Illegal but Very Cheap

Posted by jns on March 18, 2005

Here’s another for the innumeracy files.
I heard on the radio today news that the Feds had “slapped” Wal-Mart with a fine of $11 Million to settle claims that Wal-Mart had illegally hired undocumented aliens. The spokesman for the Feds was deliriously happy with this result, evidently because it was the largest fine in the history of such things, and would, therefore, show Wal-Mart a thing or two.
Alas, he doesn’t understand the magnitudes of numbers. Wal-Mart’s yearly revenues are in the neighborhood of $160 Billion, a number over 14 thousand times larger than $11 Million. Thus, this fine is only o.oo7% of Wal-Mart’s yearly revenues. Even supposing that their profit margin is only 5%, this fine would still only be a miniscule 0.14% of their yearly profit.
Now, I’m not going to wade into the Wal-Mart good / Wal-Mart evil controversy, but I think most people should be able to see that a fine of 0.007% (that is, 1,000 times smaller than a typical sales tax), is pretty far from a serious punative fine. In fact, I’d say it’s a pretty cheap price to pay for doing business any way one wants.