Free markets are not so free

As the Legislature debates the two related issues of right to work and minimum wage, we’re probably going to hear about theories like free markets and free choice. So let’s get real.

Some things are still traded in completely free markets, I suppose, but I would hesitate to name one nationally marketed product that is not somehow affected (for better or worse) by subsidies, tax breaks, or other factors that have nothing to do with consumer choice. (If you find one, please write to me!)

We are all subsidizing Walmart. If you don’t shop there, you are subsidizing the purchases of people who do.

Americans for Tax Fairness issued a report in April 2014 called “Walmart on Tax Day: How Taxpayers Subsidize America’s Biggest Employer and Richest Family.” The report is available online.

In this report, a state-by-state analysis shows the estimated number of Walmart employees in New Mexico as 14,322. The estimated public assistance costs for those New Mexico employees is $63.2 million. The estimated yearly total of tax breaks and subsidies to the Walmart stores in New Mexico, benefitting the company’s owners and stockholders, is $73.7 million. Those two figures add up to $136.9 million – money either not collected in taxes or paid out in public assistance to workers.

The report does not break down how much of this money is a direct loss to New Mexico. It’s a mixture of federal, state and local dollars. Of course, if you’re a taxpayer, it’s all coming out of your pocket.

The report also analyzes other factors such as millions in additional benefits to the Walton family (Walmart’s majority owners) through tax breaks on the income they receive from the company.

That’s just Walmart – not the only company of its kind, but possibly the most egregious.

It used to be, or at least the mythology says, that success in the marketplace was based on giving consumers what they want at the best combination of price and quality, determined by the “invisible hand” of free consumer choice. If you build a better mousetrap, the saying went, the world will beat a path to your door. Nowadays corporations need not a quality product but a creative advertising agency, a lot of lobbyists, preferential regulations and the cheapest available labor.

In a pure free-market world, minimum wage would be the wage earned by teenagers doing entry-level work, learning the ropes and getting better pay as they master workplace skills and contribute more to their employer’s profits.

But that’s not today’s world. Workers take low-paying jobs because there aren’t enough higher paying jobs. Policy makers continue to debate how to improve the job market, create opportunity, bring manufacturing back from overseas and the rest of the old blah-blah-blah. In New Mexico, the debate is about how much to give away in incentives to persuade companies to locate here. Some workers have a tough time, and the rest of us pay taxes for public assistance for workers who can’t support their families on their earnings.

So one way to think about a minimum wage increase is simply that it shifts the cost of supporting the working poor from the taxpayers to the customers. Maybe there’s a way to write a minimum wage law that applies primarily to employers who are bursting with profit at taxpayer expense while going easy on small business.

Regarding right to work laws, there’s a very simple way for employers to prevent unionization. Give workers a decent deal and they won’t want to unionize. Pay them adequate wages and treat them with dignity. For goodness’ sake, train managers so they encourage rather than insult the people they supervise. That’s the free market solution.



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