Progressive Wal-Mart. Really.

By Sebastian Mallaby

Monday, November 28, 2005; Page A21

There's a comic side to the anti-Wal-Mart campaign brewing in Maryland and across the country. Only by summoning up the most naive view of corporate behavior can the critics be shocked -- shocked! -- by the giant retailer's machinations. Wal-Mart is plotting to contain health costs! But isn't that what every company does in the face of medical inflation? Wal-Mart has a war room to defend its image! Well, yeah, it's up against a hostile campaign featuring billboards, newspaper ads and a critical documentary movie. Wal-Mart aims to enrich shareholders and put rivals out of business! Hello? What business doesn't do that?

Wal-Mart's critics allege that the retailer is bad for poor Americans. This claim is backward: As Jason Furman of New York University puts it, Wal-Mart is "a progressive success story." Furman advised John Kerry in the 2004 campaign and has never received any payment from Wal-Mart; he is no corporate apologist. But he points out that Wal-Mart's discounting on food alone boosts the welfare of American shoppers by at least $50 billion a year. The savings are possibly five times that much if you count all of Wal-Mart's products.

These gains are especially important to poor and moderate-income families. The average Wal-Mart customer earns $35,000 a year, compared with $50,000 at Target and $74,000 at Costco. Moreover, Wal-Mart's "every day low prices" make the biggest difference to the poor, since they spend a higher proportion of income on food and other basics. As a force for poverty relief, Wal-Mart's $200 billion-plus assistance to consumers may rival many federal programs. Those programs are better targeted at the needy, but they are dramatically smaller. Food stamps were worth $33 billion in 2005, and the earned-income tax credit was worth $40 billion.

Set against these savings for consumers, Wal-Mart's alleged suppression of wages appears trivial. Arindrajit Dube of the University of California at Berkeley, a leading Wal-Mart critic, has calculated that the firm has caused a $4.7 billion annual loss of wages for workers in the retail sector. This number is disputed: Wal-Mart's pay and benefits can be made to look good or bad depending on which other firms you compare them to. When Wal-Mart opened a store in Glendale, Ariz., last year, it received 8,000 applications for 525 jobs, suggesting that not everyone believes the pay and benefits are unattractive.

But let's say we accept Dube's calculation that retail workers take home $4.7 billion less per year because Wal-Mart has busted unions and generally been ruthless. That loss to workers would still be dwarfed by the $50 billion-plus that Wal-Mart consumers save on food, never mind the much larger sums that they save altogether. Indeed, Furman points out that the wage suppression is so small that even its "victims" may be better off. Retail workers may take home less pay, but their purchasing power probably still grows thanks to Wal-Mart's low prices.

To be fair, the $4.7 billion of wage suppression in the retail sector excludes Wal-Mart's efforts to drive down wages at its suppliers. "Wal-Mart: The High Cost of Low Price," the new anti-Wal-Mart movie that's circulating among activist groups, has the requisite passage about Chinese workers getting pennies per day, sweating to keep Wal-Mart's shelves stocked with cheap clothing. But no study has shown whether Wal-Mart's tactics actually do suppress wages in China or elsewhere, and suppression seems unlikely in poor countries. The Chinese garment workers are mainly migrants from farms, where earnings are even worse than at Wal-Mart's subcontractors and where the labor is still more grueling.

Wal-Mart's critics also paint the company as a parasite on taxpayers, because 5 percent of its workers are on Medicaid. Actually that's a typical level for large retail firms, and the national average for all firms is 4 percent. Moreover, it's ironic that Wal-Mart's enemies, who are mainly progressives, should even raise this issue. In the 1990s progressives argued loudly for the reform that allowed poor Americans to keep Medicaid benefits even if they had a job. Now that this policy is helping workers at Wal-Mart, progressives shouldn't blame the company. Besides, many progressives favor a national health system. In other words, they attack Wal-Mart for having 5 percent of its workers receive health care courtesy of taxpayers when the policy that they support would increase that share to 100 percent.

