Framing the Wal-Mart Debate
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Inside the war room in Little Rock, corporate management of the largest retailer in the world has discovered that it's not always that great to be at top. Hailed by business-minded journals, Business Week and The Economist for its "competitive business strategy" and criticized by virtually anyone who doesn't vehemently hate unions--Wal-Mart execs are understandably worried. As the charges continue to mount, one has to wonder, can ordinary citizens really change the way Wal-Mart conducts business? I am sure most are familiar with Wal-Mart's business practices, but here's a brief summary of a couple issues with Wal-Mart.
The most disturbing charge facing Wal-Mart is its contribution to the health care crisis. As early as 2003, documents surfaced indicating that Wal-Mart encouraged employees to apply for food stamps and Medicaid--a charge Wal-Mart corporate denies. Less than half of Wal-Mart employees are covered by Wal-Mart's health care program compared to 66% (nationally) of employees at large corporations.
Wal-Mart has also made it harder for employees to gain health care coverage, requiring full time employees to wait six months to be eligible for the company plan. Part-time employees are required to wait two years before becoming eligible for the plan--which excludes family members (for part-timers). Now is the time to point out that Wal-Mart considers workers part time if they work under 34 hours a week. The average cashier works twenty-nine hours a week at approximately $7.92 an hour bringing in roughly $11,948, well under the poverty line for a family of one adult and a child. Moreover, Wal-Mart's plan has gradually shifted the cost to the employee, now requiring the employee to pay 42 percent of the costs. On average, employees at large corporations pay 16 percent of the costs of health care.
All the evidence says that Wal-Mart doesn't want to cover its employees, and wants somebody else to shoulder the burden. As a result, many Wal-Mart employees are forced to turn to state health care or ignore health care for more pressing needs--like food and housing costs. A study by the Institute for Labor and Employment at Berkeley, found that California taxpayers subsidized 20.5 million dollars of medical care for Wal-Mart in California alone.
Low wages are also an issue. The average wage at Wal-Mart is approximately eight dollars an hour, compared to the national average of $10.16, for large retailers. Combined with low wages, associates are hard pressed to get full time work. In an effort to drive down costs, managers are pushed exceedingly hard to hit yearly growth quotas set by Wal-Mart, while similarly cutting costs. As such, Wal-Mart prefers to hire more workers under the part-time label, rather than fewer full time workers. Under this model, fewer workers are eligible for the company health-care plan and wage costs are reduced.
But cutting costs doesn't stop at reducing the hours employees work like many other corporations. In a rare moment in 2001, Wal-Mart settled by paying $50 million dollars to Colorado employees to settle a class-action lawsuit maintaining Wal-Mart had an unofficial policy that required employees to finish work off the clock. Similar charges of unpaid overtime work have prompted employees to sue in New Mexico, Texas, Minnesota, Oregon and California. One manager in Oregon testified in court that she was forced to delete hours from employee time sheets for six years. Similar depositions and documents released to the press seem to bolster the idea that pressure exerted from the top is at the root of the problem. Of course, there are other issues with Wal-Mart, including its practices of unequal opportunities for women and people of color. Currently pending is a class action lawsuit, Betty Dukes v. Wal-Mart Stores, which represents 1.6 million women on grounds of sexual discrimination. Child labor violations and Wal-Mart's support for sweatshops in China are also at issue.
As the largest retailer and company in the world, Wal-Mart is setting a terrible trend for labor practices. Responsible businesses find it exceedingly difficult if not impossible to compete with the Wal-Mart, which is leading to what is now being called the "Wal-Martization" of jobs in rich countries. This includes a pro-corporate, anti-union business model. Power is consolidated at the top, while breaking the back of unions is the goal. Witness the unsuccessful attempt by workers at supermarkets in California last year in demanding that employers shoulder a greater burden of the company healthcare plan.
What did Wal-Mart have to do with this? Everything. Many companies similar to Wal-Mart are finding they must begin to drastically reduce costs or risk becoming uncompetitive. In fact, I would argue the larger problem is not Wal-Mart's business practices, but the effect Wal-Mart is having on the U.S. labor market as well as the global economy. This is the context people should really be framing the problem, as it will eliminate the often used response of any criticism of Wal-Mart: that is "Wal-Mart employees have a choice in their employment." Yes, but this response doesn't address the larger problem of how to deal with stagnant wages, rising inequalities..etc. In framing the problem this way we can truly begin to address some of the problems Wal-Mart has created.
By the way, I would recommend anyone who hasn't see Robert Greenwald's film "Wal-Mart: the high cost of low price" to check it out. The LA times and the New Yorker have given it bad reviews, but I thought it was a good documentary--not perfect--but good.
The most disturbing charge facing Wal-Mart is its contribution to the health care crisis. As early as 2003, documents surfaced indicating that Wal-Mart encouraged employees to apply for food stamps and Medicaid--a charge Wal-Mart corporate denies. Less than half of Wal-Mart employees are covered by Wal-Mart's health care program compared to 66% (nationally) of employees at large corporations.
