Explaining Wal-Mart’s Wages & Benefits Increase

An article out today by Anne D’Innocenzio of The Associated Press addresses Wal-Mart’s announcement it will increase wages and benefits for its workers. Two main explanations appear in the article, each of which is associated with a different political position.

First, Wal-Mart is increasing wages and benefits to attract and retain the best employees. This explanation locates firms and workers in a “labor market” in which workers are free to choose employers and employers are free to choose workers. The presumption regarding workers is that workers choose employers primarily based on compensation, including both wages and non-wage benefits. The presumption regarding employers is that employers cannot choose employees but can only attract employees, and the primary means of attracting employees is wages and benefits. This explanation is associated with a conservative political view that prioritizes “economic freedom” based on the pursuit of economic incentives.

Second, Wal-Mart is increasing wages and benefits to satisfy demands of workers organized into formal and informal unions. This explanation locates firms and workers not in a labor market but instead in a political process of opposition in an ongoing confrontation between “management” and “labor”. The presumption is that management represents and bargains for the interests of the firm, while labor represents and bargains for the interests of the workers. This explanation is associated with a liberal political view that prioritizes “interest group politics” based on the pursuit of collective benefits.

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