The Evil Wal-Mart theory has been brought to my attention a couple of times recently, reminding me of some questions I've had about what makes Wal-Mart Evil. Rather than do any "reading" or "research" on the subject, I thought I'd put my questions up to you, my 2.5 or so loyal readers. Before beginning, please note that I am not trying to articulate my own opinion or claim that any of my conclusions are valid, being that I'm quite ignorant about economics in general or the American economy specifically. Rather, I'm attempting to expose my own ignorance in the hopes that some of my astute readers will help me out.
This has become quite the treatise. I had no idea I had so much to say about a subject I know virtually nothing about. I'm going to quit yakking and just post it, if you actually make it through this please feel free to correct me on my economics, factual knowledge, or anything else:
1. It is argued that EW puts locally-owned stores out of businesses. Assuming this is true, what is the main reason why this is bad--what I mean is, is it nostalgia for local businesses and the old-fashioned downtown, or does WM cause people to be financially worse-off than they were with the local businesses? If the former, an old-fashioned downtown may well be a nicer place to be than EW, however change is inevitable. It seems to me that every twenty to forty years we start looking back with fondness on the exact same societal elements that were once greeted with distrust and nostalgia for what came before.
As a side note, it's perhaps rather ironic that I shop at EW fairly frequently because it's within walking distance, whereas GR's traditional downtown certainly isn't. The Comstock Park one is, though. It contains a drugstore which I have never been into. I tried once, but it's only open from 10-6 on M-F, or something like that. You used to not be able to shop 24 hours a day, because women usually stayed home and could shop during the day. There are other businesses there too; no grocery store, but the area seems well-frequented. To sound all capitalistic for the moment; this economy is a dynamic thing. When something new comes around that people prefer for whatever reason to the old business environment, the previous businesses must improve, change, or go out of business. The alternative ways of viewing this is (1) as a good thing, in which the best possible option prevails and business owners are stimulated to be creative in improving/changing; or (2) a bad thing, for the reason that I am searching for. If (2), one must artificially keep the old system in place through legislation or what have you. This is fine as far as I'm concerned, as long as the reason for doing so is better than the reason why so many people seem to like the new option better.
If the second, I'd be interested in hearing exactly how this works. I'm guessing that the main draw to EW is its lower prices. What perplexes me about the EW situation is that, in theory, EW ought to have several benefits of scale which local businesses don't. A household which buys in bulk gets the same quality stuff for lower prices, with the added environmental benefit of using less packaging, and maybe less fuel used for transporting smaller units from store to home. EW ought to have similar benefits. I talk about this more below, but as a larger corporation EW ought to be better able to provide benefits and higher wages than a small business. Perhaps it doesn't work this way out of sheer scroogeishness, if so I agree it's time they cough up.
I don't see how lower prices can be considered a bad thing in themselves. It's not rich people who are saving money to fund their new house in Aspen by shopping at EW; it's poor people or middle class people who are able to live a better lifestyle because they can buy food, medications, household items, and clothes at a lower price. Cheaper prices don't make a difference to rich people, they can afford to pay 50 cents more for milk and they don't buy clothes at discount stores anyway; but when you are living on a budget in which every cent counts (and you don't have to be particularly poor for that to be the case), that extra 50 cents can go toward fresh vegetables instead of canned, or new shoes for your kid instead of worn-out thrift store ones.
Perhaps it's not fair that this is the case, but it is the case. Another issue which concerns me is this: I suspect that one of the reasons people with relatively low earning power (both here and I'm guessing in Europe and other westernized countries) are able to have relatively good lifestyles (meaning anything from modern housing and sufficient food to money to spend on nonsubsistence items such as movies), is because so many things cost so little because we're importing them from countries whose "wages" fall far shorter of a living wage than is the case anywhere in this country. If this is so, improving the situation for the poorest in the world might well significantly impact the lives of the poorest in this country. I don't have any answers for all this, my point is that a lot more would need to change in than just EW's raising salaries if our goal is to improve the economic situation for everyone who is struggling to survive, and that the changes won't be easy or simple.
