walmrt-econ-effctAlmost everyone understands that the key to a good job is an education in a trade or a marketable skill. What is seldom discussed, though, is that education transcends a marketable skill. A fundamental understanding of economics and politics is important to understand the issue of wages. An example of a fundamental understanding of economics and politics lies in the signs that pop all over the country promising $4,500 for one kid or $9,200 for two kids, or something similar.

Many of us understand that the signs are offering a tax return service that promises to maximize the child credit to the consumer’s benefit. What never ceases to amaze me are the number of signs that pop up everywhere. It amazes me because the signs prove that there is a large population of uneducated individuals that do not understand that taxpayers should neither be loaning money to the government in the form of large refunds the next year, or that they should not owe the IRS money at the end of the year.

If enough individuals understood that they have the tools at their disposal to calculate their withholdings each year to maximize their take home pay then the tax services signs would mostly disappear. The calculations are not simple but they are not algebraic calculations either. Wealthy individuals clearly understand this and, granted, they can afford tax advisors to let them know how to do the calculations. Lower income individuals do not have the same access, however they should still have a fundamental understanding that receiving an “IRS check” is poor financial planning.

This disparity in education is part of what I refer to as the “Walmart Effect.”

You see the “Walmart Effect” each time you shop there. Walmart has made itself successful by keeping prices at their lowest point. Consumers flock to Walmart because of the low prices. Yet, not a day goes by where someone, somewhere, complains about the low wages that Walmart pays. Therein lies the problem.

The single most expensive component any business has is labor costs, wages in other words. This is true for almost all businesses, from conglomerate manufacturers to mom-and-pop bakeries. The higher the wages paid are, the higher the prices are to the consumer.

The argument from advocates of higher wages is that companies are paying exorbitant bonuses and executive wages at the expense of the line workers. This is likely true, however, it is something that each of us can control through our own actions.

Each of us needs to understand the fundamentals of economics. We need to understand that higher wages translates to higher prices. At that point we can take control away from the conglomerates to issue exorbitant bonuses and executive salaries. For example, if enough workers stopped shopping at Walmart and instead paid higher prices at stores like Publix in Florida or Albertson’s in Texas the business model would change. Yes, Albertsons and Publix charge higher prices but if you look closely enough you will see cleaner and more efficient stores. Dwindling sales figures at Walmart would result in changes in their business model.

The problem is that workers want their cake and want to eat too.

This mentality of paying the cheapest prices for consumer products is the catalyst to jobs leaving the United States and going to other countries. It has led to substandard consumer products from China that we are all forced to buy today.

They key to wages are the employees themselves not the business owners. A business owner is forced to lower prices in order to compete because consumers would rather shop at Walmart than at the local grocery store. This has created the low wage employee that is their own worst enemy by shopping based on the lowest prices even though they have to endure sticky floors and long lines at Walmart instead of paying a little more for clean orderly shelves and shorter lines at the competitors.

Martin Paredes

Martín Paredes is a Mexican immigrant who built his business on the U.S.-Mexican border. As an immigrant, Martín brings the perspective of someone who sees México as a native through the experience...

One reply on “Education Is The Key To Wages”

  1. exactly, that’s why it’s better to pay 10-15% more for a product/service that goes beyond expectations/provides 10-15% more value. take for instance, Sprouts, they charge more for better produce, products, meat, etc….. but those products last longer and their customer service is much better, stores are cleaner and the employees are happy to help you because they are paid more. Costco is a good example as well. Sams club, not so much. Good post, sir.

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