In his column in The New York Times, Paul Krugman attacks Walmart for its claim that it creates 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.
Krugman thus implicitly accepts the notion that more jobs in any given line are better than fewer, which, of course, is the very claim Walmart mistakenly makes, but on its own behalf.
Krugman, and apparently Walmart, do not understand a vital application of Hazlitt’s Economics In One Lesson, namely, that what counts is not jobs, but production. It’s a pity that Walmart doesn’t understand it, because it has made a major contribution of substantially raising the productivity of labor not only in its own retailing operations but also in the manufacturing and processing operations of its suppliers, whom it requires to become ever more efficient.
A byproduct of a rise in the productivity of labor is often a fall in wages in the field in which the rise in productivity takes place. If for example, the same number of workers become able to produce a doubled output, a fall in wages must occur if the market is prepared to buy a doubled output only at a fall in prices of more than fifty percent. The fall in wages in such a case, is a signal that some of the labor previously employed in this line may need to be employed elsewhere in the economic system.
When Krugman criticizes Walmart for possibly causing a fall in wages in its field, he does not realize that he is making the same kind of criticism made against the businessmen of two centuries ago who introduced power looms and whose competition drove down the wages of handloom weavers.
Walmart’s contribution is that it is continuing in the path of those early innovators. Like them, its contribution to the general standard of living comes from reducing the prices that people must pay to obtain the goods they want. In bringing down prices, Walmart serves to raise the buying power of everyone’s income, first and foremost the wages earned by workers throughout the economic system. It is thus an engine of rising real wages.
Krugman apparently wants to stop this rise in real wages. His favored method, government coercion, is no different in principle than the smashing of power looms by the ignorant workman of two hundred years ago known as Luddites.
