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I would say that the monopoly fear is a pretty significant one? Walmart and Amazon are the largest US retailers in the physical and online retail spaces, respe

by cepth 8y ago

I would say that the monopoly fear is a pretty significant one? Walmart and Amazon are the largest US retailers in the physical and online retail spaces, respectively. Yes, they have helped reduce prices on goods for the average American consumer. The question is, at what cost? The US taxpayer also picks up the welfare tab for Walmart and Amazon employees, as well as the costs associated with un- or under-insured people getting sick from physically demanding work. The American taxpayer directly subsidizes these companies [1][2]. If you create a system where the lowest cost retailer now has government-backed authority to lower prices to whatever it wants, this means that stores that pay their workers a fair wage are naturally at a disadvantage. Over time, the consumer may benefit from lower prices, but on the supply side (retailer + manufacturer), an increasing share of the profits accrue to the retailer as they are able to negotiate lower and lower prices from the manufacturer due to their increased scale. The kicker is that the enforcement of predatory pricing laws is difficult. Short of selling the goods at a cost below the invoice price paid to the manufacturer, on what basis can the government intervene? Physical retailers generally need to markup goods 50-100% depending on the industry. If Amazon is willing to sell the goods at a 0.5% markup to gain market share, can the government intervene? What's the brightline for markups below which the state can intervene? --- [1] https://www.forbes.com/sites/clareoconnor/2014/04/15/report-walmart-workers-cost-taxpayers-6-2-billion-in-public-assistance/ https://www.forbes.com/sites/clareoconnor/2014/04/15/report-... [2] https://newfoodeconomy.org/amazon-snap-employees-five-states/ https://newfoodeconomy.org/amazon-snap-employees-five-states...

alkonaut 8y ago
I agree there is a risk of monopoly, especially in the US. Also in the US, the fact that employees can be laid off very easily and tax payers pick up the tab adds to the problem. But again, that’s more a problem in the US than in Europe. So perhaps it all hangs together (narrator: it does). Having consumer- rather than business friendly regulation might be intrinsically linked to social safety nets, and so on. It’s possible that just flipping one type of regulation in the US would be disastrous without changing a lot of other things. For example, I’m a big believer in single payer, but I don’t think the US can easily adopt it without also changing a lot of other related things in healthcare production, education and so on. Merely adopting single payer might just mean getting the drawbacks but not the benefits such as smaller overheads. So I think the EU regulations are actually pretty consistent and it’s possible the US framework is too. Re: predatory pricing: I’m no expert but I think “how low can you go” is basically no lower than what any other retailer can go at your scale, without making a loss. Others explained it better elsewhwre in this discussion.
baddox 8y ago
> The question is, at what cost? The US taxpayer also picks up the welfare tab for Walmart and Amazon employees, as well as the costs associated with un- or under-insured people getting sick from physically demanding work. The American taxpayer directly subsidizes these companies [1][2]. But would the American taxpayer subsidize the entire retail market any less if it were the same size but split up among several smaller and less efficient (meaning consumer prices were higher)? I could see that being possible, but I see no reason to assume it would be likely. Yes, one way that Amazon and Walmart reduce their costs (and thus their prices) is by paying certain employees as little as possible, but it seems to me that smaller firms can and probably often do the exact same thing, but are still less efficient than Amazon and Walmart due to economies of scale that are unrelated to labor costs.
- cepth 8y ago
  I think there's a pretty simple microeconomics framework through which someone could make an argument about how one huge player depresses wages. Just think of Amazon as a monopsony, a single buyer of a good, for labor. The Roosevelt Institute, which is left-leaning, did a project on this recently: http://rooseveltinstitute.org/how-widespread-labor-monopsony-some-new-results-suggest-its-pervasive/ http://rooseveltinstitute.org/how-widespread-labor-monopsony.... Noah Smith summarized the findings of another recent economics research paper, which found that there's a significant difference in wages offered in areas with multiple employers hiring for a similar position (https://www.bloomberg.com/view/articles/2017-12-29/monopolies-may-be-worse-for-workers-than-for-consumers https://www.bloomberg.com/view/articles/2017-12-29/monopolie...).
dragonwriter 8y ago
> The question is, at what cost? The US taxpayer also picks up the welfare tab for Walmart and Amazon employees They'd pick up the welfare tab if Walmart or Amazon didn't employ them, too; the only area where that might increase with their employment is EITC, since EITC goes up with earned income to a point. While Walmart and Amazon should be cashed out for our labor practices, the idea that welfare that their employees qualify for is a subsidy to them is odd. The subsidy is favorable tax treatment of the capital income of their shareholders compared to the labor income of their workers, but that's not something particular to low-paying employers.
- cepth 8y ago
  I can try fleshing out my line of thinking a little more. Amazon, Walmart, et al. have put several industries out of business. The effect of the big box stores and ecommerce sites on traditional retail is visible anywhere malls are failing. Their distortionary effect on the number of people who need welfare occurs through 1) putting traditional businesses out of work and 2) placing its warehouses in areas where wages are depressed (sometimes due to their own competitive behavior). In the second case, wages are anchored at a lower level, and factors like hysteresis further depress potential earning potential. I would agree that strictly speaking, you're correct that the burden on the social safety net is maybe reduced when workers take a low wage job at Amazon vs. being completely unemployed. But, Amazon and Walmart have collectively displaced hundreds of thousands, if not millions of jobs in industries like corner stores, grocery stores, bookstores, appliance shops, etc. Regardless of whether you believe that Amazon type companies are responsible for displacing people from jobs, my argument is that someone who works at a legacy retail outlet is likely making a better wage. Amazon can swoop into areas where the labor market is depressed, and then offer a lower wage than is offered in legacy retail. They can offer a wage that might be considered not-livable, because the social safety net will make up the difference. It seems pretty uncontroversial that Amazon's cost per unit of labor is lower than that of a legacy retailer. Do you see any reason why this isn't the case?

