It is a waste of time for the Wal-Mart critics to worry about average wages falling too low. Average nominal wages on an economy-wide basis will always tend towards the level of full employment. If average wages go higher or lower than this point, the market automatically works to bring them back to this level.
At any given time, there is a certain quantity of total dollars of demand for labor services by all employers in the entire economic system. Average wages at full employment will be at the level of the total amount of monetary demand for labor services divided by the total number of people who choose to sell their labor services. When the average wage rate is forced above the full employment level there is not enough total monetary demand for labor to pay all those who want to work at this higher average. If, for example, in a hypothetical small economy, the total monetary demand for labor is $1 billion, and the total number of workers seeking employment is one million, the average wage must be $1,000 to reach full employment. If the average wage is forced higher than this point — say to $2,000 — then employers could only hire 500,000 workers. Without artificial interference with average wages, such as minimum wage laws or labor union coercion, unemployed workers would outcompete the employed by accepting lower wages. If the average wage was $2,000, an unemployed person could outcompete an employed person by offering his services for $1,500. The next unemployed person could get a job by accepting $1,400. As wages fell, employers could hire more total workers. This would happen throughout the economic system until the average wage rate was back at $1,000, at which point there would be enough total monetary demand to hire all one million workers. Freedom in the labor market is all that is required to reach full employment.
It is in the self-interest of employers to keep wages from falling below the point of full employment because any lower wage would cause a shortage of labor services for employers. The lower average wage would allow employers who couldn't previously obtain employees to be able to afford them. This would leave many employers who were willing and able to pay higher wages without the employees they desired. In response to this imbalance, the employers who needed more labor services, and were willing and able to pay higher wages, would simply offer higher wages and outbid the employers who weren't able to pay the higher wages. This would happen throughout the economic system until the average wage was back up at the point of full employment.
I have been agnostic about Wal-Mart in the past, but anecdotally I have always respected their decision not to engage in psychological pricing.
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