Cafe Hayek

The Wal-Mart Tip Jar

I've been writing recently (here and here) about how we don't want Wal-Mart and Exxon and other corporations to share the burden during a catastrophe by holding prices below the market price or by paying employees more than the market wage.  As appealing as it is for businesses to act with kindness by altering prices and wages, it is actually destructive to ask buisinesses to be loving.  It is better for businesses to do what they do best (use information, creativity and capital to create wealth) and leave families and charities to do what they do best.  Asking businesses to be loving makes no more sense than charging my brother rent when he comes to visit for Thanksgiving.

But what can we do to help the underpaid Wal-Mart worker?  So many people are telling us how underpaid and overworked they are.  How strange that those who would help the Wal-Mart worker do so by NOT shopping there!  How strange it is that those who would help the Wal-Mart worker want fewer Wal-Marts built, reducing the demand for such workers temporarily or for even longer!  Is there a better way?

My idea is to create an organization that would go around the country putting special tip-jars by the cash registers at the check-out stations of every Wal-Mart.  In front of these jars would be a sign, saying something like this:

Hello!  We are the employees of Wal-Mart.  We earn less than the national average and only about half of us have health insurance.  Can you do your part to help us make ends meet?  Especially if you make more than we do, please consider a generous donation.  Thank you!  And thank you for shopping at Wal-Mart!

Would you give?  Many would, just as they give now to charities at the cash register that collect money for the poor and hungry.  Why not give something to the poor wretch standing right there before you, kindly ringing up your order?

Do you see the beauty of the tip jar?  Instead of asking the stockholders of Wal-Mart to give something back of those profits they could be sharing more lovingly, ask the customers!  After all, it is we the customers who foolishly think we're getting a bargain and not realizing all the hardship such selfishness creates.  The tip jar allows the customers to give something back.  Surely, with such low prices, we can afford to give something back.

It'll probably never happen.  But just thinking about the tip jar gets at the heart of the flaw behind all those who villify Wal-Mart for exploiting its workers.

The people who work at Wal-Mart show up for work of their own free will.

I know it's hard to believe.   But Wal-Mart employees work there voluntarily.  About a million every day.  A million every day!  Incredible.  And when Wal-Mart opens a new store, people throng the doors for the opportunity to work there.

Why?  Why would people line up to be exploited?  Two answers come to mind.  The first is these pitiful fools don't know any better.  They actually think it's a good idea to work at a large, profitable corporation that exploits them paying them low wages with meager benefits.  The second possibility is that for most or all of the people who work at Wal-Mart, working there is actually a good deal.  Working there is as good or better than their next best alternative.  There may actually be a few who actually believe that it's a good idea to work at a  profitable corporation because it raises the odds that your job will still be there tomorrow.

How would these workers feel about the tip jar?  Would they be grateful for the helping hand?  Or is it possible that they might find it a tad insulting, a tad condescending, a tad patronizing?  How many of those million Wal-Mart employees are actually proud to work there?

A reporter once told me how sorry she felt for Wal-Mart workers because they were treated like slaves.  Yes, I agreed, the hardest part of the job is lugging the ball and chain out to the car at the end of the day.

But it turns out that they actually choose to work there.  There is no ball and chain.  How can this be?

When Sam Walton was alive, whenever I shopped at Wal-Mart, I'd ask the cashier if she liked her job.  Invariably, she would say yes and I would marvel at Walton's ability to create enthusiasm through such a large organization.

Now where I live, the Wal-Mart is far away.  (Thank you Montgomery County politicians for making it so hard for me to exploit those poor workers at Super Wal-Mart!)  So I don't get there often.  The next time you're in a Wal-Mart, ask the cashier if she likes her job.  And whether she says yes or no, give her a ten or twenty-dollar bill as your way of giving something back, your way of saying you're sorry for shopping where the prices are low as a result of her sweat and sweatshop wages, your way of brightening her day until the tip jar shows up.  How do you think she would respond?

For economics students:  If the tip jar actually did happen and people gave generously, would Wal-Mart employees be better off?

Soft Values and Business Responsibility

The other day a friend asked me what I thought of "soft values."  Here was her scenario, at least as I remember it.  You have a business that is struggling.  You can lay off some people to make it viable.  There are 100 additional workers you can lay off and by doing so, make even more money.  Should you do it, or should you be content with making enough money as it is?  She wanted to know if I thought the soft values should count, meaning, the virtue of keeping 100 families happy and intact or should you just go for the jugular and maximize profits.

I gave her a few answers.  One of them was one that I give in my book, The Invisible Heart.  It's OK to be charitable with your own money.  It's not so virtuous to be generous with other people's money.  A publicly traded business should maximize profits and let shareholders be charitable with those returns if they so choose.  I also gave the other answer I gave in the book—that there is no such thing as "enough" profit.  The world is highly uncertain and sacrificing profits in the name of "soft values" may end up destroying the company and putting everyone out of work.  Peter Drucker, who died on Friday, said this very eloquently in his first column for the Wall Street Journal (sr, or maybe not-it's on the editorial page) in 1975:

[B]usinessmen owe it to themselves and owe it to society to hammer home that there is no such thing as "profit." There are only "costs": costs of doing business and costs of staying in business; costs of labor and raw materials, and costs of capital; costs of today's jobs and costs of tomorrow's jobs and tomorrow's pensions.

There is no conflict between "profit" and "social responsibility." To earn enough to cover the genuine costs which only the so-called "profit" can cover, is economic and social responsibility -- indeed, it is the specific social and economic responsibility of business. It is not the business that earns a profit adequate to its genuine costs of capital, to the risks of tomorrow and to the needs of tomorrow's worker and pensioner that "rips off" society. It is the business that fails to do so.

I think my friend might reply that the world would be a better place if business widens it's specific responsibilities a bit.  The easy answer (and one I have used before) to that is, OK, how much is a bit?  But I think there are two better answers.  The first is that running a profitable business requires using soft values.  It's easy to caricature the greedy profit-maximizing business owner as ruthless.  But the best businesses are led by people who excel at soft values, who treat their customers and employees well.  Business that treat customers and employees badly find it harder to thrive.

The other answer is Hayek's, from The Fatal Conceit.  Running a family like a business destroys it.  Running business like a family destroys it and leads to tyranny.  (My copy of TFC is in my other office, so if anyone out there has the full quote, I'd love to have it.)  I think my friend and millions of others want businesses to be a little bit like a family.  I just don't think that's any more possible than making a family a little like a business.  But there is probably much more to say.

I am opening up the comments section for this post to give you a chance to say it.  Have at it.