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Forum Post: As long as people want cheap products, American workers will have suppressed wages

Posted 1 year ago on Aug. 18, 2012, 11:48 a.m. EST by TheRazor (-329)
This content is user submitted and not an official statement

Walmart serve a unique niche, providing low cost goods for low income people. People shop at Walmart because its human nature to barter for the lowest price possible. A percentage of people will shop at Whole Foods, but a very much larger percentage will buy Walmart.

Its a real Catch 22. EVERYONE wants cheaper products. Cheaper products are made by cheaper labor. Cheap labor by definition means low wages. People that can organize pools of cheap labor will become very very rich. Thats what rich guys do, organize cheaper and cheaper labor to make cheaper and cheaper products. Low skill, low education Americans compete with higher skill, higher education Indians and Asians.

34 Comments

34 Comments


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[-] 2 points by shooz (17843) 1 year ago

What came first?

The demand or the marketing?

The entire Walton family did become among the richest in the World by giving anyone at all a bargain.

[-] 2 points by Misaki (893) 1 year ago

Apple products are not cheap, but workers still receive low wages. Your logic fails.

[-] 1 points by MsStacy (1035) 1 year ago

Apple at one time used american labor, but couldn't compete with the PCs made using cheap labor. If anything Apple's experience supports his position. They are still not as cheap as their competitors, but less then they would be if made completely in America.

[-] 0 points by Misaki (893) 1 year ago

If you work out the numbers, making iPhones and iPads in the US might decrease gross profit for each unit from $300 to about $250 or maybe $200. http://www.nytimes.com/2012/01/22/business/apple-america-and-a-squeezed-middle-class.html?pagewanted=all

(Labor cost for assembling each unit is about $15, after wages were raised over the past few years. Workers used to make 900 RMB = $150/month before overtime; now it's about twice that.)

Apple has lots of excuses for why it doesn't but really, why should Apple be forced to make things in the US when other companies aren't?

[-] 1 points by MsStacy (1035) 1 year ago

You're shifting the focus a little in bringing up Apple, sort of comparing apples and oranges. Apple's approach seems to be to lead and set the standard for a luxury item, be it phone, tablet, pod or pad. The competition then comes out with something just as good but cheaper. Apple products are more status symbols for people who have to have things first and are willing to pay. It's a different game for a mass merchandizer like Walmart, their clientele is definitely interested in price above all else.

I'm not suggesting Apple change whatever works for them, just that I do see the desire for the typical consumer to be centered on price above all else. That the initial post has made an accurate assessment about the typical consumer.

I don't see where any company would want to raise costs and lower profit at the same time. It does help keep costs for Apple products lower then it would be if made in America. They might be able to lower prices, but the question for them is why do that, as long as people seem willing to pay.

[-] 0 points by Misaki (893) 1 year ago

Walmart's products are cheap because they were made in countries with low wages. Walmart's wages are low only because of supply and demand—too many people in the US don't have jobs and are willing to work for whatever is offered. Completely different things.

[-] 1 points by MsStacy (1035) 1 year ago

Razor was talking more about the products sold at Walmart. They are inexpensive goods made by foreign labor. He correctly states that it is those products a majority of Americans want. American shoppers won't pay a higher price to buy American made products.

The wages paid by Walmart are another matter. Those jobs in retail have always been unskilled and minimum wage jobs. The recession hasn't had much impact on that one way or the other.

[-] 1 points by Misaki (893) 1 year ago

American shoppers won't pay a higher price to buy American made products.

There is absolutely nothing wrong with this. Corporate profits are high because people are spending money. Maybe because of TV, people tend to assume that everyone is just like them and every "consumer" is having problems with not enough money to buy the things they want.

Just like how inequality means that the average income is much higher than the typical (median) income, the average consumer has much more money than the typical consumer. From the NYTimes:

“If a designer shoe goes up from $800 to $860, who notices?” said Arnold Aronson, managing director of retail strategies at the consulting firm Kurt Salmon, and the former chairman and chief executive of Saks.

“This group is key because the top 5 percent of income earners accounts for about one-third of spending, and the top 20 percent accounts for close to 60 percent of spending,” said Mark Zandi, chief economist of Moody’s Analytics. “That was key to why we suffered such a bad recession — their spending fell very sharply.”

Part of the demand is also driven by the snob factor: at luxury stores, higher prices are often considered a mark of quality.


Rich people want work-life balance too. If we just 'share the work', we can create enough jobs for everyone who wants one.

