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The Wally Way: Is Walmart Destroying America?

“You shouldn’t shop at Wal-Mart. Their employees make low wages and the company doesn’t provide health insurance for them.”

My mother spoke as I continued to look for an available parking space in the sea of cars that is a Wal-Mart parking lot.

She continued:  “And women are paid less for doing the same job as their male counterparts.”

My hunt for a place to park went on. I could see  the store about a mile back in the rear view mirror. It was 1pm on a Saturday.  It seemed as if, pardon the pun, everybody and their mother was at Wal-Mart.

In Fortune‘s latest ranking of the world’s largest companiesWalmart is No. 1. The only other American business at the top? ExxonMobil at No. 3. [1]

Wal-Mart is probably the most powerful company in U.S. history. Its low prices keep people coming back.  If you follow the trail of low prices in America, though, they will lead you to low wages in China.  This is where American jobs have gone.

By squeezing its suppliers for impossibly low prices, Wal-Mart has forced many of them to move their manufacturing jobs to low-wage countries.

“Wal-Mart gets its economic power because it is a gateway to the U.S. consumer. Wal-Mart is the largest retailer in the United States. It’s the largest employer in the United States. The demand for Wal-Mart stores is what provides China and other countries in Asia with their access to the most powerful capitalist economy in the world. So Wal-Mart is providing a gateway into the American economy for overseas suppliers in China and elsewhere, and it’s doing it on a scale that is unprecedented. No company has had the kind of economic power that Wal-Mart does, to be able to source products from around the world. … Wal-Mart is able to transfer whole U.S. industries to overseas economies.”  Duke University sociology professor Gary Gereffi told the PBS program Frontline as part of a special “Is Wal-Mart Good for America?” [2]

The Wal-Mart way of the lowest prices has led to lower wages and job loss here in the United States.

Wal-Mart fights to keep wages and benefits low by battling workers’ attempts to form unions. The company has closed stores rather than negotiate with workers who want to organize themselves  to collectively bargain with the retailing giant.

The remote Quebec outpost of Jonquière is a town of 60,000. Businessweek reported in February of 2006:

“A media capital Jonquière is not. And yet Wal-Mart’s abandonment of this north Quebec outpost in the spring of 2005 made news from Tokyo to São Paulo as an object lesson in the lengths to which America’s largest company will go to throttle the threat of unionization. Wal-Mart closed its store here a few months after it was certified by the Quebec government as the only unionized Wal-Mart in North America… Wal-Mart entered Canada by buying 122 discount department stores from the Canadian subsidiary of Woolco in 1994. (Wal-Mart passed on 22 other Woolco stores, including all 10 of its unionized outlets.)”[3]

The Bentonville, Arkansas giant touts its computerization and harnessing of the new world order of just-in-time delivery and the web as the reasons for its success.  There are two darker ones, though. The first is its epidemic disregard of United States labor laws. The 2008 Minnesota Law Review notes:

“Pioneering technological and organizational innovations account for a portion of Wal-Mart’s advantage, but the nation’s largest private employer has also been hostile to labor regulations. It has often violated the phalanx of laws, administrative rulings, and enforcement mechanisms that constitute the governmental regulation of work and labor established in the United States during the decades of social reform that stretched from the Progressive Era, through the New Deal, and on into the 1960s and early 1970s. For nearly two decades Wal-Mart has faced a stream of litigation charging that company policies violate and distort state and federal laws covering overtime pay, workers’ compensation, the minimum wage, fair employment practices, and various health and safety regulations.” [4]

Wal-Mart has changed the balance of power in the world of business not through buying power and better technology, but by forcing jobs overseas which makes them the vital link between the vast majority of American consumers’ needs for finished goods and the supply chain that delivers them.

“The question of who has power has actually shifted dramatically in the last 30, 40 years. It used to be that manufacturers — big, multinational manufacturers — had the most power, companies like General Motors and General Electric. Today, global retailers actually have become the most powerful companies in the global economy because they have the ability to shape global supply chains, global sourcing networks, and make decisions about where products are made around the world, at what price and how fast things have to be moved. And that kind of power is dramatically new, and we’ve just seen that emerging in the last 15 years or so,” said Gereffi. [2]

Sam Walton’s philosophy of buying cheap, selling for less than the other guy, and making a profit on high volume and fast turn over have forced many workers to rely on public aid because they cannot afford both health insurance and food for their families.

“‘Wal-Mart’s health insurance was awful!'” Susan Mediger-Paul, a Wal-Mart accountant  told Alternet in 2005.  “Mediger-Paul opted out of the company health plan, she says, to pay into the state healthcare system. ‘I had two preemies and they both had asthma–there was no way I would have made it on Wal-Mart’s insurance.’ With cheap premiums but large deductibles and gaps in care, she says the Wal-Mart insurance wouldn’t even have covered her kids’ vaccinations.”

