The high cost of cheap goods (and high corporate profits)
As I See It
When we buy food, clothing, and other products and services at bargain-basement prices, do we ever think of the cost in the quality of life being paid by the people who produce these goods and services?
Let’s start with food. The average American family spends less than 7 percent of its income for food, compared with 10-15 percent in most industrialized countries and 20-45 percent in other countries. Our food prices are low due in part to the efficiency of large-scale production by huge agribusinesses (which receive tax-payer-financed subsidies totaling $16 billion a year). But a large part of the low cost of food in the U.S. is made possible by the low pay of farm workers. These are the jobs filled by immigrant workers because other workers are unwilling to take them at the abysmally low wages they offer.
Pay scales of employees in service industries like food processing, fast foods, and retailing are also, in many cases, too low to cover basic living costs, let alone medical expenses, which most of these jobs do not cover. WalMart is a perfect example. Think of the price being paid by struggling families forced into dependence on food stamps because of their low wages. Imagine for a moment the hopeless “lives of quiet desperation” (a quote from David Thoreau) these families and their children live, not being sure of their next meal, and knowing they will never get ahead and accumulate any reserve for emergencies or savings for retirement — all so we can buy stuff at WalMart for a few bucks less.
And the long arm of WalMart reaches down into all tiers of its suppliers. Because of its enormous purchasing power, WalMart can put the squeeze on those suppliers, who have become dependent on WalMart for their survival, to cut their prices to the bone or face being cut off. That in turn forces them also to keep wages below subsistence level, and push their suppliers to do the same.
Overseas conditions are the worst. There we have seen the effects of these cut-throat tactics in the April collapse of a garment factory in Bangladesh that killed over 1000 workers, who were being paid slave wages and forced to work under deplorable conditions in a decrepit building because margins are so low that little is left for necessary maintenance — and nobody in the outside world seems to care.
Presently, in the U.S., 46-48 million people are receiving food stamps — now called the Supplemental Nutrition Assistance Program (SNAP). The cost of the program doubled during the George W. Bush Administration (before the Great Recession), and since then, as a result of the Recession has doubled again to $75 billion a year. Nearly 20 percent of American families, most of them employed in minimum wage or poverty level jobs, or able to find only low-paying part-time jobs, depend on SNAP to put food on the table. The payment per person is $134 per month, or $1608 per year, which is not sufficient to cover the cost of a month’s food, requiring supplemental aid from local food pantries.
The economics of this system is unconscionable. The money saved by corporations by paying their employees unlivable wages raises corporate profits, which are then paid out in stockholder dividends and fat salaries and executive bonuses. It then falls to the government to make up the difference to keep those employees from starving, which means that we, the taxpayers, are in effect subsidizing those increased corporate profits.
These inequities could easily be corrected simply by paying a living wage for a day’s work. This would lift millions of families back into the middle class, and bring millions more into the middle class for the first time. Sure, we would have to pay a little more for the products and services we buy, but look at the benefits. Those families would no longer need food stamps, and they would be paying income taxes instead of collecting earned income payments which total as much as $100 billion per year. More important, it would restore the self-esteem of millions of Americans, including their children, and lift the burden of financial stress and wondering where their next meal is coming from. In addition, rebuilding middle class purchasing power would boost the economy, benefiting everyone.
Poverty is like quicksand — once you are in it, it’s hard to get out without a helping hand.
— “As I See It” appears on the first and third Thursdays of the month. Hal Sundin lives in Glenwood Springs and is a retired environmental and structural engineer. Contact him at firstname.lastname@example.org.
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Economics may seem complex, but it’s actually common sense, which explains why politicians have difficulty considering the economic effects of their legislation.