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For Profit, Anti-Poverty

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For Profit, Anti-Poverty

No institution or agency has done more to help the poor than Walmart. April 16, 2017
Economy, finance, and budgets

If budget-cutters in Washington decided to eliminate food-stamp benefits to New Yorkers, the city’s politicians would be denouncing the cruelty of the “Republican war on the poor.” Yet Mayor Bill De Blasio and the city council are already inflicting the same sort of pain on low-income New Yorkers by denying them access to one of the nation’s most effective anti-poverty programs: Walmart.

When he was mayor, Michael Bloomberg supported Walmart’s efforts to open a store in New York, but the company faced unremitting resistance from unions and elected officials, and it gave up the fight once de Blasio moved into Gracie Mansion. “I have been adamant that I don’t think Walmart—the company, the stores—belong in New York City,” de Blasio said.

Walmart’s benefits are obvious to shoppers and to economists like Jason Furman, who served in the Clinton administration and was chairman of the Council of Economic Advisers under President Obama. In a paper, “Walmart: A Progressive Success Story,” Furman cited estimates that Walmart, by driving down prices, saved the typical American family more than $2,300 annually. That was about the same amount that a family on food stamps then received from the federal government.

How could any progressive with a conscience oppose an organization that confers such benefits? How could de Blasio and the city council effectively take money out of the pockets of the poorest families in New York? Because—though they would deny it—they care a lot more about pleasing powerful labor interests, especially the United Food and Commercial Workers (UFCW), which helped lead the long fight to keep Walmart out of the five boroughs.

Labor activists have been spreading horror stories for more than a decade about Walmart’s purported mistreatment of workers, yet somehow they haven’t dissuaded thousands of people in other cities from lining up for jobs whenever a Walmart opens. Often there are five or ten applicants for each job. As the economist Richard Vedder has noted, the pay at Walmart is comparable with that of other large retailers.

Some argue that Walmart exerts downward pressure on retail wages, but even if that’s true—and it’s debatable —the effect is tiny compared with the savings at the cash register. According to Furman, Walmart lowered American retail workers’ pay by less than $5 billion while saving shoppers more than $250 billion with lower prices on food, clothing, and household staples.

Anti-Walmart agitators complain about the government subsidies that some of the company’s workers receive for health insurance, which, they argue, burden taxpayers. But these are the same Medicaid subsidies available to low-income workers at other stores and in other industries, or in any kind of employment, including public schools and other government jobs. It makes zero sense to single out Walmart employees, as the state of Maryland did with a law (eventually struck down in court) forcing Walmart alone to forgo government subsidies and shoulder these costs by itself.

If the activists succeed in their quest to transfer these health-care costs to Walmart, they’ll be striking yet another blow against the poor. When low-income workers receive subsidized health insurance through Medicaid, the money comes out of general tax revenue—paid mainly by upper-income taxpayers. If Walmart becomes responsible for paying for its own subsidies, the company might offset the expense by reducing its workers’ cash wages. Or it might raise prices, which would effectively be a new regressive tax hitting its low-income customers hardest. Either way, the burden would shift from affluent taxpayers to the working poor.

These Robin Hood-in-reverse effects prompted Furman to reject his fellow Democrats’ campaign against Walmart. “The collateral damage,” Furman wrote, “from these efforts to get Walmart to raise its wages and benefits is way too enormous and damaging to working people and the economy more broadly for me to sit by idly and sing ‘Kum-Ba-Ya’ in the interests of progressive harmony. Not to mention the collateral damage to rational thought from many of the arguments made by the anti-Walmart community.”

De Blasio and the city council keep spouting these irrational arguments, but they haven’t persuaded the public. In a 2015 Quinnipiac poll asking whether Walmart stores should be allowed to open, New Yorkers favored Walmart by a margin of 2-to-1. Overall, 63 percent of New Yorkers wanted Walmart stores in the city, with virtually no difference in favor of the big-box emporium between those living in union and non-union households. Support was higher among blacks, who favored Walmart by 66 to 30, and among Hispanics, who favored Walmart by 71 to 27.

But so far, their feelings don’t seem to matter to de Blasio and his fellow progressives on the city council. After all, as long as shoppers go on paying higher prices at unionized stores, some of their money will keep flowing to the mayor and his allies in the form of campaign contributions. To progressive politicians, that’s the ultimate in social justice.

Photo by Joe Raedle/Getty Images

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