That means that many Wal-Mart employees end up on public assistance. Democrats in the U.S. Congress and in more than 23 states sponsored so-called “Wal-Mart Bills” to force employers to either contribute meaningfully to their employees’ health care plans, or compensate the state plans for their failure to provide adequate coverage that meets the letter of the labor law.

Wal-Mart has so pacified shoppers into ignoring the difference between the price of something and the cost that Americans are only starting to realize ever-cheaper prices have consequences. Steve Dobbins, President of thread maker Carolina Mills told FastCompany in December of 2007:

“We want clean air, clear water, good living conditions, the best health care in the world–yet we aren’t willing to pay for anything manufactured under those restrictions.” [5]

You can’t buy anything if you’re not employed. There are certainly other factors contributing to the historic level of unemployment, but it is clear that Walmart is like consumer rat poison.  As a country we have gorged ourselves on cheap shopping. Now we’re slowly starving to death with joblessness in a declining America.

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13 comments on “The Wally Way: Is Walmart Destroying America?

  1. thedrpete
    August 30, 2011

    On so very-many levels. The Founders of these United States brilliantly concluded and proclaimed that humans were born with unalienable rights from their Creator, e.g., liberty (the right to do whatever you please . . . as long as you don’t infringe on another’s like right in the process. If Sam Walton or his heirs want to offer a job at 25 cents per hour, it is their unalienable as well as Constitutional right to do so.

    Both the unalienable right to liberty and the Sherman Act of 1890 prohibit collusion in restraint of trade. It was only the threat of bullying by FDR that got the then Supreme Court to allow passage of the Wagner Act of 1935, which exempted labor from organizing and collectively bargaining from the above.

    The most-successful “welfare” program in human history is WalMart, whether you’re speaking of low-price goods and services to the so-called “poor” in America or the wages now-4-times what was available to then rural Chinese when WalMart began in PRC.

    Associates at WalMart stores are empowered early and have all of the upward-mobility opportunity that they earn. Former clerks have become millionaires there.

  2. saundra
    August 31, 2011

    Wal Mart doesn’t have low prices….I really don’t understand why everyone keeps saying that…the prices of food keep going up weekly…on somethings..and they constantly are moving everything…so the customer has to keep looking for things they buy on a regular basis…it’s ridiculous…

    Almost everyone I have ever spoken with who does or use to work at WM literally hate it…the biggest problem we have in small town USA is that the mom and pop shops have worse prices than WM in order to try and survive…

    Irregardless I shop at WM every week…because it’s the only place that is so convenient ….so if they don’t mind being greedy selfish pigs …then I guess that’s between them and God??? Time will tell…my one message to the owners…you can’t take it with you….

  3. thedrpete
    August 31, 2011

    On so very-many levels. Only 3% of ExxonMobil’s business is in the United States. They are excoriated by President Obama, and threatened with getting their “tax loopholes” removed and ceasing the subsidizing of “big oil”.. Fact: In FY 2010 ExxonMobil made 2 cents on each gallon of gasoline. Fact: State taxes were 48.1 cents on each gallon of gasoline. Fact: In the last 5 years (2006-2010) ExxonMobil had earnings in the U.S. of $40.5 billion and paid federal income and other taxes of $59 billion. Who is subsidizing whom?

    America’s jobs have gone to China? Over the past 30 years non-union manufacturing jobs in America have increased. Over the past 30 years union manufacturing jobs have decreased even more. The killers of American manufacturing jobs are federal taxation, federal regulations, and unions in quid-pro-quo collusion with Democrat politicians.

    There’s so much more that’s misguided and blind in this blogpost.

    • Brian Ross
      August 31, 2011

      Fact: Exxon made far more than .02 on every gallon because they are both the importers, the distributors, and the distillers. Fact: You spout off a lot. How about you backstop your “facts” and while you’re at it, leave off the data from the astroturf political fronts for the Petroleum institute?

  4. thedrpete
    August 31, 2011

    My figures, Mr. Ross, are from the INDEPENDENTLY-AUDITED (by federal law) FY 2010 financial statements submitted to the IRS from ExxonMobil Corporation. When you say “Fact”, was that just off the top of your head?

    It is certainly true, Mr. Ross, that demagoguery beats data. http://thedrpete.wordpress.com/2011/08/16/demagoguery-beats-data/

    • Brian Ross
      August 31, 2011

      Oh yes, well we all know that Exxon Mobil is on the up-and-up. ;)

  5. Ron
    September 7, 2011

    How did this get to be about Exxon? The fact is the reason we are experiencing such drastic unemployment is because almost all of our manufacturing jobs have been sent overseas by the CEO’s in order to line their own and their shareholders pockets. Given the state of the union i would almost think their actions to be tantamount to treason. Bring manufacturing back and put our own people to work.