[-] 0 points by jrhirsch (4714) from Sun City, CA 1 year ago

You might check out this page for reasons why corporate profits are so high during a recession. Lots of interesting graphs too.

http://gradycarter.wordpress.com/2012/06/26/corporate-profits-just-hit-an-all-time-high-wages-just-hit-an-all-time-low-business-insider/

[-] 1 points by Misaki (893) 1 year ago

#comment-811149
I'm not following you reasoning here. Taxation does not create wealth, it redistributes it. Spending money by the poor does not create wealth. Spending is trading one person's labor for another's labor.

If a government collected apples as tax from one group and then distributed the apples to the poor. If the poor trade their apples for tomatoes no wealth has been created.

Many poor people currently have very little money. Some of them are even homeless. If they were given "apples", they would end up eating more "tomatoes" than they are currently able to.

Business are not making tomatoes just to throw them away. During the economic crisis, businesses ended up with much more goods than they were able to sell because demand dropped sharply. If poor people had money, businesses would end up hiring more people so they could make enough tomatoes to meet demand.

[-] 1 points by Misaki (893) 1 year ago

(you can link to a comment using this format: [link text](URL link). More info. Replying to #comment-810508)

From the post on unions:

The AFL-CIO is wedded to the Democratic Party, whose leaders offer no solutions for unemployment, falling wages, foreclosures and the other problems of American working people. For public support of labor unions to change, unions themselves will have to change.

I do agree that the evidence that "high unemployment" is responsible for most of the disconnect between wages and productivity for the last 30 years is weak. Unions are a good/better explanation. But again, unions don't really lead to higher employment, just better wages (and with overseas competition unions can actually lead to fewer jobs).

Even though unions have earned a bad reputation for some of their excesses, I can't think of another way to increase bargaining power for the lower incomes, except for raising the minimum wage. The profits are there, they just aren't sharing them fairly.

If we work less, this will lead to full employment and more bargaining power even without unions (or for employers that don't allow unionization). http://occupywallst.org/forum/capitalism-for-the-workers-and-a-new-global-econom/

[-] 1 points by jrhirsch (4714) from Sun City, CA 1 year ago

Thanks for the comment link info.

Even though I think that unionizing and other forms of bargaining are required to raise wages, the present union system seems to be so full of corruption that they seem to be their own worst enemy.

I've considered starting a low income workers union, really low dues, more educational than confrontational. Taking on Walmart and the fast food chains would be quite a battle though. I know it's already been tried.

By working less, you mean the hours intentionally lost by one employee are gained by an out of work employee? A group of 10 workers cut their hours by 10% so that one more can be hired. That would take some very selfless people.

Here is what would happen if wages were increased by unions and minimum wage laws. Since the lower 90% employees now have more money, someone has less. The top 10%. Would investment suffer? My guess is that much of their so called investments are really speculative, so it would have no bearing on starting new businesses.

Since money is now more equally distributed, the added money restores economic health to the lower 90%. As demand increases, businesses start back up, and more people are hired, raising wages further.

Just like when part of a body is deprived of it's blood supply. Once a minimum level of blood starts to flow again, so does it's function. This is a key part of my theory of economics. That segments of an economy require minimum of amounts of monetary flow or else they stop functioning, just like the organs and limbs of the human body.

Big business will likely threaten sending more jobs overseas. They do it already. To fight this the people need to boycott any business who does export jobs. The same with businesses that refuse to raise wages. Boycott them too. Easy to say though. Much tougher to educate people in the necessary steps to restore the economy.

[-] 1 points by Misaki (893) 1 year ago

If you read the thread, it suggests that people with high incomes work less. Remember, even within the top 1%, 95% of them are working in some sort of job. http://www.nextnewdeal.net/rortybomb/who-are-1-and-what-do-they-do-living

For high-income workers, the only "sacrifice" they might be making is decreased promotion changes... but this is a cultural thing since promotions should be based on competence, not the "time macho" mentioned in this article by someone who worked directly under Secretary of State Hillary Clinton.

People say that unemployment is the major problem, not "low wages". http://www.gallup.com/poll/149453/Unemployment-Emerges-Important-Problem.aspx and in fact... most workers in 2010 were willing to take a pay cut: http://www.msnbc.msn.com/id/36141641/

[-] 1 points by jrhirsch (4714) from Sun City, CA 1 year ago

I've read your thoughts about high income people working less. It doesn't make sense. If they are the business owners, the managers, the movers and shakers, how will that benefit the economy? Aren't they the drivers that without, the economy would coast to a stop?

