The Kroger grocery workers in my section of Michigan recently ended a strike of several weeks after management gave in to some of their demands for higher wages and benefits. Most of my friends and acquaintances refused to shop at Kroger during the strike and were shocked that I did not join their boycott. When they visited me, some even asked for assurances that the food I was serving had not been purchased from Kroger. The University of Michigan graduate student teaching union, to which I am forced to pay dues, organized members to help the Kroger workers picket and harass customers. Union officials and opinion columnists assailed us non-boycotters in print with arguments about how Kroger was denying its employees "justice" and "fair" or "decent" wages. To them we were just "classists" who don’t care about he American worker.
One does not have to be a bleeding heart liberal to be concerned about the condition of low-wage workers, however, any more than one has to be a Social Darwinist to reject the arguments of the strikers and their sympathizers. Not only was it possible for those of us who cared about the conditions of low-wage workers not to support a boycott of Kroger while its workers were on strike, it was in fact the best way to show we care. Here’s why:
Economic theory suggests that wages, like other prices in a competitive market, reflect the value of their product to others. If prunes suddenly were to become the nation’s favorite fruit, we would see this increased value reflected in rising prune prices. If Michael Jordan’s vertical leap were to drop three inches, we would see the decline in his value as a basketball player reflected in his salary. Likewise, grocery workers were probably earning what stocking shelves, punishing keys on cash registers, and labeling food is worth in a modern economy, where food production and distribution is hampered by regulations and taxes, yet is still efficient, cheap, and competitive.
If Kroger workers were in fact being underpaid in a market sense, they should not have needed a boycott by customers for their strike to be successful—Kroger should have been able to find enough useful workers at the prevailing wage. Indeed, Kroger was able to find replacements at lower wages, but the accompanying boycott forced them to reconcile with the union. Many people sympathetic to unions, however, do not think in terms of the value of the product of the worker’s labor. They seem to think in terms of the value of the worker as a person. Hence the union did not argue that Kroger should pay its employees a fair price for their labor; it demanded a "decent wage," defined only as being higher in terms of salary and benefits than current wages. Certainly, if they accept the Marx-influenced notion that wages are a reflection of a person’s intrinsic value, their visceral reaction against low-wage jobs might be justified. But if that is their belief, they should be open about it and work for the destruction of what is left of our free market in the United States. In its place they could appoint a group of experts, presumably union officials and college professors, to dictate what each of us is worth as humans.
Fortunately, outside a few tenure radicals and disillusioned members of the Revolutionary Workers League, strike supporters would not favor abandoning a market economy. Instead, they would like to modify it and make it more humane, by their standards. With regard to the Kroger workers, most sympathizers don’t think in Marxist terms (although their thinking is influenced by these terms more than many of them know); they simply believe that honest workers deserve a decent standard of living for themselves and their families. If this is the goal, however, then working toward it by boycotting Kroger seems misguided for two reasons.
Forcing Kroger to provide salaries and benefits higher than mandated by the market will have at least three results: fewer employees, lower profits, and eventually higher prices for consumers. To understand the first point, remember that when we cut larger pieces of the pie, fewer people get a piece. We don’t have to rely on pastry theory to get these results; American economic history reveals that mandatory wage increases produce higher unemployment and inflated prices. It is no coincidence that heavily unionized states, like Michigan, also have a higher than average cost of living. A successful boycott by union sympathizers means higher wages and benefits for some at the expense of future potential employees who will be turned away. Furthermore, if Kroger’s profit margin is already very slim, a successful boycott could mean that all the employees lose their jobs if the company decides to pull out of the area.
On the other hand, if Kroger’s profits are large, they will shrink because of the higher costs. These shrinking profits will signal investors to place their saving elsewhere—leading, in the long run, to fewer jobs in the grocery business.
When I argue to my liberal friends that a successful strike will mean higher prices, the response is always the same: "So? Unlike you, an uncaring fascist, I don’t mind paying a few extra dollars for my groceries if it means that those people will be paid a decent living wage!" This raises my second point. The fact that wages, like other prices, send signals from buyers is only half the story. Not only do they reflect market value, they send signals to producers. In the earlier example, a sudden national craving for prunes would not only yield higher prices, it would stimulate investment in prune production as entrepreneurs tried to get in on the profits. Similarly, higher wages for a job, all other things equal, will attract more people to that job. If we force Kroger to pay wages on which a high school dropout can support a family, we in effect make it easier to be a high school dropout. Wages, in other words, are signals about what consumers value, and artificially inflating the wages and benefits of grocery workers tells other workers and potential workers that this is a profession they should choose.
The belief that everyone deserves a certain living standard does not necessitate the support of demands by low-wage, unskilled workers for higher wages and benefits. Requiring government to meet those demands with income transfers would be a less dishonest way to address the costs of these dubious goals and would avoid some of the market distortions created by paying artificially high wages for a job that is not worth that much to consumers.
Of course, the American public is probably much more sympathetic toward demands for a "decent" wage, with its hidden costs in terms of prices and efficiency, than they would be toward an outright welfare program whose skills are not very valuable to the economy. That certainly explains why we have protectionist automobile policies that cost consumers more in higher prices than if we simply paid each auto worker laid off because of foreign competition a $50,000 salary. But perhaps that is the reason why unions and their supporters speak in terms of wage "decency" rather than living standard entitlement — it allows them to obfuscate the issue and avoid difficult questions about the origin of their "entitlements" to our income.
Friedrich Hayek stressed that in a free market economy, some people necessarily fail through no fault of their own, because no one can foresee future preferences. Whether this applies to poorly educated Kroger workers is unclear (Although the case can be made that the public education system has failed at least some of them). What is clear is that if we want to help people obtain our idea of a decent living standard, we should not go about doing so by distorting market signals and telling other unskilled workers and potential workers that society values their shelf-stocking abilities enough to support them and their families with high wages. If we are truly interested in thoughtful solutions to the problems of unskilled workers, we should make the costs of being unskilled clear, and work toward revamping our education system and eliminating roadblocks in our economy so that these people have more options. But perhaps for some people, like a few of my colleagues, being politically correct is more important than thoughtful solutions.