Companies like Wal-Mart are not run by saints. They can treat workers and competitors roughly. They may be poor stewards of the environment. When they break the law they must be punished. Wal-Mart is at the center of the globalized, technology-driven economy that's radically increased American inequality, so it's not surprising that it has critics. But globalization and business innovation are nonetheless the engines of progress; and if that sounds too abstract, think of the $200 billion-plus that Wal-Mart consumers gain annually. If critics prevent the firm from opening new branches, they will prevent ordinary families from sharing in those gains. Poor Americans will be chief among the casualties.

Well said.

My bet is they got so many applications because the job market is basically non-existent there and you have tons of people looking for a job. They just opened a Wal-Mart in my former hometown area (which is basically a third world country compared to the rest of the US) and I'm sure there were similar numbers there. When you don't have a job, any job is pretty damn attractive to you.

On the other hand, I'm not a total Wal-Mart hater, I think it has it's pros and cons like anything else, and the article did make a few good points. I always go back to the episode of South Park "Something Wal-Mart This Way Comes"; basically everyone dislikes Wal-Mart to some extent or another, but almost everyone shops there from time to time.

*illegally



*waits*

Please explain "illegally".

Walmart is killing America by systematically driving American suppliers either overseas or out of business. How many television manufacturers are left here in the states? Zero. We can ship raw supplies to China, have the goods built at pennies on the dollar, and then shipped back here to sale in Walmart for next to nothing. And despite what the author says, Chinese workers are vastly underpaid to produce what would cost sometimes three times as much to make here. This is where the savings lie. And that's if they are paid. Chinese dissidents and prisoners are routinely placed in work camps where they are forced to manufacture goods that end up over here...in Walmarts and the like.

Chinese workers are underpaid relative to American workers? Almost all workers outside of the US are underpaid by that standard. I strongly suspect (as does the author) that most sustainance farmers would rather work in a factory.

What's the big deal about moving consumer electronics manufacturing overseas anyway? Don't Chinese/Mexican/Tawainese people deserve jobs? Shouldn't poor people be able to buy cheap computers and TVs? Or should rich people be forced to buy them for the less wealthy?

Plus, Walmart has kept US inflation in check for years. This helps all Americans.

You seriously need a history lesson. Guess who was did the manufacturing and was underpaid in the 1950's and 1960's? Yeah it was us Americans. People like my grandmother who worked in a clothing factory with no air conditioning and sewed for 8 hours a day for a few pennies a week. If you want that in our country, go for it. But you are gonna have a hard time finding workers.

Who cares how many tv manufacturers there are? How many steel plants were there in the 1950's compared to now? And look where the American economy has gone.

Wal-Mart is not killing America. In fact, Wal-Mart if anything is saving Americans who are poor by providing goods at extremely low prices. Wal-Mart has single handedly taken on inflation over the past 10 years and won.

Sure they deserve jobs, but do they deserve OUR jobs? At OUR expense? Is that worth a cheap TV to you? How many of those factory workers do you think will ever be able to afford one of those cheap TVs they themselves produce?

This isn't necessarily my area of expertise, so I apologize if this ends up sounding naive. But I've always been under the understanding that Wal-Mart provides goods to the poor at extremely low prices to people...but that it comes at the expense of the jobs that these poor people would ordinarily work. Like at the TV factory, or at the injection molding plant, or whatever it might be. So yeah, you can buy that 27" TV for $100, but it's going to be made by some dude in China making 10 cents a day instead of some person at the plant in Tulsa making $10 an hour. This person in turn ends up working at Wal-Mart for $6 an hour. So obviously the TV costs less, but it comes at the expense of the person paying $100 for the TV in the first place (the unskilled workforce). Is this incorrect?

So what jobs DO they deserve?

Anything as large as Wal-Mart I cannot praise or endorse

Let's say for a moment that you are the Walmart worker that's also buying that $100 TV, and let's say that it would have cost $200 otherwise. In the old scenario, it would take you 20 hours to earn enough for that TV, where in the new scenario it would only take you 16.67 hours to earn it.

Wages alone don't tell the whole story--cost of living and inflation, as Zutballs mentioned, also has to also be factored in. If everyone in the nation got a $5/hour raise at the same time, it'd mean nothing because the value of the dollar has decreased because there is more of them out there.

Tell it to the blacksmiths. Times change, markets change.

