Thursday, January 11, 2018

Security Limits Opportunity

Real life is an untidy, somewhat chaotic thing. And economics is part of real life.

For example, we’re a couple of weeks since the passage of the Tax Cuts and Jobs Act. In the wake of that, many companies have offered bonuses to the employees and other investments in the business. Among them, Walmart this week announced raising their starting wage to $11 an hour, which is more than $3 above the national minimum wage.

No law was required to force them to do this. The free market did it. Entry workers are in short supply, so much so that they need to offer more money to entice the workers of the level they want. That’s a good thing for every entry-level worker willing to do the work Walmart wants done.

One of the Sam's Club locations closed in Houston
image from KHOU

But then, this morning, without prior warning, the Walmart corporation closed about 100 Sam’s Club 
locations across the country. Sam’s Club, if you’re not familiar, is the big box store branch of Walmart. It requires a membership fee, and quantities and sizes of products tend to be large. But prices are typically better than you can get elsewhere. Three of these closed stores were in and near Houston.

When I heard the news, I immediately went to the internet to find out if our nearby store was among them, and breathed a sigh of relief. The closed ones are far away enough that I’ve never been to them.
But employees weren’t even given a heads up. The announcement apparently went out overnight. The company explains,

After a thorough review of our existing portfolio, we’ve decided to close a series of clubs and better align our locations with our strategy. Closing clubs is never easy and we’re committed to working with impacted members and associates through this transition.
The suddenness seems harsh. But employees will get pay for next 60 days and are eligible to apply for transfers to other Sam’s Club locations or Walmart stores.

If you see the sudden upheaval that these employees face —the untidy chaos—as a problem that needs to be solved, you might forget that the free market solves this “problem” better than government or any other way.

In France there are guarantees that you can’t lose your job for life. That’s security. But there are steep costs for that, in money and freedom. I met an exchange student during recent travels. She was studying here to avoid, or postpone, some requirements from her high school in France. She was expected, by age 16, to have decided on her life’s work. From that point on, all education and opportunities would be limited to that decision—assuming she qualified for her choice. She would have a job waiting for her after graduation, but no opportunity to change her career once she realized, at age 19 or 23, that what she loved at 16 didn’t still interest her or fit who she grew up to be.

That kind of limitation might work for people who are raised from birth to believe job security is everything, and choice and flexibility are overrated. But here in America, that kind of control over life choices bristles with tyranny. And we won’t stand for it.

Does that mean we don’t care about workers at Sam’s Club who just lost their jobs? Of course we care. But the solution is in the market. We know—and it’s also evidenced by Walmart’s raise in wages—that there’s something of a shortage of workers right now (at last). So those workers will be in demand elsewhere.

It’s a general rule of thumb that, the lower the pay rate, the quicker a worker can find a job. Over a certain level, you add a month of searching for every $10,000 in annual pay. Except for management, most of the laid off workers are in the under $20,000 a year range; that means they’re very likely to find new work within the two months of their severance pay. If they get work very quickly with a different company, that severance is actually a bonus.

Lack of control, and that sense of insecurity, may feel uncomfortable while you’re in a moment of upheaval. But this is America, where opportunities abound when government gets out of the way. There’s always a good chance that change will lead to something better. There’s a reason we still talk about the American Dream.

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