by cepth 8y ago

alkonaut 8y ago

I agree there is a risk of monopoly, especially in the US. Also in the US, the fact that employees can be laid off very easily and tax payers pick up the tab adds to the problem. But again, that’s more a problem in the US than in Europe. So perhaps it all hangs together (narrator: it does). Having consumer- rather than business friendly regulation might be intrinsically linked to social safety nets, and so on. It’s possible that just flipping one type of regulation in the US would be disastrous without changing a lot of other things. For example, I’m a big believer in single payer, but I don’t think the US can easily adopt it without also changing a lot of other related things in healthcare production, education and so on. Merely adopting single payer might just mean getting the drawbacks but not the benefits such as smaller overheads. So I think the EU regulations are actually pretty consistent and it’s possible the US framework is too. Re: predatory pricing: I’m no expert but I think “how low can you go” is basically no lower than what any other retailer can go at your scale, without making a loss. Others explained it better elsewhwre in this discussion.

baddox 8y ago

> The question is, at what cost? The US taxpayer also picks up the welfare tab for Walmart and Amazon employees, as well as the costs associated with un- or under-insured people getting sick from physically demanding work. The American taxpayer directly subsidizes these companies [1][2]. But would the American taxpayer subsidize the entire retail market any less if it were the same size but split up among several smaller and less efficient (meaning consumer prices were higher)? I could see that being possible, but I see no reason to assume it would be likely. Yes, one way that Amazon and Walmart reduce their costs (and thus their prices) is by paying certain employees as little as possible, but it seems to me that smaller firms can and probably often do the exact same thing, but are still less efficient than Amazon and Walmart due to economies of scale that are unrelated to labor costs.

cepth 8y ago
I think there's a pretty simple microeconomics framework through which someone could make an argument about how one huge player depresses wages. Just think of Amazon as a monopsony, a single buyer of a good, for labor. The Roosevelt Institute, which is left-leaning, did a project on this recently: http://rooseveltinstitute.org/how-widespread-labor-monopsony-some-new-results-suggest-its-pervasive/ http://rooseveltinstitute.org/how-widespread-labor-monopsony.... Noah Smith summarized the findings of another recent economics research paper, which found that there's a significant difference in wages offered in areas with multiple employers hiring for a similar position (https://www.bloomberg.com/view/articles/2017-12-29/monopolies-may-be-worse-for-workers-than-for-consumers https://www.bloomberg.com/view/articles/2017-12-29/monopolie...).

dragonwriter 8y ago

> The question is, at what cost? The US taxpayer also picks up the welfare tab for Walmart and Amazon employees They'd pick up the welfare tab if Walmart or Amazon didn't employ them, too; the only area where that might increase with their employment is EITC, since EITC goes up with earned income to a point. While Walmart and Amazon should be cashed out for our labor practices, the idea that welfare that their employees qualify for is a subsidy to them is odd. The subsidy is favorable tax treatment of the capital income of their shareholders compared to the labor income of their workers, but that's not something particular to low-paying employers.

cepth 8y ago
I can try fleshing out my line of thinking a little more. Amazon, Walmart, et al. have put several industries out of business. The effect of the big box stores and ecommerce sites on traditional retail is visible anywhere malls are failing. Their distortionary effect on the number of people who need welfare occurs through 1) putting traditional businesses out of work and 2) placing its warehouses in areas where wages are depressed (sometimes due to their own competitive behavior). In the second case, wages are anchored at a lower level, and factors like hysteresis further depress potential earning potential. I would agree that strictly speaking, you're correct that the burden on the social safety net is maybe reduced when workers take a low wage job at Amazon vs. being completely unemployed. But, Amazon and Walmart have collectively displaced hundreds of thousands, if not millions of jobs in industries like corner stores, grocery stores, bookstores, appliance shops, etc. Regardless of whether you believe that Amazon type companies are responsible for displacing people from jobs, my argument is that someone who works at a legacy retail outlet is likely making a better wage. Amazon can swoop into areas where the labor market is depressed, and then offer a lower wage than is offered in legacy retail. They can offer a wage that might be considered not-livable, because the social safety net will make up the difference. It seems pretty uncontroversial that Amazon's cost per unit of labor is lower than that of a legacy retailer. Do you see any reason why this isn't the case?