2. A major anti-Walmart argument is that Walmart employees make low wages and get no benefits. I keep wondering, would/do/could local businesses offer better wages and benefits than EW? For a couple of years, I worked at a small locally-owned bookstore which was struggling to stay alive in a dying mall with a Barnes & Noble only a couple of miles away. I earned minimum wage (actually 10 cents or so above minimum wage until the federal minimum wage was increased a few months after I was hired) and received no benefits. We were not allowed to work more than 35 hours a week (or something like that) because then the store would be legally required to give us benefits. I believe that the "benefits" we got for working full-time would have been hospitalization only. This was not because the bookstore owners were evil, rather this is all the bookstore could afford, and incidentally as much as our services were financially worth to the store. This was fine by me, since I was an irresponsible early-20-something who was still on her parents' insurance, but there were people working there who were in need of more money and better medical insurance. However, it was simply beyond the means of the store to provide this. Maybe if EB&N wasn't a factor they could have paid us more, but I kind of doubt it.
Anyhow, let's assume for a moment that an employer, either a local business or an EW, can in fact afford to pay an employee more than what their services are worth. Let's say that the services of a clerk at a bookstore, for example, are judged to be worth $5.50 an hour to the store, on the basis of how much profit the clerk brings in to the store, and what a competitive wage would be--how much, in comparison to other similar jobs in the community, would make a person want to work there instead of somewhere else. This store, however, is making profit hand over fist--they find a supplier who can provide them with books very cheaply, or people are flocking to the store, practically begging to pay top dollar for their products. The store cuts the prices of the books, bringing in yet more consumers, and still they're rolling in the dough. In appreciation of a job well done (or even if the clerks' good work has had nothing to do with the increase in profit), they increase the clerks' pay to $10 an hour and start rolling out the benefits.
What does this do to other businesses, who can't afford to pay their employees this much?
(1) If they continue to pay what they can afford, they might end up with dissastisfied employees who don't perform as well, and/or have to hire less qualified employees, with the result that their business starts to go downhill.
(2) They're forced to increase their wages to stay competitive, and therefore must employ fewer people and/or go bankrupt, resulting in more unemployment. Either way, the functional results appear to be similar to or worse than alleged problems with EW.
Furthermore, if an employer begins paying their employee more than the market value of his or her services, whether it can afford to or not, isn't it more or less running a charitable organization as much as a business? Does it receive tax breaks for paying more than market value, just as I might for buying a $5 pizza for $15 from a nonprofit organization? If the employer simply doesn't have the money to pay its employees a "living wage," must it go out of business, or would it receive some sort of governmental subsidy to pay the decided-upon wages? One of the conservative arguments against raising minimum wage is that it sparks a concurrent increase in cost of living, thus there is no net increase in buying power--would there be some sort of legal or other restrictions on raising prices to go along with the increase in wages? Furthermore, if a single parent with two children needs $10 an hour to live, and an irresponsible childless 20-something on her parents' insurance needs $6, while a 16-year old earning pocket money only needs $3, whereas the business estimates the services of any of the above are worth $5.50 per hour to the business; would there be some sort of sliding scale by which each person, according to his or her life circumstances, gets paid a different amount for the same work, the teenager therefore subsidizing the wages of the parent? If so, the store would obviously prefer to hire the teenager rather than the parent, leaving the parent unemployed; or would be forced to pay $10 to all of the above, regardless of the economic consequences to the business--even if that means bankruptcy and unemployment for all.
I'm kind of playing devil's advocate here, in fact I don't think it's really fair that the "market" determines pay rate, with very little regard to how good a job an individual employee does, and whether the business can afford to pay more. Also, there's little incentive to do a good job if you are paid the same amount whether you spend your hours sullenly punching buttons on a cash register, or sacrificing your break time to hunt something down for a customer. But if the employer doesn't care which you do, or can get you to go above and beyond for peanuts, what is the appropriate way to get them to recognize your worth--legislative action, unionization, appeal to their better natures, or what? If you think the businesses' decision as to what employees' services are worth to them is inappropriate, who gets to make that decision for them? At what point do you go beyond appropriate ways of getting businesses to behave responsibly, and begin to prevent business owners from running their own businesses?
I think that the employees at EW as well as my bookstore are worth way more than $5.50 an hour for their helpfulness and pleasantness, even if a replacement machine would only cost 50 cents an hour. (I'd like to see a machine locate a book for a customer based on the info "I think the cover was sort of reddish [it's actually green] and it has the word "the" in the title..."). However, my question is, exactly what kind of changes in the economy would be required to meet the living-wage standard, and how could this be made fair for everyone involved?
Another scenario: let's say EW raises the salaries of its cashiers to $10 an hour (hypothetically more than these services are financially worth to the company). How does it subsidize this pay increase?
(a) EW runs its business more efficiently (I understand it's already one of the most efficiently-run businesses in existence, one of the reasons it has succeeded)
(b) EW cuts executives' salaries (I have no particular problem with this, although they might. However, how far is this really going to go among so many tens of thousands of EW employees?)
