Attacking Wal-Mart

Liberals have been ganging up on Wal-Mart for the past few years and the situation is headed toward a fever pitch. Witness today’s attack in the New York Times.

With most of Wal-Mart’s workers earning less than $19,000 a year, a number of community groups and lawmakers have recently teamed up with labor unions in mounting an intensive campaign aimed at prodding Wal-Mart into paying its 1.3 million employees higher wages.

A new group of Wal-Mart critics ran a full-page advertisement on April 20 contending that the company’s low pay had forced tens of thousands of its workers to resort to food stamps and Medicaid, costing taxpayers billions of dollars. On April 26, as part of a campaign called “Love Mom, Not Wal-Mart,” five members of Congress joined women’s advocates and labor leaders to assail the company for not paying its female employees more.

And in a book to be published this fall, a group of scholars will argue that Wal-Mart Stores, having replaced General Motors as the nation’s largest company, has an obligation to treat its employees better.

One person cited in the article is Jason Mrkwa, a 27 year old “high school graduate who stocks frozen food at a Wal-Mart in Independence, Kansas.” Jason says he is underpaid.

With pay that brings him about $20,000 a year, he said he could not afford a decent apartment or a vehicle better than his 1991 Dodge Dakota. “I don’t see why Wal-Mart can’t pay more,” Mr. Mrkwa said. “Unfortunately, in the market we live in there just aren’t many jobs available.”

I wonder if by “market” Mr. Mrkwa means the high school grad market. It is, I think, readily accepted conventional wisdom that if you really want to make money you need to go to college. But, what is perhaps the stupidest comment of the whole article belongs, naturally, to a union official.

“Henry Ford made sure he paid his workers enough so that they could afford to buy his cars,” said William McDonough, executive vice president of the United Food and Commercial Workers union. “Wal-Mart is doing the polar opposite of Henry Ford. Wal-Mart brags about how its low prices help poor Americans, but its low wages are helping increase the number of Americans in poverty.”

Well, Mr. McDonough, what would happen if Wal-Mart weren’t there to provide jobs at all? Welfare is only a five year option now. Wal-Mart is not increasing “the number of Americans in poverty.” Rather, Wal-Mart is providing work for a large number of individuals who would otherwise be working at the corner gas station really making minimum wage. Others would probably be on the street. At the same time, Wal-Mart is able to sell low cost goods to individuals who do make low wages.

[Wal-Mart] attracted 8,000 job applicants for 525 places at a new store in Glendale, Ariz., [and] 3,000 applicants for 300 jobs in outlying Los Angeles.

Michael T. Duke, chief of the company’s stores division, said, “Wal-Mart is a very good place to work for our associates, and every day we make it even better.”

Those numbers speak for themselves. Wal-Mart brought work to people who most likely would not have work. But, because those people are not under the “protection” of a union, Wal-Mart is attacked.

The piece keeps referring to Ford and GM and how Wal-Mart should be more like them. If Wal-Mart were more like them, we’d be reading stories now about how Wal-Mart was adding to unemployment rolls and suffering losses, as opposed to employing people across the country, providing low cost goods to consumers, and turning a profit.

The debate is far from over. LaTasha Barker, a single mother who worked for two years as a cashier at a Sam’s Club in Cicero, Ill., said she earned so little that she could not afford the $1,860 a year for family health insurance.

“They don’t pay a living wage,” said Ms. Barker, who quit her $8.40-an-hour job in 2004 to take a $15-an-hour social work job. While at Sam’s, she said, she qualified for Medicaid and $139 a month in food stamps.

By contrast, Jamie Schifferer, manager of the health and beauty aids department at a Wal-Mart in Algonquin, Ill., said Wal-Mart was a terrific employer. She quit her $25,000-a-year post running a Cingular wireless shop to go to Wal-Mart.

After 20 months, she earns $12.50 an hour – close to her previous pay – but now works 40 hours a week rather than the 60 hours at Cingular.

“I was very miserable,” she said. “As soon as I heard about this store opening, I jumped. It’s perfect for me right now.”

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Erick Erickson

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2 Comments

  • I understand that this is just capitalism at work, but it’s sad to see. Here in Arizona, the existence of a Walmart spoils the well. The smaller buisnesses around it wither and die because they can’t compete with the low prices Walmart maintains by pitting Chinese bidders against each other until they have to resort to meager conditions for their employees. The neighborhoods around a Walmart usually go downhill because all the traffic around it. People move out of those houses and they become rentals or lower-income housing. Eventually that Walmart has sucked the buisness out of the area, and closes it down, leaving a massive shell that never becomes anything else, and the Walmart moves five miles away to open an even larger superstore, and the process begins again. And the original neighborhood is left in disrepair, much as a forest in the aftermath of a volcanic eruption. It takes years for sparks of revitalization to come back.

    The moral of the story is: Shop at your local bodega.

  • Who said you need a college diploma to make money? Like, that’s some kind of guarantee? What happened to those little things like hard work?

    In the world of business, there are several conflicting ethical issues that businesses face in order to succeed. One can look at the principle of efficiency as an ethical good, and Wal-Mart is generally a very efficient operation where it needs to be — procurement, distribution, etc. However, the company loses a great deal of efficiency by lacking a competitive HR strategy, and this is a major reason why the company deservedly gets so much flack.

    All the major economic studies I’ve seen on Wal-Mart’s net effect on jobs show that the company has a depressive effect on local economies. This makes sense: Wal-Mart moves into a town, local businesses shut down. The jobs “provided” by Wal-Mart pay lower wages, with the assumption that the goods sold by Wal-Mart are sold at lower prices (this is actually not true — only the goods set out in the aisles are offered at low prices, which gives the impression that the other goods in the store are also offered at low prices).

    Most unions, as far as I’m concerned can go to hell. I don’t believe they’ve outlived their usefulness, but collective bargaining is not going to solve any of the problems created by Wal-Mart. It certainly won’t solve the company’s HR problems, which only exacerbate unionization efforts. It’s a problem the company will need to solve on its own if it wants to achieve sustainable growth and offer even bigger returns for its shareholders. This is especially the case, seeing that its stock price has been stagnant for about five years.

    I do not believe there is anything inherently evil in taking on a cost leadership strategy, which Wal-Mart does. They have been very efficient wrt their supply chain, and in taking advantage of their economies of scale. However, the company has not paid much attention to HR, and this has hurt them in the long run. In response to the criticism, they decided to launch a PR campaign rather than fix the problem. To ignore Wal-Mart’s effects on small-town America, wages, and net jobs is to be a blind partisan. This ain’t partisan politics — just business.