Krugman - War on Wages

Paul Krugman is - excuse the pun - waging war. And his use of Wal Mart as an example of exactly how companies chose to depress paypackets is interesting. (I'm quoting here from Mark Thoma's longer extract.)

The problem from the company’s point of view, then, is that its workers are too loyal; ... not enough workers quit before acquiring the right to higher wages and benefits. Among the policy changes the memo suggested to deal with this problem was a shift to hiring more part-time workers...

And the strategy is being put into effect. ... Wal-Mart ... wants to transform its work force to 40 percent part-time from 20 percent.” Another leaked Wal-Mart memo describes a plan to impose wage caps, so that long-term employees won’t get raises. And the company is taking other steps to keep workers from staying too long: in some stores, according to workers, “managers have suddenly barred older employees with back or leg problems from sitting on stools.”

Krugman's remarks put into practical view something that Rob Shapiro has discussed before - how company's are forced to depress wages in order to remain competitive in the face increased competition:

The first effect of an increase in competitive pressures is that companies find it harder to raise their prices, even when their costs increase. For example, health insurance and energy costs have risen by more than 60 percent since 2001, and pension costs have gone up sharply as well for many of them. When a firm’s costs increase and competitive pressures prevent it from raising its prices enough to cover those cost increases, it has to find other costs to cut – and most have turned to jobs and wages. And that’s what’s been happening in the United States.

And, as NDN has been saying for a while, this is is why this happens. So good job to Krugman for keeping the pressure on.