Krugman and Wal-Mart
By Arnold Kling
According to George Reisman, Paul Krugman is now accusing Wal-Mart of destroying jobs.
Krugman notes that Walmart’s competition against other retailers also destroys the jobs its competitors had offered before being put out of business by its competition. He attempts to show that Walmart has destroyed more jobs in this way than it has created.
Paul used to argued against the people who claim that international trade destroys jobs. He used to argue for the economist’s point of view on trade, which is that it is like technological innovation. It increases efficiency, but increased efficiency does not destroy jobs. It changes jobs around, and overall raises the average standard of living.
That same argument would apply to Wal-Mart, and Paul knows it.
I do not have access to the column, so I do not know if Reisman is being fair to Paul or not.
UPDATE: A reader showed me the column. Here is an excerpt:
Because Wal-Mart’s big-box stores employ fewer workers per dollar of sales than the smaller stores they replace, overall retail employment surely goes down, not up, when Wal-Mart comes to town. And if the jobs lost come from employers who pay more generously than Wal-Mart does, overall wages will fall when Wal-Mart moves in.
…Maybe it should consider an alternative strategy, such as paying higher wages.
This is not persuasive. Wal-Mart hires low-skilled workers. If you want the wages of low-skilled workers to go up, what you need are more Wal-Marts, so that there is a lot of competition for them. If you want higher-skilled workers to enjoy high wage jobs, what you need is for them to be in highly productive businesses.
If Wal-Mart pays higher wages without competitive pressure to do so, that does not solve anyone’s problem. Krugman really knows better. Or used to.