How Did Walmart Get Cleaner Stores and Higher Sales? It Paid Its People More

Can the answer to what ails the global
economy be found in the people in blue
vests at your neighborhood Walmart?

What most store employees probably didn’t know was that Mr. McMillon and his executive team, who had been promoted into their jobs a year earlier, were under extraordinary pressure from investors. They needed to reverse a slide in business and fight off threats in all directions — dollar discounters on the low end, Amazon online, direct competitors like Target

.. “Walmart U.S.’s relentless focus on costs does seem to have taken some toll on in-store conditions and stock levels,” they wrote. The analysts wryly added: “If an item is not on the shelf, you cannot sell it.”

.. The company had been busy raising profits by cutting labor costs. The number of employees in the United States fell by 7 percent from early 2008 to early 2013, for example, a span in which the square footage of stores rose 13 percent.

.. Walmart had become viewed as a last-ditch option for employment — not the place that ambitious people might want to work. They were under such pressure to keep labor costs low that the employees they hired showed little loyalty or career-building devotion to their jobs.

.. To macroeconomists, it suggested that a falling unemployment rate was finally creating the response that theory suggests it should: employers raising wages to attract the workers they need.

.. And executives really had concluded that customer service woes and slumping sales were because of underinvestment in employees.

.. And the actions far well short of what Zeynep Ton, an associate professor of operations at the Sloan School of Business at M.I.T., calls a “good jobs strategy,” in which a retailer builds its entire operating philosophy around better-compensated staff members who are empowered to make decisions.

.. An employee making more than the market rate, after all, is likely to work harder and show greater loyalty

.. What is interesting about this is that, if you look at what’s ailing the broader United States economy, it looks a lot like what you would expect if employers were, en masse, failing to understand the possibility of efficiency wages.

.. Individually, employers may think they are making rational decisions to pay people as little as possible. But that may be collectively shortsighted, if the unintended result is less demand for the goods and services they are all trying to sell to these same people.

.. “Out of the gate, they’ve seen some improvement, but I think that’s because they were doing Retail 101 so poorly,” said Brian Yarbrough, a retail analyst at Edward Jones & Company. “The better question is what happens next year and the following year. The low-hanging fruit has been harvested.”

The Cost of a Decline in Unions

More broadly, I disdained unions as bringing corruption, nepotism and rigid work rules to the labor market, impeding the economic growth that ultimately makes a country strong.

.. about one-fifth of the increase in economic inequality in America among men in recent decades is the result of the decline in unions.

.. A study in the American Sociological Review, using the broadest methodology, estimates that the decline of unions may account for one-third of the rise of inequality among men.

.. A full-time construction worker earns about $10,000 less per year now than in 1973, in today’s dollars

.. worst abuses by far haven’t been in the union shop but in the corporate suite.

.. Germany’s car workers have a strong union, and so do Toyota’s in Japan and Kia’s in South Korea.

.. In Germany, the average autoworker earns about $67 per hour in salary and benefits, compared with $34 in the United States. Yet Germany’s car companies in 2010 produced more than twice as many vehicles as American companies did, and they were highly profitable. It’s too glib to say that the problem in the American sector was just unions.

.. raises concerns about some aspects of public-sector unions

The Case for Smart Protectionism

About 11.5 million of the 11.6 million jobs created in the recovery have gone to workers with at least some college education, according to the Georgetown University Center on Education and the Workforce.

.. The U.S. government spends 0.4 percent of GDP on childcare and early education, while France, Denmark, and Sweden all spend at least three times more as a share of their economies. It is cheaper to publicly invest in the achievement and health of poor young children than to spend billions trying to remediate them as adults.

.. Many workers don’t have time for training, because U.S. welfare policy pushes them to find work immediately, even if it doesn’t lead to a more prosperous career

.. Automation redistributes wealth—from routine-based work to work that cannot be automated. Globalization redistributes wealth, too—from activities that can be off-shored to the owners of global supply chains. Economic history is one long story of wealth being created, destroyed, consolidated, and, yes, redistributed.

.. Of the 27 million net new jobs created between 1990 and 2008, 99 percent occurred in so-called “nontradable” occupations, which is work that must be done locally, such as a treating patients, teaching students, or cutting people’s hair.