(c) EW cuts stockholders' earnings (obvious problems)
(d) EW starts demanding products at even cheaper prices from its suppliers (who will in turn have to fire employees or cut their wages to afford to be able to do this, so problem not solved)
(e) EW employs fewer cashiers, putting some people out of work altogether and making the dang lines even longer.
Some concluding observations:
I checked EW's website and it offers some rather vague non-information about its health care plan and so forth. Again, in theory, EW ought to have the benefit of scale in being able to offer better benefits than a small, locally owned business. Offering a decent health care plan could well be beyond the means of a small business with a staff of 20, EW ought to have much less of a problem in doing so. If this is the case, EW ought theoretically to be better for people than local businesses; of course if EW is more than able to provide benefits and doesn't out of pure meanness, than certainly moral persuasion to get them to shape up seems appropriate, bringing us back to the question of how to determine exactly what EW ought to be offering and who gets to make that decision.
In my opinion, the federal minimum wage is kind of silly. What constitutes a "living wage" differs so drastically across the country that really each city, county, or whatever governmental unit makes the most sense should set the legal minimum wage according to cost of living and the economic situation in that region. Also, I'm not sure that it makes sense for the "minimum wage" to reflect what a parent with two kids needs to survive. A parent might need $10 an hour or whatever to live, a sixteen-year-old working for pocket money doesn't though, and if paying the 16-year old the $10 means only five people can be employed instead of 10, the advantage is questionable. Also, it's not really fair to pay people different wages for the same work.
There are a lot of variables there that I don't know anything about, such as EW's ability vs. willingness to pay their employees more; the impact on lower-income people of either raising prices at EW or not allowing EW in at all, in favor of possibly higher-priced local stores; etc.
3. In writing this I came up with a couple of possible anti-EW arguments; I'm not sure if these are "official" or not.
(a) EW takes ownership out of the community, and perhaps money as well. It is possible that EW might increase the actual number of available jobs in the community, and honestly I'm guessing the salaries for cashiers or stockpeople at EW are about the same as they would be for similar positions at local businesses. However, the ownership would be outside the community, and money would be filtered away from the community towards the corporation. It seems to me this would affect the wealthy people in the community more than, say, a cashier, but it is a consideration.
(b) If EW went out of business, that really would have a negative impact on a lot of rural communities. If EW is pretty much the only store for a community, and the corporation as a whole failed, that would at one fell swoop increase unemployment significantly and stick people with fewer and much more expensive options for acquiring basic goods.
(c) EW destroys the "uniqueness" of small towns or communities. I actually don't put much stock in this argument. I think this happened a long time ago. The last time I went to a small clothing store in a small town, they had pretty much the same type and quality of clothes you find at EW (all made in China or somewhere like that), but much, much more expensive. I think that the market for locally-produced items, crafts and suchlike, is unlikely to be replaced by the type of stuff they sell at EW.
(d) EW has slimy business practices. This argument was posed to me by my conservative roommate in Israel. The argument is that EW comes into a community offering very cheap prices with which local businesses can't compete. As soon as they go out of business, EW raises its prices. This seems like the classic monopoly scenario which should obviously not be allowed. Here in my neck of the woods, EW has Meijer and Target to compete with as well as other smaller stores, so this doesn't really apply--I buy stuff at whichever of the above has what I need or sells it at a lower price or has locally produced stuff or X variable. In rural communities I can see how this wouldn't be the case, and I can see why such communities would want to keep EW out if that's the way they're going to be.
thanks for the info and comments! It's clear that you all know more about the subject than I do, which was my hope. I'm glad other people had a lot to say about EW. As time went by and I was still thinking/writing about Wal-Mart, I began to fear I was becoming obsessed.
Posted by: michele on August 9, 2004 2:37 PMMichelle, thanks for posting thoughts on this topic. I think its a pretty fascinating modern morality story. I'll be upfront about this: I love Wal-Mart. I think it's one of the greatest American achievements of the last 50 years. And I don't even shop there that often since it just arrived in Escondido this year.
