This attack would be funny if it were not for the fact that so many people have been taken in by it. Let me do this by the numbers so that even a lying halfwit like Gawenda can understand it.

About 50 per cent of Wal-Mart employees get their health insurance through the company. The rest mainly get healthcare Medicare. It’s true that the company’s health plan doesn’t pay for extras like eye tests and contraceptives. However, the company does pay 100 per cent of an employees health-costs in excess of $1,750. In addition, there are — unlike more than 50 per cent of other companies — the company’s health coverage does not include lifetime caps.

That Gawenda chose to deliberately omit these facts from his article serves to demonstrate his contempt for the truth. His accusation that the company doesn’t pay “pension benefits to most of its workers” is completely meaningless and is clearly intended to smear the company further

What economic illiterates like Gawenda cannot grasp is that companies do not pay pensions and health benefits. These oncosts — as they are called in Australia — are part of the gross wage. In absence of such costs the net wage would actually rise. When these additional costs raise the gross wage rate above the market clearing level unemployment emerges. Where unions have managed to capture capital and ruthlessly exploit it, large-scale cut backs eventually take place, if not bankruptcy (Consider the perilous state of General Motors) .

Gawenda also lied about the company paying only the minimum wage, despite the fact that its average starting wage is nearly double the national minimum. Last October H. Lee Scott, Jr., the company’s CEO, called for the government to raise the minimum. Now why did he do that? Because a higher minimum wage would reduce potential competition by imposing Wal-Mart entry labour costs on them.

What most people do not know is that minimum wage jobs tend to be entry jobs, meaning that extremely few people remain on them. (About 70 per cent of Wal-Mart’s executives worked their way up from these types of jobs). By crippling potential competition through raising the cost of hiring young people, Scott hopes to maintain Wal-Mart’s competitive edge while simultaneously throwing the left a bone. Now that is what I really call a stupid tactic.

What the ever so clever Gawenda never thought to ask is that if Wal-Mart is such a lousy company how come its employees don’t leave in droves for greener pastures? Economics tells us (except for the lefty likes of Gawenda who seem to think economics is capitalist plot) that if any factor, particularly labour, is paid below its market rate more of it will be hired until the wage rate equals the value of the factor’s marginal product. Any firm that tries to buck this process will face a labour shortage. Last time I heard, Wal-Mart had no trouble attracting labour.

A Los Angeles County Economic Development Corporation study calculated that the true difference between Wal-Mart rates and that of the union dominated stores is less than $3 an hour. Those who support Wal-Mart argue that the difference is probably offset stock benefits and the strong possibility of advancement, unlike its competitors.

Moreover, Wal-Mart has a very successful profit-sharing account scheme. There is the case of Jean Kelly who in 10 years with the company managed to amass $230,000 in Wal-Mart shares through this program. Bob Clark, a truck driver who had been with the company for more than 20 years, accumulated over $700,000.

Nevertheless, the possibility that part of the difference in wage rates might still be largely accounted for by the overpricing of labour by unions should be given consideration. It follows from this that without the presence of Wal-Mart unemployment would be higher and wage rates for those excluded by unions from the retail sector would be even lower.

This conclusion seems to be supported by the company’s hiring experience. Within a week of opening one of its stores in Panama City in the Los Angeles area the company was inundated with 7,000 job applicants. A similar thing happened when, in the face of ferocious union opposition, it opened its Baldwin Hills store where 10,000 applied for jobs.

If the union had have succeeded in keeping the company out many people would have remained unemployed. But according to Gawenda’s impeccable logic there should not have been any job applicants anyway because they should have been all happily working at much smaller stores while the evil Wal-Mart schemed in secret to wipe out their highly-paid jobs.

Gawenda is not bright enough to see that he is peddling the fallacy that a reduction in the number of firms means a lessening in the demand for labour. The intensity of demand for labour is not determined by the number of firms in existence but by the capital-labour ratio The higher this ratio the higher will be productivity and hence real wage rates. As that great Bush-hating liberal economist Paul Krugman* said:

Economic history offers no example of a country that experienced long-term productivity growth without a roughly equal rise in real wage. (Pop Internationalism, The MIT Press, Cambridge, Massachusetts, 1997).