  6. thedrpete
    September 7, 2011

    CEOs — by U.S. law — have a fiduciary responsibility to act in the best interests of their shareholders. Given that corporate taxes in the United States are second-highest on the planet*, and given that American business faces the most-onerous government regulations on the planet, CEOs have been doing the right thing.

    (*Corporations don’t pay taxes. They just collect them in the price of what they sell from their customers, then pass them through. If they couldn’t, they’d go broke and cease to exist. What the economics-illiterati call “tax loopholes” are really price breaks for customers.)

    The idea that corporate CEOs should subject their shareholders to robbery and plunder by the U.S. federal government, all in the interest of feeding legislators’, government executives’, and government bureaucrats’ addiction to spending (other people’s money) is incomprehensively-adolescent.

    Just a note: Over the last 30 years non-union manufacturing jobs in America have increased. Union manufacturing jobs have decreased by more. As to the net-puny growth in the number of manufacturing jobs over that time, one might be well-served to study the astounding growth in U.S. agricultural output over the past 120 years while farm-labor numbers have plummeted. One might just find a parallel.

  7. Chris
    September 8, 2011

    Well, now we know how reliable thedrpete is. His claim that that “corporate taxes in the US are the second-highest on the planet” is misleading enough to be considered a lie. Only the statutory top tax rate is the second highest in the world. The EFFECTIVE corporate tax rate (what percent of income the corps actually pay) is one of the LOWEST in the world.

  8. thedrpete
    September 9, 2011

    U.S. companies face the sixth- highest effective tax rate in the world, according to a study by PricewaterhouseCoopers LLP.

    The tax rate for the largest U.S. companies between 2006 and 2009 was 27.7 percent, compared with a non-U.S. average of 19.5 percent, according to the study released today. Companies based in Japan, Morocco, Italy, Indonesia and Germany faced higher tax rates.

    The statutory rate is 35%. Since the beginning of 2009 — well, since the 20th of January of that year — the effective rate has been climbing closer to the statutory, well except for GE and ADM who have a quid pro quo cozy deal going with the prexy.

    The rates in Japan and Germany are why we see Toyota, Honda, Nissan, and VW, et al, building cars here, albeit just to sell to the American consumer. The rate here is why, say, Ford’s two largest and most-modern plants in the world are NOT here.

  9. Calvin B Grub
    January 8, 2012

    I always find the Walmart argument amusing; the concept that people with no skills shouldn’t just be happy to have a job is what’s missing in this writeup. Walmart is also the only reason that low-income people can buy a lot of stuff that they buy; because it’s the only place where they can afford to shop.

    Yeah, lets get rid of efficient, well run enterprises and go back to poorly run mom-and-pops where you can finger the exact individual who is ripping you off with too-high prices. We should all pay more for some silly idea that companies should pay people a lot more than they’re worth because you say so; it’s the responsibility of corporate america to pay people enough to live well; rather than the responsibility of people to gain some skills so they can make a living wage.

    It’s exactly the idea that is driving America in the wrong direction.

    • Brian Ross
      January 8, 2012

      Walmart is also like rat poison: Lots of great, cheap products, but in order to drive costs continually lower, WalMart first bullies its vendors into shipping the work overseas (or provides them nice seminars to learn how to do it) then, when the vendor can’t get much lower, WalMart sources directly to their production and buys “Great” branded product directly from them, undercutting the brand company causing further job reduction in the already skeletal American workforce of many of these companies.

      Your harking back to the mom and pops is a specious argument. WalMart can, by its size and volume, still deliver goods at far more competitive prices than other large box retailers and grocers, BUT, if they don’t encourage some of this stuff to be built, canned, and processed here in America, people won’t have the money to spend on the goods and services that they vend.

      Customers are like rats: Slowly starving themselves to death by pushing the off-shoring of jobs that they need to survive.

  10. Calvin B Grub
    January 8, 2012

    Bullying vendors is what every good businessman does. In the end the vendor can decide not to do business with them.

    The arguments you make are mostly intellectual; and intellectual arguments often don’t play out in the real world. People scream for a green agenda but they all drive big SUVs because you can’t service your family’s needs with a golf cart. Walmart doesn’t stock cheap Chinese products because they’re trying to screw consumers; they stock them because people are clamoring to buy cheap chinese products.

    Businesses operate in the environment that exists; they don’t dictate what people buy. If people want better products they go to stores that sell better products. Your arguments reduce consumer choices; higher wages and benefits translate into the elimination of cheaper products available for consumers; and ultimately fewer jobs.

    The MTP debate today provides a great example of left vs right; a question was asked as to whether the candidate would be in favor of continued home heating oil subsidies for poor families. Newt gave the correct answer; We wouldn’t need subsidies if the government promoted increased development and product of energy resources. We only need a subsidy because prices are too high; and prices are too high because the Obama administration has policies in place that curb production. More production means jobs for the unemployed, more royalties to the government, lower prices for the consumer, and the elimination of the need for the government to dole out subsidies. It’s win-win-win.

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