Ok. But thinking aloud here, when and how does exchange rate come into play? The only reason I have been lifted out of poverty living in India is because of "Western" consumers - I do work for which my employer gets paid in dollars, and they give me a fraction which is enough for me to lead an upper middle class lifestyle in India. No Indian company will pay, or has the ability to pay, as much money as I am getting now doing the same work for Indian consumers. So if a large percentage of "Western" consumers don't consume as much as they used to, it directly affects my livelihood. Is it a paradoxical situation that I am probably taking away the job of someone in US thereby temporarily improving my livelihood in the short term, whereas I actually don't have a livelihood in the medium / long term?

The hope is that the temporary wealth transfer until you reach equilibrium can fuel your own countries growth to the point where it can self perpetuate the cycle with its own infrastructure.

IE, you built factories and call centers and all manner of things to service western tastes, and even when the western money dries up by then you should have enough in your own little money cycle plus the infrastructure to produce enough to compete globally to maintain equilibrium.

It is an efficiency game. You start out with a farmer who has no tools, but because they live in an impoverished nation he sells his crops for next to nothing and that next to nothing money is considered a lot where he comes from. That money gets him funds to buy tractors and plows and other productivity boosters or maybe self driving combines to just outright replace some of his labor.

Now while a lot of that might come from the same western market, he will still spend some of it locally, and macroeconomically that effect will spread wealth in the local area assuming locals can buy something from each other. As long as the equation has money flowing out of another country into yours you are boosting your economy through your citizens productivity.

By the time the equation equalizes, the farmer should have all the modern tools of the farming trade such that there is price equalization between himself and all other farmers - their countries economic deficit gave him an opportunity to invest in his farming, yielding a more efficient farm that can produce significantly more food and by the time it is done sell it at western market value because their economy has equalized with the first world.

Of course, the farmer could also blow all his temporary profits on drugs and women, and end up screwed when he cannot produce enough crop to sustain himself as the cost of living rises with a modernizing economy.

> that effect will spread wealth in the local area assuming locals can buy

That's the problem you can't be sure once there is no more "western jobs" that they will remain enough money in the country. You are just assuming without proof. The exact thing neocon have been doing for years.

From a purely humanitarian standpoint, it's hard to argue that it's a good thing for CEOs who make $9.6 million a year to be getting bigger raises than workers who make $37000.

http://www.csmonitor.com/Business/2014/0527/CEO-pay-hits-10-...

http://www.huffingtonpost.com/2012/05/02/ceo-pay-worker-pay_...

http://www.csmonitor.com/Business/2013/1212/CEO-vs.-worker-p...

http://www.epi.org/publication/ceo-pay-231-times-greater-ave...

Agreed, but that's actually a separate problem. There are so few CEOs relative to average workers that their aggregate pay isn't enough to explain why workers in the west aren't experiencing wage growth.

Actually, in some of the most egregious examples (Walmart), management and/or owners are paid enough to make a real difference in what workers are paid. The six Walton heirs hold as much money as the entire bottom 42% of Americans combined. A pay raise of $2/hour for every non-management Walmart worker (raising hundreds of thousands of people out of poverty), and/or giving them reasonable benefits, would not change that statistic in dramatic fashion.

http://www.motherjones.com/mojo/2012/09/sam-waltons-fortune-...

It's not enough to explain it, but it is a relevant piece of the puzzle.

According to the wikipedia 2013 stats, WMT has 2.2 million employees and and Walmart family owns "over 50%" of Walmart (let's assume 50%). 2014 net was 16 billion but 6 billion was paid in dividends to shareholders. Assuming a 2000 hour work-year, if ALL of the non-dividend was spent on wage increases, that's a $2.27 extra per hour all 2.2 million employees could get.

Well, boards often approve costly "incentive plans" for employees, but would a board approve 10 billion dollars to be distributed to employees every year? What would that mean for the future stock price?

Keep also in mid the other 50% ownership - probably pension plans funds.

You also mention already accrued wealth in form of stock, not income originally. How would distributing that work exactly? Would you add some kind of extraordinary tax on every WMT stakeholder? Their dividend alone (6 billion) is not enough to cover the wage increase.

It would also mean that all of the employees have a lot more money to spend, a part of which they'd spend at Walmart. Wasn't it Ford who back in the early 1900 gave his employees a lot higher wages than other companies so they could spend more and thus raise his own profits?

That's a nice example! I always thought that it didn't make economic sense to pay people more money just so they could buy stuff from you. But just now I realized that it's actually possible.

Let's say you're selling cars for 100 dollars, and make 10 dollars in profit from each car sold. There's a lot of folks who have only 99 dollars and can't afford a car. If you give such a person one dollar, they will buy your car and you'll be 9 dollars richer.

Now, of course that's just a market segmentation scheme in disguise. If you could identify the folks who have 99 dollars and give them a 1 dollar discount instead, you'd profit even more, because they wouldn't be able to spend it on anything except buying a car from you. That's how companies do it today, they use employee discounts to get all the benefit of raised wages without actually raising wages.

No, Ford raised wages to curb employee turnover.

"Assuming a 2000 hour work-year"

That's an incorrect assumption, possibly wildly so. Likely, more than half of Walmart employees are part-time and temporary employees, partly to avoid giving them legally required employee benefits.

http://www.forbes.com/sites/lauraheller/2013/06/14/obamacare...

Also, I appreciate that you've done the math in more detail than I did. I did a quick calculation in my head based on the 2 million employees to come up with $2, but you've been more precise and provided numbers, and I appreciate it. Even though we disagree on what the starting numbers for the calculation should be. Basing the discussion in reality is nice, and what I like about HN.

You don't have to single out Wal-Mart specifically. Just put in sensible inheritance taxes, raise the marginal tax rates on high-income brackets across the board, and raise the capital gains rate.