It takes decades for a country to establish a domestic market for things like consumer electronics... how many people who assemble BMWs can afford them? No one is entitled to every thing, only to exchange their time for what goods and services and available to them.

Wisconsin law stops holiday deals

By Amy Hockert, KARE 11 News.


Getting the best holiday shopping deal right after Thanksgiving may depend on which state you're in. And we're not just talking about the fact Wisconsin has a clothing sales tax and Minnesota doesn't.

On the day after Thanksgiving at Wal-Mart, everyone was hungry for a deal. But some of the shoppers paid, in some cases, hundreds of dollars more than others for the exact same item.

KARE 11 compared prices at two Wal-Mart stores that are ten miles apart. One is in Hudson, Wisconsin. The other is in Woodbury, Minnesota.

Here's what we found:

A Trivial Pursuit game selling for $19 in the Woodbury flier, cost $27 in the Hudson.

A portable DVD player selling for $68 in Woodbury, cost $83 in Hudson.

A TV selling for $98 in Woodbury, cost $129 in Hudson.

A $398 personal computer in Woodbury was almost $100 cheaper than its Hudson twin.

And a laptop that cost $398 in Woodbury, cost $632 in Hudson. That's a difference of $234 for the exact same computer.

"That's unreal, isn't it?" says Judy Darwin of Hudson. "May as well go across the border."

"How can they do that? It's the same store," says Amy Weiser of Madison, Wisconsin.

The answer dates all the way back to 1939, when Wisconsin lawmakers passed the Unfair Sales Act. That state law says it's illegal for retailers to sell items below cost. It's supposed to ensure a competitive marketplace.

"Kind-of irritates me," one Wisconsin customer said.

Wal-Mart officials would not go on camera, but they told KARE 11 they're simply complying with state law.

"State regulations prevent us from practicing certain pricing policies in Wisconsin," says Gail Lavielle, Wal-Mart spokeswoman.

But that policy means some Wisconsinites might be crossing the state line.

"Be heading back over to Woodbury every time, instead of staying here," says Jody Swenson of Hudson.

Wal-Mart officials were not able to say what they could legally do for you if you purchased one of the more expensive items in Wisconsin and wanted to return it in Minnesota.

The items discussed in this story were Black Friday sales items. They are now sold out.

When KARE 11 called several local Wal-Marts, store managers stressed the importance of keeping your receipt because, more than likely, you will only get back the amount of money you paid in the first place.


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The real effects of "fair trade" pricing practices.

This is no different than what happens in the NY/ NJ area. All the New Yorkers do their shopping in Jersey b.c of the cheaper prices. There is no sales tax on clothes in Jersey but in NY I think its 8%.

The answer dates all the way back to 1939, when Wisconsin lawmakers passed the Unfair Sales Act. That state law says it's illegal for retailers to sell items below cost. It's supposed to ensure a competitive marketplace.

Am I supposed to feel bad because Walmart A can't compete with Walmart B? If you want your low price that much, drive across the border!

What they DO deserve, GH, is a fair trade economy that allows them to work and live life at a standard higher than what they currently are. Walmart (and they are not, by far, the only culprit here) is effectively REWARDING governments who either allow or turn a blind eye to reprehensable labor practices and low wages in return for increased business, and on our end, lower priced goods.

Also, you can say that Walmart has helped keep inflation low. You can also argue that it has been one of the largest contributors to the trade deficit with China.

So what is that standard, then? Is it on par with a standard here? If so, then there would be no incentive to go overseas in the first place, and then what jobs would they have?

From your article:



$35 a week sounds like absolute shit, but it might be an increase compared to the past.

BTW, I'm not reall saying that you are philosophically wrong here: there are some ethical dilemmas to be encountered. But I'm just trying to look into the reality of the situation.



I don't think trade deficits are an entirely bad thing, but that could start a whole 'nother thread.

I obviously picked those number randomly...and according to them, it would require fewer hours to buy the TV. But the $6 wage also needs to be spent on gasoline, groceries, utilities, etc. Unless Wal-Mart offers huge savings on everything required for survival, doesn't this still have a negative impact on the poor consumer?

And yes, obviously inflation plays a role. My only question would be whether or not the impact that Wal-Mart has had on inflation offsets its other negative impacts.