[-] 1 points by Misaki (893) 1 year ago

This is what one of them has to say about it: http://www.theatlantic.com/business/archive/2012/05/here-is-the-full-inequality-speech-and-slideshow-that-was-too-hot-for-ted/257323/

(Summary is that "middle class are the job creators, not the rich")

[-] 1 points by jrhirsch (4714) from Sun City, CA 1 year ago

"By that definition, taxation or deficits would create more "wealth", since the middle class or wealthy would create the same amount of wealth by working (unless they chose to work less) while government spending would lead to more "wealth" being created when the poor spend money"

I'm not following you reasoning here. Taxation does not create wealth, it redistributes it. Spending money by the poor does not create wealth. Spending is trading one person's labor for another's labor.

If a government collected apples as tax from one group and then distributed the apples to the poor. If the poor trade their apples for tomatoes no wealth has been created.

[-] 1 points by jrhirsch (4714) from Sun City, CA 1 year ago

He is saying that the rich are not job creators, but he doesn't say they should stop working. Wealth comes from labor human labor. The less labor we provide, the less wealth is created.

All income groups are necessary to create wealth. It's just that the upper income workers have taken such a large portion of it, that the rest of us are depleted of the essential money necessary to carry on our economic lives.

A good analogy are the camel herders is Africa. They actually drain the blood from the camel to survive, mixed with some of the milk. We are like that camel that has been drained to the point of failing health. Keep on draining us and eventually we will collapse and so will those who feed off of us.

[-] 1 points by Misaki (893) 1 year ago

Wealth comes from labor human labor. The less labor we provide, the less wealth is created.

By that definition, taxation or deficits would create more "wealth", since the middle class or wealthy would create the same amount of wealth by working (unless they chose to work less) while government spending would lead to more "wealth" being created when the poor spend money.

People are generally united in their opposition to deficits. Do you support higher taxes on the middle class and rich? There's a petition which is valid for one more day that you can sign if you think this. Currently it has three signatures; you can add yours.

[-] 1 points by Misaki (893) 1 year ago

It's not complicated... at least for anyone familiar with US culture. High unemployment reduces bargaining power for employees, and this has been going on for the past 30 years.

(Meanwhile, in Europe companies are "nicer" the way people in the US mistakenly expect our own corporations to be, so people are kept on payrolls even if lower demand means that companies do not strictly need the extra people. Then this helps out other corporations by increasing demand.)

[-] 1 points by jrhirsch (4714) from Sun City, CA 1 year ago

Wages over the past 40 years for the majority of workers have been stagnant even in times of high employment. Our bargaining power that was gained by the unions during the 30's and 40's began a gradual decline in the 70's and continues to decline. That is the main reason why wages are low. Real wages have not increased, just the inflated dollar amount has.

http://3.bp.blogspot.com/_GMkD4mFrFxw/TL3PN79ok4I/AAAAAAAAEEw/oti9Js4-eAc/s1600/US+income+inequality+widens.jpg

http://stateofworkingamerica.org/who-gains/#/?start=1968&end=2008

[-] 1 points by Misaki (893) 1 year ago

No, wages rose significantly during the late 1990's when unemployment was very low and demand for labour was high. You can even see it in the chart you linked.

Wages for the top 10% of workers may still have risen more than for the rest of the population, but wages were rising. And 'sharing the work' would fix any inequality problems within the workforce. High-income workers might end up with more time than they do now, but this would be completely fine especially when educated workers currently work more on average than less educated workers (probably in large part because less educated workers can't even get retail/minimum wage jobs since college students are doing that work).

[-] 2 points by jrhirsch (4714) from Sun City, CA 1 year ago

Show me the evidence.

[-] 1 points by jrhirsch (4714) from Sun City, CA 1 year ago

In reply to:

"Wrong. http://jaredbernsteinblog.com/full-employment-a-force-against-rising-inequality-and-stagnant-incomes/

It isn't perfect... there was stagflation in the 1970's after all while labour unions kept wages high. But periods of low unemployment show clear rises in wages, and high unemployment show stagnant wages.

Unemployment is not the reason why wages are low. Lack of bargaining power is.

Then how do you explain the late 1990's? Unions did not suddenly become more popular, but wages went up significantly while unemployment was very low.

You might also like this: http://economix.blogs.nytimes.com/2011/06/30/the-wageless-profitable-recovery/

Corporate profits captured about 90% of the rise in real national income for the first ~7 quarters of the recovery, while wages captured 1%."

REPLY. Looking at two periods, 1945-70 and 1970 -2010 overall fluctuations in unemployment were similar, but wages gains were not. The effect from short term changes in unemployment is not the cause of the decrease in wages since the 70's.

