we were truly living in a free-market society, the economy would be robust, unemployment would be much, much lower—if nonexistent—and wages would be much, much higher. And, in addition to lower unemployment and higher wages, we also wouldn’t be paying huge portions of our income to the state. The US would once again be a prosperous nation, as it was before the governments, at all levels, seized control of everything and the parasite class was born.

I’m perpetually astonished at how the state drives the cost of living through the roof, steals up to half of everyone’s income, wrecks the economy, destroys jobs—but people are angry with their employers, for not paying them more! This is akin to demanding a higher wage from your employer because you keep getting robbed on your way home! Obviously, that would be ludicrous.

So people, direct your outrage appropriately, will ya?

And lastly, I would say that if you are unhappy with the wages your employer is paying (which, by the way, you agreed to upon being hired; in fact, you probably went through several interviews, background/drug checks, etc., essentially begging them to hire you), then quit working there, and go find a job elsewhere that pays more.

Better yet, learn a skilled trade—then you’ll actually be worth more, and thus can expect to be paid more. That’s how it’s supposed to work.