The essence of Wal-Mart can be summed up as follows: Low Prices. You mentioned that they are experts at efficiency, and that's exactly right. All aspects of the company--from labor, to purchasing, to transportation, to store ambiance--are geared toward lowering prices. Low wages are a direct cause of low prices. I basically think that across-the-board low-prices are more socially beneficial than a $15/hour wage for unskilled labor. It's important to look at exactly what kind of people work at Wal-Mart for these wages. From my personal observations, the entirity of the non-management workforce is made up of teenagers, college students, middle-age women without college degrees, and the semi-retired elderly. Basically, every employee is either unskilled or temporary (less than 2 year tenure). Many are part-time workers by choice. My question is, given these characteristics, exactly what kind of wage do they expect to get? If you only work part-time, and all you have is a high school diploma, and you don't plan on staying at your job for more than a couple years, do you really expect to get full benefits, or enough money to raise a family? Their employees get paid what they're worth. If they want to make more, they should make themselves worth more to someone. And with an unemployment rate of only 5.5%, you don't quite have to sell your children to make ends meet.
It also doesn't bother me in the slightest that Wal-Mart monopolizes communities. They DO create monopoly markets by undercutting the prices of their competitors and driving them out of business. So why don't they get sued for anti-trust violations? Simple, its because they don't then USE their monopoly position to unfair advantage. Instead of raising their prices when their competitors are destroyed, they just keep lowering them. It's an amazing concept and it puts billions of dollars into the hands of middle and lower class consumers.
Obviously, the Walton family makes billions off the deal, but I don't hate them for it. Their money isn't made off the profit MARGIN, which is the lowest in the industry. Their money is made off the VOLUME of billions of transactions in thousands of stores.
I don't begrudge people who choose not to shop at Wal-Mart for any reason--moral or otherwise. That's the essence of consumer freedom. But there are obviously hundreds of millions of people in the U.S. who find that Wal-Mart's mix of unskilled labor, unbelievable low prices and yellow happy faces is exactly what they want. More power to 'em.
Posted by: Mark M on August 6, 2004 5:35 PMI get a little weary of hearing all the negative comments in the media about Walmart. It's as if Walmart were the only big store out there driving Mom and Pop stores out of business. Home Depot does the same to small hardware stores. How many small dress shops are around anymore--thanks to J. C. Penney, Macy's, and all the department stores? How many small diners are left thanks to McDonald's and Burger King? Stores now are huge and most are open 24/7. I can't go to a simple, single theater anymore--I have to go to one that's showing 18 movies at once. And don't forget about the mega-churches.
EW has somehow become the unfortunate poster child for what is simply the reality of our changing times.
Will keep this short--I have to go pick up a few things at Walmart.
Posted by: Debby on July 31, 2004 7:46 PMI think a lot of the reason Evil Walmart (a term I use somewhat flippantly) is so reviled is due to the sheer scale of the issue. Walmart is the largest employer in the U.S., its profits are astronomical, and its executives are the richest people in the country, yet its aggressive business practices and poor treatment of its employees are among the most notorious. I don’t know much about the economics behind your discussion of living vs. minimum wages, but I can give you some quick facts and resources from a variety of sources on the alleged sins of Walmart.
You question why it’s bad that EW puts locally-owned stores out of businesses. I would argue that some of it is nostalgia, some of it is tourism fueled by that small-town charm (an issue here in VT), some of it is having a faceless multinational corporation put the neighbors we know personally out of work, but mostly it is the economic impact of those lost jobs on the community. You postulated in point 3a that Walmart wages are comparable to those at local businesses, but the data I dug up suggest that salaries are far lower (there are a couple of different figures in the statistics I found below, but none are above $10/hr). One source (http://en.wikipedia.org/wiki/Wal-mart) claimed that Walmart wages are 20% less than competitors; another web site (http://www.scu.edu/ethics/publications/ethicalperspectives/wal-mart.html) said that union grocery workers earn 30% more than Walmart employees (Walmart is also known to be aggressively anti-union - read some specific examples at http://en.wikipedia.org/wiki/Wal-mart). Another site determined that Walmart doesn't pay its employees enough to get by even when they shop at Walmart (http://members.cox.net/t.s/walmart.html - this is a fascinating article on how someone actually calculated the income vs. expenses of a hypothetical Walmart employee. Barbara Ehrenreich actually tried to make ends meet and couldn’t as a Walmart employee as chronicled in her book, Nickle and Dimed.). One site reports, “On average, WM workers earn an estimated $8.00/hour with a 32 hour work week. This equals $256 a week or $13,312 a year. The Federal poverty level for a family of three is $14,630.... 2/3’s of WM workers can’t afford to participate in the company health insurance plan, which costs about 20% of a worker’s paycheck. Since 1993 WM has increased the premium cost for its workers by 200%, well above the rise in cost of health insurance ” (http://www.scu.edu/ethics/publications/ethicalperspectives/wal-mart.html).
