Friday, February 17, 2012

A Very Confused Henry Blodget is at It Again

Business Insider co-founder Henry Blodget is bitching, again. This time, he thinks WalMart should pay its employees more. He writes:
Walmart made $26 billion of operating profit last year.

Walmart pays its average "associate," of which it has about 1.5 million in the U.S., just under $12 an hour. This equates to an annual salary that is below the poverty line.

Like other healthy corporations, Walmart could afford to pay its associates more. It chooses not to because it doesn't have to.
Duh! Hasn't Blodget ever heard of supply and demand. Wages are determined by this and nothing else.

If outsiders should determine what a business should pay its employees, I continue to offer my services to Blodget in going over his payroll at BI, where I think employess are way underpaid, especially Joe Weisenthal.

Blodget doesn't stop with his absurd remark about Wal Mart wages, he goes on to reveal even more ignorance about basic economics:
This decision [not to pay higher wages], which is repeated by many other healthy companies. is responsible for one of the biggest problems in our economy.

Specifically, one of the biggest problems in our economy right now is the disappearance of the middle-class. The middle-class is disappearing because middle-class jobs are disappearing. This is not just because of the loss of "manufacturing jobs." It's because of the loss of middle-class jobs. Many of these jobs have been replaced with "low-wage service jobs."

Low-wage service jobs are not low-paid because they are low-skilled. They're low-paid because they're low-paid. Companies don't have to pay their employees more, so they don't.

Unfortunately, this situation is one reason inequality in our economy has become so extreme in recent years. And it's one reason economic growth is so weak: Most Americans live paycheck to paycheck and have no money to spend on anything other than basic necessities.

Not true. The decline of the middle class is a direct result of increasing government involvement in the economy. Government designs rules and regulations that protect elitists and their firms, and make it extremely difficult for anyone else to  compete.

It is near impossible for a small firm, unless it has connections with Silicon Valley elitists, to go public. It is near impossible for someone to start up a brokerage firm. It is near impossible for a small firm to go through the hoops required to introduce a new drug,  etc.. etc.

You either work for an elitist firm or become part of the lower class masses. The elitist, with their government protection, are sucking everyone else dry. You have to be very aggressive and a hustler to succeed otherwise.

Blodget's confused interventionist-type thinking will only make things worse.


  1. Von Mises wrote:

    It is not the fault of the entrepreneurs that the consumers--the people, the common man--prefer liquor to Bibles and detective stories to serious books, and that governments prefer guns to butter. The entrepreneur does not make greater profits in selling "bad" things than in selling "good" things. His profits are the greater the better he succeeds in providing the consumers with those things they ask for.

    Blodget knows how to tap into the populist psyche.

    I give him the benefit of the doubt and speculate that he knows better than what he writes.

    But, as of now, his ALL CAPS link-bait headlines are what the people want. And the anti-capitalist content works to (ironically) make him a richer capitalist.

  2. For about the past six years I've been tracking the geographical locations of Wal-Mart stores versus those of their retail competitors so I can try to make a relatively accurate adjustment for cost of living to assess the hourly wages. The method is a bit crude but has consistently been telling; Wal-Mart on average pays their employees $.75-$1.00/hr. more than their competition. That's more than a trivial gap in pay, and yet we have folks like Blodget who see fit to lecture Wal-Mart on its pay practices. Ignorance is bliss, I suppose.