Thursday, January 26, 2006

Wal-Mart and Jobs

Thomas DiLorenzo, writing at the Mises Economics Blog, asks "Is Wal-Mart Overpaying?":
If the idea of prices and wages is that they should clear the market, leaving neither shortages or surpluses, consider that Wal-Mart might be overpaying. According to "The new Wal-Mart Stores Inc. location opening Friday in suburban Evergreen Park received a record 25,000 applications for 325 positions, the highest for any one location in the retailer’s history."
My comment:

There are a few things missing from your formulation. First, Wal-Mart is seeking persons with certain qualifications (as low as those qualifications might seem to us lofty bloggers). Having been in the business of hiring people (my portfolio included what's now called "human resources"), I can tell you that job openings typically attract dozens of unqualified applicants for every qualified applicant.

Second, it's also conceivable that Wal-Mart is offering better compensation than the applicants (including the qualified ones) are able to command elsewhere in the relevant geographic area. Given Wal-Mart's superior business model, a person with a given set of qualifications is worth more to Wal-Mart than he or she is to, say, a 7-11 down the road.

Third, it's also conceivable that there is presently a "surplus" of persons with the requisite skills in geographic area; reluctance to move, for various reasons, tends to create a kind of geographic "stickiness." Thus, Wal-Mart's entry creates jobs and soaks up some of the surplus.

The market-clearing notion applies only in the "perfect" microeconomic world where there is no stickiness and no growth.