Now, to set the stage here, North Dakota is in the middle of an oil boom. The increased price of crude has combined with the development of new extraction techniques to result in a massive expansion of oil production in the Bakken shale. This has led to North Dakota having the lowest employment of any state in the country, and the Williston area is right at the boom's epicenter. Now, in what follows, we're going to ignore the fact that the continued extraction of oil from the Bakken shale is actively contributing to the warming of our planet and the concomitant impending destruction of society as we know it, and choose instead to focus on the specific economic arguments.
See, Dr. Perry is using the example of this one Walmart situated in the middle of perhaps the strongest economy in the state to argue for Walmart and against the minimum wage. Either he's dumber than a bag of hammers, or he thinks his readers are, and it's hard to tell which. More below the fold.
In his first point, Professor Perry notes the first and most obvious thing about about the store in Williston: the comparison between the wages at the store in Williston with Walmart's average wages nationwide indicate that, yes, even Walmart has to respond to the market forces prevalent in a particular community in order to get its stores staffed. Yes, Walmart won't be able to staff its stores if it attempted to pay minimum wage in Williston—but that doesn't mean that market forces require Walmart to pay lower wages in other places. Perry's apparent confusion on this issue is illustrative of a significant difference between upward pressure and downward pressure on wages: upward pressure on wages sets a higher floor for businesses to be able to get labor at all. Downward pressure, on the other hand, allows businesses to use wage levels as a determiner of company values and strategy. A Costco and a Walmart in the same general vicinity are subject to the same wage pressures, but Costco chooses to pay a higher wage to engender higher employee loyalty and morale, along with its corresponding effects on customer satisfaction. Walmart, on the other hand, chooses to exploit its labor by seeking it out at the lowest possible price, and expecting government to pick up the remaining tab through social services. In short, Walmart could choose to pay higher wages: after all, if it weren't profitable to keep the store in Williston open despite the comparatively high labor costs, Walmart would simply close it down.
But Dr. Perry isn't just using the example of this one store to mistakenly defend Walmart's business practices. Instead, he and AEI are using it to attack the very concept of a minimum wage:
2. The fact that Walmart is paying almost 2.5 times the minimum wage in Williston, ND is evidence that a single, national minimum wage for every city, county, labor market in the country can’t possibly make sense. Even proponents of the minimum wage have to agree that a single national minimum can’t be optimal for every labor market in the country. In that case, they would logically have to support thousands of minimum wages tailored to thousands of local communities, or maybe even more logically agree that minimum wages are unworkable.Now, as we break down this section, let's not forget that Perry is a professor of economics at the University of Michigan. Arguments like this are convincing evidence that Wolverine State taxpayers aren't getting their money's worth. To begin with, Perry is assuming that Walmart is by its very nature a minimum-wage employer, and will only pay the lowest wage it can possibly get away with. But if Perry is representative of his colleagues, it seems that AEI is so invested in the supremacy of free markets that it has forgotten what the job of the minimum wage is. The entire point of a minimum wage is not to find what the lowest wage is that the market will bear, and codify it. The minimum wage exists as a tool for governments to contravene the very cheap price that the free market places on human dignity, and to ensure that those who work can theoretically enjoy some modicum of decency regardless of what the free market might have otherwise intended for them. The entire point of a minimum wage isn't to tailor it to every single local community. Instead, the point is to establish a floor that will be functional for every community, regardless of whether upward pressure on wages in boom towns like Williston is ensuring that nobody will ever meet that floor. The same principle, of course, applies for the concept of the living wage: if a local economy is putting such upward pressure on wages that everyone is making a living wage, that's fantastic in theory—but it doesn't change what a living wage is or why it needs to exist. They exist because some businesses won't pay even that much unless they absolutely have to.
3. You probably won’t be hearing anybody calling for a $15 per hour “living wage” in North Dakota, since the entry level wages at Walmarts there are already above that
This, of course, brings us to Perry's final, and most ridiculous, claim:
5 (New). From Jon Murphy in the comments:Yep. This, after writing just a couple of paragraphs earlier that Walmart is only paying good wages in this one boomtown because the local economy gives them no other choice. It's simply amazing that material like this is being published on the website of one of the most active, longest-standing economic think tanks on the right. They're clearly scraping the bottom of the barrel.
Of course, what we also have here is a huge hole blown in the "we need minimum wage because businesses won't pay good wages" argument.