Capitalism has been very effective in reducing poverty and ushering prosperity throughout the world. It has led to impressive economic growth in various parts of the world that has pulled people out of poverty and improved their quality of life. It has been correctly suggested in the book, Saving Capitalism from the Capitalists, that the free market system is the most potent form of economic organization to improve human condition and benefit human society. Even though capitalism or free market economy has an impressive record of improving human condition and fostering economic prosperity, it has drawbacks that need to be addressed.
Walmart is one of the largest companies and employers in the world. Also, members of the Walton family, who own a considerable portion of Walmart, are some of the wealthiest people in the world. However, a considerable number of Walmart employees have to access public assistance for their survival. According to Americans for Tax Fairness, Walmart’s low-wage workers, most of whom make above minimum wage, cost U.S. taxpayers an estimated annual $6.2 billion in public assistance that included food stamps, Medicaid and subsidized housing. https://www.forbes.com/sites/clareoconnor/2014/04/15/report-walmart-workers-cost-taxpayers-6-2-billion-in-public-assistance/#56d12b3a720b This indicates that even though the wages are above minimum wage, they are inadequate to provide the workers decent living standards, which force them to access public assistance. The study found that a Walmart Supercenter cost US taxpayers between $904,542 and $1.75 million per year, which is between $3,015 and $5,815 per worker. Also, the study estimated that Walmart accounted for $13.5 billion out of $76 billion in food stamp sales in 2013, which was 18 percent of the Supplemental Nutrition Assistance Program (SNAP) or food stamp market. However, the number of Walmart employees accessing Medicaid is similar to the US national average and other large retailers.
Walmart is a large company and employer that sells goods and services to consumers at affordable prices. However, it has social costs as well. Its low wage workers access various forms of public assistance and, consequently, Walmart imposes a social burden. Even though the business model of Walmart has been very successful for its shareholders and even consumers, it has come at a social cost as its low-wage workers are forced to rely on public assistance.
The same phenomenon is observed in the American fast food industry, which outsourced a combined $7 billion in annual labour costs to taxpayers. https://www.forbes.com/sites/clareoconnor/2014/04/15/report-walmart-workers-cost-taxpayers-6-2-billion-in-public-assistance/#56d12b3a720b McDonald’s accounted for $1.2 billion of this followed by Yam Brands whose workers accessed $648 million in public assistance each year. Therefore, the fast food industry, even though a profitable business model, imposes a social burden as its workers depend on social assistance for survival.
The founder and CEO of Amazon, Jeff Bezos, is the richest man in the world with a net worth of over US $130 billion. http://time.com/money/5262923/amazon-employee-median-salary-jeff-bezos/ The company has 560,000 full-time and part-time employees who had a median annual salary of $28,446 in 2017. It takes the CEO under nine seconds to earn the annual salary of Amazon’s median worker. This indicates the significant difference in earnings between the CEO and Amazon’s median worker. According to Policy Matters Ohio, 700 Amazon employees, which is more than one in ten Ohio-based employees of the organization, received SNAP benefits in August 2017. https://www.cnbc.com/2018/01/25/10-percent-of-amazons-ohio-employees-are-on-food-stamps-liberal-think-tank-says.html While Amazon warehouses receive considerable state and local subsidies, its workers depending on social assistance increases the total subsidies that Amazon receives. http://www.newsweek.com/jeff-bezos-amazon-employees-food-stamps-782714 This again indicates how a large organization which has many employees, has a very rich CEO and offers beneficial services to its customers, can have social costs when a considerable number of its employees seek food stamps.
On the other hand, the CEO of a technology company reduced his own salary to provide all his employees a minimum ‘living wage’ of $70,000. https://www.huffingtonpost.ca/entry/dan-price-minimum-wage_us_5afd3d8ee4b06a3fb50dcf28 Even though this is an extreme example, it shows how the introduction of higher salary may eliminate the social costs a company may impose when its employees don’t have to seek government assistance for sustaining.
According to the Center on Budget and Policy Priorities, 62 percent of food stamps-receiving households are employed in low-income and part-time employment. http://www.newsweek.com/jeff-bezos-amazon-employees-food-stamps-782714 This indicates a drawback of capitalism as the employed, even though they are low-income earners or part-time employed, seek social assistance to sustain. Also, around 66 percent of US jobs pay less than $20 an hour. http://money.cnn.com/2018/05/17/news/economy/us-middle-class-basics-study/index.html When jobs pay less than $20 an hour, a considerable number of people will be financially struggling. The three states, California, New Mexico and Hawaii each have 49 percent of struggling families, which are the largest among the states. According to a report by the United Way ALICE Project, 43 percent of households (51 million households) cannot afford a monthly budget which includes housing, food, child care, health care, transportation and a cell phone.
In conclusion, capitalism has drawbacks when some of the largest companies in the world, even though are major employers, provide customers with excellent goods and services, have gargantuan revenues and very rich owners and shareholders, have considerable number of employees who need to access government assistance including food stamps for survival. The business models of these companies are excellent and very profitable; however, they impose a social burden as well. When a considerable number of their employees depend on social assistance, these companies are being effectively subsidised by the societies in which they operate and, thus, create social costs. Policies that address the issue of low wages by increasing them so that employees don’t need to seek social assistance will be suitable as it will reduce or even eliminate the social costs that these companies incur. Then, the affected employees and their families will not financially struggle and can have higher standard of living as well as be more active economic participants in the society. When capitalism is inclusive so that it works for all members of the society and raises their welfare without incurring serious external costs is desirable and sustainable.