Over the last 20 years or so, Wal-Mart has grown from a kind of K-Mart for places too rural to have a K-Mart to the world’s largest retailer. This company, a Dow Jones Industrial Average component, is huge, with $238 Billion in stock, $246 Billion in revenues in the last year, almost $4.5 Billion in the bank, and 1.4 Million employees. And that figure doesn’t even include contractors.
If you go into a Wal-Mart, you will find yourself confronted with goods too cheap to pass up. Why, how can you afford not to shop at Wal-Mart? Where else can you find name brand products at prices this low? How on earth do they manage to make a profit?
Like all deals that sound too good to be true, this one has some ugly stuff under the surface. Stuff so ugly that some people are publicly calling for a boycott of Wal-Mart, and many others make it a practice to avoid the place whenever possible, even if that means paying a little more someplace else. Please consider some of the reasons why:
Wal-Mart reduces the number of small competitive businesses in the communities it serves over time. Smaller competitors, which means all competitors, live in fear of the juggernaut, and continually seek ways to stay afloat. It is hard to compete with a company with a wide array of products, low prices, and a seemingly limitless advertising budget. Don’t let your inner Darwin start talking about how if you can’t compete, you deserve to go out of business. Having a local economy run by one large employer is bad. Furthermore, the businesses that are closing up often can’t compete because they actually pay a living wage and charge a sum of money that allows the business to make a modest profit without pressuring suppliers for special deals. This brings us to my next two points.
Wal-Mart places pricing pressure on its suppliers in a manner that is bad for the economy as a whole. By cutting special deals, sometimes on exclusive products, they effectively undercut certain dumping regulations. These special deals slash supplier profits. Sometimes, the only way for a supplier to make the deal work is to cut costs. Either the quality goes down or the payroll goes down, whether by cutting jobs or cutting wages. Sometimes the manufacturing has to be done overseas, somewhere that wages are so low that it is cost effective to ship the finished product halfway across the world. Even this is sometimes not enough, and financial trouble ensues for the provider. Wal-Mart does not particularly care; the contract to supply them is so lucrative on the surface that companies line up and bend over backwards to get or keep the deal. By the way, this is so far the second way Wal-Mart takes jobs out of the American economy and reduces wages for those jobs that remain.
Wal-Mart pays a poverty level wage to it’s employees — oops, “associates.” And these are the legal employees. This fact is well documented. Pay so low that full-time employees qualify for government assistance — that’s right, people who want to work, people who are working but getting paid so little they get food stamps. And then there are benefits, in the case of those lucky enough to qualify for them. When the paycheck doesn’t even go far enough to buy groceries, even at the Wal-Mart Supercenter, health insurance just seems like an unnecessary luxury. As if that weren’t enough, Wal-Mart is chronically plagued by claims that they discriminate against women, and that they do everything in their power to eliminate “troublemakers,” such as those rapscallions that get injured on the job. Furthermore, Wal-Mart does everything in its power to keep unions out. Whatever you may think of unions, they began to protect workers from abusive employment situations, and by many accounts this is such a situation. We are up to two ways Wal-Mart actively eliminates American jobs, and two ways it keeps working people in poverty.
It is even worse to do contract work for Wal-Mart. By now we have all heard about Federal raids that found illegal immigrants working long hard hours cleaning Wal-Mart stores at night. And of course Wal-Mart executives are shocked — just shocked I tell you — to discover that contractors who assured them would follow all applicable laws would hire illegal immigrants. The Feds aren’t buying that either, by the way. Wal-Mart should consider themselves lucky the various state Attorney Generals haven’t decided to rally around this issue. Forbes has an excellent article on this issue, and why it is more widespread than any of us like to admit. My favorite quotes are on the second page:
Whatever happens in the Wal-Mart case, the abuse of workers will continue until immigration law recognizes that cleaners need labor from abroad and makes the hiring of them legal. “I’ve got documentation for my workers, but now [U.S. Immigration & Customs Enforcement] says their Social Security numbers don’t match, and I have to fire them,” fumes the chief of a big Southeast cleaning contractor. “There are no other workers available. The situation is ludicrous.”
Now let me get this straight, millions of jobs have been lost in the American economy in the last 3 years, and we need to hire foreign labor? “There are no other workers available”? I think he means “no other workers willing to work in the middle of the night for sub-minimum wages and no benefits.”