The Case for Shopping at Kroger; A. Woodlief

wages. To them we were just "classists" who don't care about the 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 boy cott of Kroger while its workers were on Anthony Woodlief is a third-year graduate stu dent in American government at the University of Michigan. 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 to three inches, we would see the decline in his value as a basketball player reflected in his salary. Likewise, grocery workers, who are clearly in a competitive market in this area,can see the value of their labor to the rest of us reflected in their wages. Grocery workers were probably earning what stocking shelves, punching 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 unable 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, how ever, do not think in terms of the value of the 107 108 THE FREEMAN • MARCH 1993 product of a 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-influ enced notion that wages are a reflection of a person's intrinsic value, their visceral reac tion against low-wage jobs might be justi fied. 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 tenured radi cals and disillusioned members of the Rev olutionary Workers League, strike support ers would not favor abandoning a market economy. Instead, they would like to mod ify it and make it more humane, by their standards. With regard to the Kroger work ers, most sympathizers don't think in Marx ist terms (although their thinking is influ enced 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 em ployees, 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 eco nomic 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 savings 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 each week if it means that those people will be paid a 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 ajob, 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 cer tain living standard does not necessitate support of demands by low-wage, unskilled workers for higher wages and benefits. Re quiring government to meet those demands with income transfers would be a less dis honest way to address the costs of these dubious goals and would avoid some of the market distortions created by paying artifi cially high wages for a job that is not worth that much to consumers. Of course, the American public is proba bly much more sympathetic toward de mands for a "decent" wage, with its hidden THE CASE FOR SHOPPING AT KROGER 109 costs in terms of prices and efficiency, than they would be toward an outright welfare program for workers whose skills are not very valuable to the economy. That cer tainly 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 "decen cy" rather than living standard entitle ment-it allows them to obfuscate the issue and avoid difficultquestions 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 New from Economics America! 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 ifwe want to help people obtain our idea of a decent living standard, we should not go about doing so by distort ing 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 thought ful 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 road blocks 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. D THE 1993 RIGHT GUIDE This comprehensive guide to the worldwide conservative and libertarian movement has earned praise from many: "Immensely useful directory" (Robert Hessen, Hoover Institution); "Best documentation. . .coverage of libertarian organizations is both careful and extensive" (William Niskanen, Cato Institute); "No previous directory has covered as many conservative and libertarian organizations" (E. Weber, Librarian, Univ. of Michigan); "Awesomely complete" (Julian Simon, Univ. of Maryland).

The Right Guide lists 2,500 organizations by name, address, and contact; offers 500 in-depth profiles, and much more; covers 6 continents, 101 nations, and 490 organizations outside the U.S.A. The Right Guide is an oversized, 8" x 11" format, library quality clothbound book. It includes a key word index and 456 pages. Partial List of Entries: Art-Literature-Culture, Economics, Education, Environment, Foreign Policy, Foundations, Gender, Gold-Backed Money, Health Care, Immigration, International, Legal, Media, Military, Privatization, Pro-Choice, ProLife, Publishers. Credit Card Orders (VISA/Mastercard): 800-878-6141 Satisfaction Guaranteed. $49.95 (includes shipping and handling). Mail orders must be prepaid by money order or check drawn on a U.s. bank. Economics America, Inc., 612 Church St., Ann Arbor, MI 48104 THEFREEMAN IDEASON LIBERTY RICHARD COBDEN: CREATOR OF THE FREE MARKET by John Chodes T he first half of the nineteenth century in England was much like contemporary America: It was a country strangled by bureaucratic regulations. Many people were always hungry, not because of poverty level wages, but because the price of grain for bread was kept artificially high by laws which simultaneously prevented the impor tation of foreign grain and subsidized do mestic producers. Food riots, domestic un rest, and a stagnating economy were not sufficiently frightening to make the govern ment eliminate these barriers.