How Welfare Hurts Walmart
26th February 2014
Bryan Caplan, a Real Economist, lays it out for ‘progressives’ and other dimwits.
Walmart’s critics often argue that food stamps, Medicaid, and other poverty programs subsidize its labor force. Since government pays a big part of its workers’ living expenses, Walmart doesn’t have to. Is this true?
As long as non-workers remain eligible for poverty programs, the answer is no. This is basic supply-and-demand. When the government offers free stuff to people with low incomes, the marginal benefit of work falls – and so does labor supply. When labor supply falls, hours of work go down, and wages rise. This could be very nice from the point of view of Walmart’s workers. From the point of view of Walmart’s stockholders however, it’s bad.
Not convinced? Ask yourself: “If I ran Walmart, would I favor higher unemployment benefits?” Of course not. Why not? Because higher unemployment benefits make it easier to not apply for a job at Walmart. The same goes for any government program that makes idleness less unpalatable.