Low unemployment has to be led by an economic factor, it is not the result. The computer revolution was largely responsible for the boom in the 90's, with great numbers of workers drawn from old tech into new tech, leaving a wide range of old tech jobs needing replacements.

The only explanation I see for the differences in wages from those two periods is union membership. If you go back further there is a direct correlation as well.

http://philebersole.wordpress.com/2012/06/12/the-decline-of-american-labor-unions/

In regard to the first link, the difference in unemployment was just 1% for the two periods. It's really hard to make a definite conclusion from such a small change.

The second link was interesting. It's amazing that the media could call this recovery a recovery.

Even though unions have earned a bad reputation for some of their excesses, I can't think of another way to increase bargaining power for the lower incomes, except for raising the minimum wage. The profits are there, they just aren't sharing them fairly.

[-] 1 points by jrhirsch (4714) from Sun City, CA 1 year ago

Unemployment has been fairly steady, rising and falling for the last 60 years except for a blip in the 80's and the current one in 2008. During the 40's, 50's, and 60's, real wages continued to rise even though unemployment rose and fell.

Beginning in the 70's, real wage growth stagnated, again with unemployment rising and falling, just as it did in the 40's, 50's, and 60's. Unemployment is not the reason why wages are low. Lack of bargaining power is. Once a source of bargaining strength, unions have greatly diminished since the 70's when they were nearly 35% of all workers, now they're only 12%.

Unions are the reason why Americans enjoyed rising incomes 40 plus years ago. Low employment was not a factor.

[-] 0 points by Misaki (893) 1 year ago

Wrong. http://jaredbernsteinblog.com/full-employment-a-force-against-rising-inequality-and-stagnant-incomes/

It isn't perfect... there was stagflation in the 1970's after all while labour unions kept wages high. But periods of low unemployment show clear rises in wages, and high unemployment show stagnant wages.

Unemployment is not the reason why wages are low. Lack of bargaining power is.

Then how do you explain the late 1990's? Unions did not suddenly become more popular, but wages went up significantly while unemployment was very low.

You might also like this: http://economix.blogs.nytimes.com/2011/06/30/the-wageless-profitable-recovery/

Corporate profits captured about 90% of the rise in real national income for the first ~7 quarters of the recovery, while wages captured 1%.

[-] -3 points by OdronaOdronaOdrona (-29) from Washington, DC 1 year ago

Obama! Obama! Obama! 810229

[-] 1 points by repubsRtheprob (1209) 1 year ago

You got it right. Our corps have to believe the hype that only serve their stockholders/owners or the profit margin. They must learn they also serve the community that supports then

If the community that supports them wasn't brainwashed with that nonsense also we could more easily get people to boycott in larger numbers. maybe affect the change we need.

[-] 1 points by Misaki (893) 1 year ago

As one Apple executive said,

“We don’t have an obligation to solve America’s problems. Our only obligation is making the best product possible.”

Apple had over $30 billion in profit last year. Not revenues; profit. So yes, people are very brainwashed. I already linked how we can circumvent these attitudes and create enough jobs for everyone while also raising wage rates for people who are already working.

Focusing on individual companies is pointless. There are too many, and people with money really have nothing else to buy except luxury goods. We just need to enable people who want to work less to do so, without feeling they're violating social conventions about "hard work" or "making as big of a pie as possible".

[-] 1 points by nwr12 (1) from 布鲁克林, NY 1 year ago

It seems just like what you had said. But not all cheap products are from cheap labor. High technology can also reduce the cost of the product which ensure a low price. www.cchappiness.com

[-] 1 points by Kinetica (14) from Houston, TX 1 year ago

I am of the belief that oil prices will eventually reach a high enough level to serve as a death knell for modern globalization. The wage advantage in Asian countries will disappear as it becomes more expensive to ship the goods across oceans and seas.

[-] 2 points by TheRazor (-329) 1 year ago

That could very well be true, but if you read these forums, OWSers want the government to enforce higher wages and a much higher minimum wage. That idea runs dead into your understanding of the clear wage advantage found overseas.

Sure, raise wages by force and watch more jobs go away.

[-] -1 points by funkytown (-374) 1 year ago

Yea I know but what you forget is that you are dealing with people willing to sacrifice anything and anybody in the intellectual pursuit of some wholly cerebral Utopia.

[-] 0 points by richardkentgates (3269) from Fort Walton Beach, FL 1 year ago

Not true. Deflation would bring down prices while wages remain the same. The system lacks balance. http://occupywallst.org/forum/the-fed-has-been-fighting-deflation-why-does-this-/