The pricing of labour brings me to Gawenda’s ridiculous charge that Wal-Mart “killed off most of its smaller competitors”. No it didn’t. Wal-Mart did not shutdown any competitors, not one — consumers did that when they switched to Wal-Mart because it supplied a vastly superior service. If Gawenda doesn’t like what happened then he should take it up with Wal-Mart’s customers instead of sliming the management. If this leftwing hack genuinely cared about informing his readers he would have referred to a Global Insight study that

...found that the expansion of Wal-Mart over the 1985 to 2004 period can be associated with a cumulative decline of 9.1% in food-at-home prices, a 4.2% decline in commodities (goods) prices, and a 3.1% decline in overall consumer prices as measured by the Consumer Price Index-All Items, which includes both goods and services.

The main driver of this impact was a 0.75% improvement in the overall efficiency of the economy. Increased capital intensity and lower import prices were secondary drivers. The 3.1% decline in the price level was partially offset by a 2.2% decline in nominal wages, so that the net effect was to increase real disposable income by 0.9% by 2004.

Then there is what they said about wage rates:

We did not conduct a thorough, comparative analysis of Wal-Mart’s wages, benefits, and working conditions relative to a fair and comparable benchmark. The limited analysis we did undertake, based on an analysis of a large sample of employee wage data, did not find evidence to conclude that Wal-Mart pays its workers below-market wages.

Gawenda’s assertion that Wal-Mart ruthlessly exploits suppliers is as equally mendacious as his other charges. In 2003 Fortune magazine’s annual survey found that Wal-Mart was the most admired company among American executives. In addition, a survey of manufacturers by Cannondale Associates rated Wal-Mart as the best retailer with which to do business.

(I didn’t want to bore readers with a lengthy economic explanation of why Gawenda’s assertion about squeezing suppliers is economic nonsense).

No article from America by our progressive journalists would be complete without obligatory swipe at President Bush, and Mr Gawenda is no exception to this miserable leftwing rule. He described Washington D.C. as having suburbs that

... remain, like most of the inner-city areas of America, poor and socially devastated, where fathers are mostly absent and single mothers struggle to bring up children not much younger than themselves and where gangsta rap describes not a fantasy but in large part a grim reality

That these inner cities have been ruled by Democrats for decades and that the social disaster that he described is the direct result of these Democrats’ destructive social and economic policies is an observation he chose not to make. This inner cities are not George Bush’s America but a grim testimony to the Democrats’ failed attempts at utopia. Their only success — and it has been an astonishing one —– has been in keeping 90 per cent of blacks on the political plantation. Not that Gawenda would ever draw anyone’s attention to that particular fact.

Gawenda went out of his way to emphasise how many Starbucks there are in Washington while stressing that the customers are the elite (journo code for white) while the staff are young blacks making little more than “$7 an hour for their labours”, i.e. they are being exploited by whitey.

I think we get the message. However, it is a thoroughly deceitful one. Gawenda approvingly wrote of how the Washington council had banned Wal-Mart from the city. Yet he omitted to point out that by doing so it was denying blacks access to higher wages, the possibility of promotion and the opportunity to accumulate capital. I could be wrong here: it could be that he’s worried that Wal-Mart will obliterate all those high-paying low-priced mom-and-pop stores like Starbuck

Note: ACORN (Association of Community Organizations for Reform Now) is one of Wal-Mart’s most persistent critics and one that played a significant role in getting the company barred from Washington D.C. on the phony grounds that it does not pay a “living wage”. (To my knowledge, this gang of hypocrites has never objected to Starbucks operating in the city).

But while pushing for living-wage legislation in California someone blew the whistle on on this lot for paying less than the minimum wage to their own employees. Their defence was that forcing them to pay the minimum would curtail their operations which in turn would, and I kid you not, violate their First Amendment free-speech right.

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Gerard Jackson is Brookes’ economics editor

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