How Walmart Made Liberals Turn Right

The left gets a lesson in basic economics.

Liberals and conservatives do not agree with each other, as a matter of general principle. If one side says something is true, then the other side will try hard to prove it isn't, just to show them. So it is nice to see liberals come around on a point conservatives have been making for decades: Welfare leads to moral rot.

Conservatives have made this point over and over again, in books and conferences and blog postings ad nauseam. Twenty years ago David Frum, a former speechwriter for George W. Bush, wrote that "without welfare and food stamps, poor people would cling harder to working-class respectability than they do now." A couple of years ago Paul Ryan made the same point: "We don't want to turn the safety net into a hammock that lulls able-bodied people to lives of dependency and complacency, that drains them of their will and their incentive to make the most of their lives."

By giving people their daily bread, conservatives say, the welfare state robs them of any reason to get off the couch and make it themselves. And this is bad not just because it imposes economic costs on society. It is bad because it corrodes virtue. Industry, thrift, a go-getter spirit—these are important qualities in both the individual and the community. Laziness, sloth, dependence on others—these are character flaws. Those on welfare could go to work and do for themselves, conservatives say, if only the welfare state hadn't enabled them not to.

Liberals think this is all bunk. While some, such as economist Paul Krugman, might concede that "incentives do have some effect on work effort," they contend the effect is quite small. What's more, they say conservatives get the causality backward. People receive government benefits because they are poor, and they are poor because of economic circumstances. They aren't poor because of government benefits.

Or so they used to say. But then came Walmart.

A couple of weeks ago Walmart announced it would raise hourly wages for half a million employees. The New York Times argued it should be forced to raise pay even further through an increase in the national minimum wage. After all, the paper said, there is "little doubt that Walmart (and other employers) would pay more if low wages were not, in effect, subsidized by taxpayers, who pay for the food stamps and other public assistance that low-wage workers rely on to get by."

The Times was referring to a study, such as it was, purporting to show Walmart's low wages cost taxpayers $6.2 billion in public assistance, including food stamps, Medicaid, and housing benefits. Other studies have purported to show similar things about the fast-food industry—which ostensibly costs the taxpayers $7 billion in social-welfare spending.

These tendentious claims have several shortcomings, such as loaded assumptions (PolitiFact has ruled a similar claim, by an MSNBC figure, "mostly false") and the fact that a slightly smaller percentage of Walmart's workforce receives public benefits than the average for the U.S. retail sector as a whole.

Imagine, too, what would happen if Walmart and fast-food restaurants went out of business tomorrow. Would other companies snap up all their employees, perhaps even pay them better? Probably not. (In fact, the increase in job applicants might depress wages elsewhere.) It is far more likely that the shutdowns would lead to higher unemployment and therefore even more social-welfare spending. Hence Walmart and other low-wage employers probably reduce the total amount of social-welfare spending in the U.S., rather than increase it.

But forget all that. Assume the company's critics are right—that Walmart is leaning on public assistance to avoid pay hikes it otherwise would have to make. The criticism here isn't simply an economic one. It's also a moral one.

Greed, stinginess, lack of compassion—those qualities that supposedly produce Walmart's low wages—are character flaws. Indeed, one of the groups criticizing Walmart's pay scales is Americans for Tax Fairness—and fairness is a question of moral judgment. Another left-leaning group, Demos, lamented in a report on raising Walmart pay that "American workers are working harder for less" even as the rich get richer. Walmart, says The American Prospect, creates "an America where millions of people who get up and go to work each day are nevertheless paid too little to feed themselves."

You get the idea: Walmart has a moral obligation to pay its workers more—and it would, if not for all the food stamps, housing assistance and medical benefits those workers receive from the federal government.

What is this but the conservative welfare critique applied to a different party? It's not economic circumstances that have led to Walmart's low wages, but moral shortcomings. Government assistance has lulled an able-bodied company into dependency and complacency, draining it of the will and the incentive to do the right thing for its workers.

The two arguments continue running in parallel. Conservatives argue that poor people would be better off in the long run if they took even menial jobs, and thereby started to develop the habits of character that are essential for anyone who wishes to prosper.

Liberals argue that Walmart and other low-wage companies would be better off if they paid workers more. As Demos argued two years ago: "Walmart . . . workers earn too little to generate the consumer demand that supports hiring and would lead to economic recovery. . . . If Walmart redirected its current spending to invest in its workforce, the benefits would extend to all stake-holders in the company—customers, stockholders, taxpayers, employees and their families—and the economy as a whole."

Conservatives used such arguments to push through welfare reform, forcing recipients to seek the jobs right-wingers felt they needed for their own good. And as the Times put it the other day about Walmart's recent wage announcement, "Walmart can readily afford to do better than those measly increases. But it is very unlikely to do that voluntarily, without government action."

By government action, the paper meant raising the minimum wage, not cutting welfare. But be thankful for small favors: At least some progressives are beginning to admit there's a problem.