Walmart's wages aren't the company's only human resources issue that has received lots of criticism. In addition to wages that are lower than those at comparable stores (whose profits are a fraction of Walmart’s), Walmart has an abominable reputation for labor violations. Walmart employees have complained of being forced to work "off the clock" for any hours over 40 a week so that Walmart could avoid paying overtime (http://en.wikipedia.org/wiki/Wal-mart). And in somewhat recent news, “In 2004, a class-action suit affecting as many as 1.6 million current and former female employees was brought against Wal-Mart. This makes it the largest private-employer civil-rights case in U.S. history. The case is based on statistics that show that women working at Wal-Mart are paid less than man in every region and in most job occupations and take longer to enter management positions” (http://en.wikipedia.org/wiki/Wal-mart - some specific complaints female Walmart employees are available here http://www.walmartvswomen.com/faq.html and you can read about how one female Walmart manager was forced to go to Hooters for business meeting here http://www.poe-news.com/stories.php?poeurlid=37516).
Additionally, Walmart's lower wages effect the community and the economy more broadly. One writer claims, “By crushing local businesses, [Walmart] eliminates three decent jobs for every two Wal-Mart jobs that it creates--and a store full of part-time, poorly paid employees hardly builds the family wealth necessary to sustain a community's middle-class living standard” (http://www.indyweek.com/durham/2002-05-08/news.html). An article in Fortune magazine reported, “Just as its Everyday Low Prices benefit shoppers who've never come near a Wal-Mart, there are mounting signs that its Everyday Low Pay (Wal-Mart's full-time hourly employees average $9.76 an hour) is hurting some workers who have never worked there. For example, unionized supermarkets in California—faced with studies showing a 13% to 16% drop in grocery prices after Wal-Mart enters a market—have been trying to slash labor costs to compete, triggering a protracted strike. The $15 billion in goods that Wal-Mart and its suppliers imported from China in 2003, meanwhile, accounted for nearly 11% of the U.S. total—contributing, some economists argue, to further erosion of U.S. wages” (http://www.fortune.com/fortune/subs/article/0,15114,590782,00.html). Critics also charge that Walmart's "relentless pressure on suppliers to cut costs have forced suppliers to move production overseas” thereby eliminating American jobs (http://en.wikipedia.org/wiki/Wal-mart - for an in-depth look at Walmart’s relationship with suppliers, check out http://www.fastcompany.com/magazine/77/walmart.html).
You may doubt the agenda of some of these sources (some are anti-Walmart activists, some are business and academic sources), but the bulk of evidence that I've seen doesn't paint a pretty picture. The market and the local economy can support a certain level of wages, but when Walmart comes into town, those wages decrease and the resulting profits are taken out of the community to Walmart HQ in Arkansas. I think the reason Walmart is so reviled is that, with its enormous profit margin, the company can afford to treat their employees better while still making the Walton family zillionaires, but it chooses not to. Instead, Walmart externalizes the true cost of the low, low prices, forcing their employees and communities to pay for them (not to mention taxpayers - there are even reports that Walmart encourages its employees to apply for food stamps and other public assistance to subsidize their inadequate salaries - http://www.walmartversuswomen.com/news/walmart_bee.pdf).
I think the issue you bring up of low prices helping the poor is an important one. I'm not going to condemn someone on a fixed income, or public assistance, or working at a low wage job for shopping at Walmart. For many people in this country, I can understand that when forced to choose between Walmart prices or not making a car payment, they're going to go for the low prices. But for someone who, even though I've been underemployed and struggling a little financially over the past year, is firmly entrenched in the middle class, I have the luxury of choosing to shop at Walmart. Shopping at Walmart might save me enough money to go out to the movies rather than renting a dvd, or allow me to buy shoes that aren't on sale, but it's not a matter of necessity for me, it's a matter of convenience. In the past few years, I've been trying to consider how spending money is a moral issue for me and how I can make decisions that fit with my ethical and religious beliefs. In the end, I decided that supporting systems that reduce a standard of living in an area and promote labor violations go against Biblical mandates for how we should treat the poor and our neighbors. By shopping locally or even at other big chains, I feel like I'm using my money to be more than just a consumer, but also a better neighbor. The low, low prices just aren't worth the trade-off for me.
Sorry I went on so long - what is it about Walmart that brings out the verbose tendencies in all of us? :)
Posted by: Kim on July 31, 2004 3:14 PM