Wal-Mart has also made it harder for employees to gain health care coverage, requiring full time employees to wait six months to be eligible for the company plan. Part-time employees are required to wait two years before becoming eligible for the plan--which excludes family members (for part-timers). Now is the time to point out that Wal-Mart considers workers part time if they work under 34 hours a week. The average cashier works twenty-nine hours a week at approximately $7.92 an hour bringing in roughly $11,948, well under the poverty line for a family of one adult and a child. Moreover, Wal-Mart's plan has gradually shifted the cost to the employee, now requiring the employee to pay 42 percent of the costs. On average, employees at large corporations pay 16 percent of the costs of health care.
All the evidence says that Wal-Mart doesn't want to cover its employees, and wants somebody else to shoulder the burden. As a result, many Wal-Mart employees are forced to turn to state health care or ignore health care for more pressing needs--like food and housing costs. A study by the Institute for Labor and Employment at Berkeley, found that California taxpayers subsidized 20.5 million dollars of medical care for Wal-Mart in California alone.
Low wages are also an issue. The average wage at Wal-Mart is approximately eight dollars an hour, compared to the national average of $10.16, for large retailers. Combined with low wages, associates are hard pressed to get full time work. In an effort to drive down costs, managers are pushed exceedingly hard to hit yearly growth quotas set by Wal-Mart, while similarly cutting costs. As such, Wal-Mart prefers to hire more workers under the part-time label, rather than fewer full time workers. Under this model, fewer workers are eligible for the company health-care plan and wage costs are reduced.
But cutting costs doesn't stop at reducing the hours employees work like many other corporations. In a rare moment in 2001, Wal-Mart settled by paying $50 million dollars to Colorado employees to settle a class-action lawsuit maintaining Wal-Mart had an unofficial policy that required employees to finish work off the clock. Similar charges of unpaid overtime work have prompted employees to sue in New Mexico, Texas, Minnesota, Oregon and California. One manager in Oregon testified in court that she was forced to delete hours from employee time sheets for six years. Similar depositions and documents released to the press seem to bolster the idea that pressure exerted from the top is at the root of the problem. Of course, there are other issues with Wal-Mart, including its practices of unequal opportunities for women and people of color. Currently pending is a class action lawsuit, Betty Dukes v. Wal-Mart Stores, which represents 1.6 million women on grounds of sexual discrimination. Child labor violations and Wal-Mart's support for sweatshops in China are also at issue.
As the largest retailer and company in the world, Wal-Mart is setting a terrible trend for labor practices. Responsible businesses find it exceedingly difficult if not impossible to compete with the Wal-Mart, which is leading to what is now being called the "Wal-Martization" of jobs in rich countries. This includes a pro-corporate, anti-union business model. Power is consolidated at the top, while breaking the back of unions is the goal. Witness the unsuccessful attempt by workers at supermarkets in California last year in demanding that employers shoulder a greater burden of the company healthcare plan.
What did Wal-Mart have to do with this? Everything. Many companies similar to Wal-Mart are finding they must begin to drastically reduce costs or risk becoming uncompetitive. In fact, I would argue the larger problem is not Wal-Mart's business practices, but the effect Wal-Mart is having on the U.S. labor market as well as the global economy. This is the context people should really be framing the problem, as it will eliminate the often used response of any criticism of Wal-Mart: that is "Wal-Mart employees have a choice in their employment." Yes, but this response doesn't address the larger problem of how to deal with stagnant wages, rising inequalities..etc. In framing the problem this way we can truly begin to address some of the problems Wal-Mart has created.
By the way, I would recommend anyone who hasn't see Robert Greenwald's film "Wal-Mart: the high cost of low price" to check it out. The LA times and the New Yorker have given it bad reviews, but I thought it was a good documentary--not perfect--but good.
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It seems to me from my reading on this subject that Wal Mart's competitive advantage is not from the low wages of its hundreds of thousands of workers, but the even lower wages of the workers overseas who make Wal Mart's rock-bottom priced products.
It also seems like Wal Mart's competitive advantage is so great (beating competitors in pricing by 20%, 30%, even 40%, depending on the products) that raising the pay of its workers or increasing their benefits wouldn't hurt their bottom line all that much if it were paid for by a small price increase.
Which makes you wonder: Why is Wal Mart so anti-union and why does it pay such a pittance and provide such crappy benefits? I think it has little to do with economics, and a whole lot to do with Wal Mart's ideologically-tainted business plan.
"As the largest retailer and company in the world, Wal-Mart is setting a terrible trend for labor practices..." No kidding. The sad part is, it doesn't have to be so. Not only could Wal Mart provide better pay and coverage for its workers (this, of course, it setting aside the debate about the labor policies of its suppliers) but the business community needs to provide its own leadership. Profitable businesses don't have to be driven by the world-view of a modern-day Scrooge.
The reality is that Wal-Mart could actually improve people's lives. The only difference would be a slimmer profit margin.