Is Free Always Good?

Like most people, I love a good bargain.  Taking part in sales and promotions can really save me some money and, if I learn of something being “free,” that’s even better!  A lot of us really like those cheap prices and freebies but are they benefiting all of us economically?

We have all probably shopped and experienced Wal-Mart and Amazon where we can get the lowest price possible.  As consumers, it’s great, but are we helping fellow workers, or any of us, to increase wages?  The Center For Economic and Policy Research doesn’t think so.  Economist Heather Boushey says the model Wal-Mart has used may have helped temporarily but we all know how Amazon is competing against Wal-Mart and pushing prices even lower.  The problem, Heather Boushey says, is the demand Wal-Mart and Amazon place on their suppliers for the lowest cost only ends up hurting workers.  She says it causes the suppliers to have difficulty paying decent wages and benefits.  In addition, because we love those great bargains Wal-Mart or Amazon, it ends up hurting other retailers like the brick and mortar ones that employ our neighbors and friends and other small-businesses that eventually close because they can’t begin to compete with Wal-Mart and Amazon .  Jobs are lost which hurt not just individuals but the communities in which they reside.

In addition, Heather says there have been stories about Wal-Mart and Amazon employees having to rely on subsidies and our cheap shopping habits are contributing to it.  Even though Wal-Mart has been pressured to increase wages, they still do not begin to pay enough.  In January of this year, Wal-Mart started raising wages to $11 an hour after receiving a tax cut from the recent congressional tax cut measure.  If you look at it from a 40 hour week perspective, that’s a gross amount of $22,800 annually which, according to the 2010 U. S. Census, is poverty level for a family of four.   It’s also unlikely most Wal-Mart employees receive 40 hours because most retail establishments don’t rely on 40-hour weeks.   A Forbes article said, too, it was important to look beyond the raise Wal-Mart provided to entry level employees.  While providing an increase is good, says the author, the $11 an hour is actually way less than what the average hourly rate is today and much less than a comparable $5 an hour wage from 1983 when you add inflation into the mix.  All of this comes from a company that just made $130.9 BILLION in revenue for 2017.  Last week, Amazon warehouse employees in European countries went on strike to protest working conditions.  Fulfillment Center employees in Europe receive about $14 U. S. an hour with Amazon saying they will be raising wages 2.5 to 5.6 per cent.  Please understand that 2.5% they will be raising entry level workers is just 35 cents based on $14.  Last week,  Business Insider, reported Jeff Bezos is worth about $150 Billion.  A far cry from the $14 or $14.35 an hour he is paying individuals working for him.

Low prices and free isn’t just about hurting retail workers.  This week I read about a free service that involves a small local community.  A local landscaper decided he wanted to provide free service to a local park as a gesture of goodwill to his community.  The landscaper said he would provide trimming, mowing and other tasks.  That sounds great on the surface but what happens to the local municipality workers who already perform the job?  They have other parks to take care of but what happens if another landscaper or another volunteer decides to follow suit in another park and then another and so on?  That becomes less and less work which eventually means local municipality workers will no longer be needed.  This is what unions call outsourcing or contracting out. It causes workers to lose their job which is why unions are very sensitive to this type of issue.  Once outsourcing or contracting out is started, it can be very difficult to stop it.  The good paying union jobs that this local community so desperately needs will probably disappear because it’s doubtful the landscaper can pay as well as the local municipality especially when he’s doing free work.

The other problem that’s created from this is what’s called a “trickle-down effect.”  The landscaper as a  small employer can’t pay as much for employees doing the work so that means fewer dollars going into the community’s economy and it also means it comes back to the local government as they don’t have the tax dollars they once had to provide services to citizens.  Eventually it even comes back to the landscaper as residents can’t afford the services he provides or they leave the community for other jobs.  And one other thing, what happens to the park if the landscaper becomes too busy with his paying customers?  I doubt he will ignore them to provide free service to the park.  Does the park then get ignored?

What about other existing landscapers?  Free service puts all of them at a disadvantage if they would ever want to provide services because free is hard to beat.  Not all landscapers can offer free service.

Again, “free” sounds great but we need to think beyond the term and what it means for all of us.  It may be a great way to advertise business but in the landscaper case, he needs to be held accountable and so should the local government officials that made the arrangements for the free service.  There’s also something else that pertains more exclusively to public sector entities and that relates to ethics.  Volunteering by groups from local churches or other non-financial groups is fine.  They usually don’t make a living on their good efforts but when a business is providing free service, it’s a little different.  It can open the door to bribery or kickbacks and that truly is unethical and illegal.  That becomes a very fine line that needs to be considered.

And lastly, here is another example of what happens when we buy “cheap.”  In November of 2012, 112 workers were killed in a horrible fire in Bangladesh.  In April of 2013, less than six months after the fire, another tragedy occurred at a garment maker in Bangladesh.  A building collapsed killing and injuring over 1,000 workers. Bangladesh makes much of the world’s clothing for retailers like Wal-Mart, Gap, H&M, and so on because it can be made so cheaply.  Garment workers in Bangladesh are some of the lowest-paid workers in the world.  Many said Wal-Mart and other retailers should demand better working conditions for those who make the clothes we love to buy at low prices.  Little has been done since those tragedies occurred.  A report from NPR in 2017  said of the 72 apparel companies, only 17 had agreed to help make changes.  As consumers, we can help make that change but we also need to be willing to do it.

As a society, we need to decide what buying “cheap” or receiving “free” means.  Do we want to buy so cheap or accept more freebies that we put people out of work or put employers out of business or enable employers to provide less than safe working conditions?  There’s lots of talk going on now about raising the minimum wage to $15.  Some people complain that if wages start to go up, prices on those cheap products and services we like will go through the roof.  That’s been proven to be false as locations where wages have been raised have not seen large increases.  And if the prices on goods and services would go up would it make that much of a difference to us since prices are so low now?

We can act.  We can encourage vendors who promote “cheap” or “free” to start doing the right thing and we can also stop buying from them.  We also can support local business people by buying from them.  We may pay a little more but we’re also putting money back into our communities and saving jobs.  We also can support unions.  They’re being attacked by those who see them as bad, use propaganda to persuade people they’re evil and are working very hard to make them disappear.  This hurts all us.  It’s time we decide what we want because eventually it will come back to bite us.  Maybe it already has.

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About CALMC Blog

Columbus Area Labor-Management Committee is a not-for-profit organization dedicated to involving employers and employees to preserve jobs, resolve workplace issues, and promote labor-management cooperation. Visit our website at http://calmc.org
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