Wal-Mart: Why They Suck (Part 1 of a Series)

By Kathy G.

Given the gratifying burst of publicity that this story received yesterday, and not just in the left blogosphere but in the mainstream media as well, I thought it was as good a time as any to begin a project I've been contemplating for a while now: an occasional series of posts about why Wal-Mart is the single institution that, above and beyond all others, represents the despotism, moral depravity, and sheer viciousness of American life in the 21st century. As surely as the motto of this humble blog is "Écrasez l'infâme!," there is no better synecdoche for the modern infâme than Wal-Mart.

Why Wal-Mart? For one thing, Wal-Mart is huge. It is America's, and the world's, biggest company (in terms of revenues), and also America's, and the world's, largest private sector employer. Using the figure listed here on Walmart's 2007 revenues, and the figures for the U.S. GDP in 2007 listed here and here (which all give slightly different estimates for the GDP), I calculate that Wal-Mart's revenues are equal to approximately 2.7% of the gross domestic product of the United States.

To get a sense of what that means, consider, as Nelson Lichtenstein points out this invaluable book, that at the height of its power back in the 1950s, General Motors, then America's largest corporation, was responsible for about 2% of the GDP. And just as General Motors, along with the other Big Three auto-makers, set the standard for one model of employment -- the so-called "Treaty of Detroit,"  which secured for workers collective bargaining rights, a middle-class wage, and extensive health, unemployment, pension, and paid leave benefits -- well, Wal-Mart has pioneered a rather different paradigm for labor relations.

An academic I know who studies work in the low-wage sector believes that Wal-Mart gets a bad rap for its labor policies. Not that she thinks that the Wal-Mart's labor policies are any good, mind you -- but she argues that most other employers in the retail sector as just as bad. I think she misses the point, which is that Wal-Mart is the 800-pound gorilla. Its ginormous size makes it not merely a market-taker, but a market-maker -- a monopsony, if you will. It has the power to set standards, and it does; where Wal-Mart leads, other employers, and particularly employers in retail and other low-wage sectors, follow. And Wal-Mart is leading the way toward some very nasty places indeed.

Here, for example, is a great example of how Wal-Mart's entry into a market led to dramatically worse working conditions for non-Wal-Mart employees:

Wal-Mart has also set off a particularly destructive form of competition among corporations, which seek competitive advantage by pushing down the wages and benefits of employees. A clear example of this has been the conflict provoked by Wal-Mart's decision in 2002 to enter the southern California grocery market with forty of its "supercenters"—where the shopper can buy everything from tomatoes to deck furniture and spare tires. Although Wal-Mart has not yet opened any of these new stores, the response of California supermarkets, led by Safeway, has been to demand cuts in their employees' wages and benefits, with the cuts falling heavily on newly hired workers. This posed a serious threat to the supermarket employees, 70,000 of whom are members of the Union of Food and Commercial Workers (UFCW) and have benefited from its bargaining with employers. While a sales clerk at Wal-Mart earns only $8.50 an hour, a worker holding a similar job at Safeway or Albertson could earn $13 an hour along with full health care benefits.^[11] For employees that could make the difference between minimal financial security and a life spent scraping by on the poverty line.

After the UFCW called a large-scale strike against the Safeway stores last winter, two other retailers, Kroger and Albertsons, locked out their workforce—and replaced it with temporary employees—as a demonstration of support for Safeway even though their workers were not on strike themselves. Taking full advantage of their right to hire replacements for striking and nonstriking workers, the supermarket owners beat the Safeway strike and forced the UFCW to accept cuts in wages and benefits.

Given Wal-Mart's race-to-the-bottom labor strategy, keeping unions out is Job One. Wal-Mart pours enormous resources into union-busting. For instance:

Every store manager at Wal-Mart is issued a "Manager's Toolbox to Remaining Union Free," which warns managers to be on the lookout for signs of union activity, such as "frequent meetings at associates' homes" or "associates who are never seen together...talking or associating with each other."

The "Toolbox" provides managers with a special hotline so that they can get in touch with Wal-Mart's Bentonville headquarters the moment they think employees may be planning to organize a union. A high-powered union-busting team will then be dispatched by corporate jet to the offending store, to be followed by days of compulsory anti-union meetings for all employees.

And there's this tidbit, from yesterday's Wall Street Journal story:

The United Food and Commercial Workers was successful in organizing only one group of Wal-Mart workers -- a small number of butchers in East Texas in early 2000. Several weeks later, the company phased out butchers in all of its stores and began stocking prepackaged meat. [They also fired the offending employees, which is illegal under the National Labor Relations Act.] When a store in Canada voted to unionize several years ago, the company closed the store, saying it had been unprofitable for years.

Wal-Mart a powerful player not just in the way it influences markets, but in the way it influences our government as well. Of course, one of the public policies Wal-Mart cares most passionately about are the ones involving unions, and as yesterday's reports showed, the prospects of President Obama and a Democratic Congress passing card check seems to be the main thing that currently has them in freak-out mode. But there are a multitude of other public policies they have an interest in as well.

For more on this, I highly recommend that you view a recent episode of the HDNet series, Dan Rather Reports (you can find the relevant episode by clicking on this webpage, then scrolling down to the April 22, 2008 episode, "Wal-Mart Goes to Washington.") It contains exclusive footage filmed by Wal-Mart itself of a 2001 managers meeting, wherein company officials put the pressure on employees to pony up and contribute money to Wal-Mart's political action committee The report does a great job of explaining how corporations raise money for political donations, and what they get in return.

Getting back to Wal-Mart and unions -- where does the company's ferociously anti-union attitude come from? Historians like Bethany Moreton (whose fascinating chapter of the Lichtenstein book you can read here) have written about important role the paternalistic -- even feudalistic -- Ozark culture had in shaping Wal-Mart's values and its management and labor practices. Wal-Mart's culture is notably insular, and women and racial minorities -- and even non-WASPS -- rarely make their way into the corporation's upper echelon. Even amongst Wal-Mart's middle managers, women and nonwhites are few and far between, as this anecdote tellingly demonstrates:

 

The depositions of witnesses in the Dukes case, alleging sex discrimination at Wal-Mart, name hundreds of Wal-Mart managers with whom the witnesses had dealings. Over 90 percent of these were male, but around 80 percent had Anglo-Saxon, Scandinavian, or German names. It was as if the great twentieth-century immigrations from eastern and southern Europe, and more recently from East Asia and Latin America, had never take place. This ethnic bias reflects Wal-Mart's continuing belief that a managerial elite recruited mostly from the rural, small-town heartland will best uphold the corporation's core values of discipline and obedience.

In the next post in this series, I'll be writing more about the Dukes case, as well as the larger subject of how Wal-Mart treats its female employees.

 

Comments

[Angry at the Margin]

Well, efficiency requires P=MC in the labor market too. So where's the fuss?

The lack of opportunities for many people (and hence their low opportunity cost) comes from then not having productive capabilities: health, education, etc.

So this crusade is at best misguided. I won't say that it is at worst.

[Ninja Zombie]

I'm just curious, why do so many Democrats want to take away workers right to vote on a secret ballot about unionization (aka "card check")? While many things make sense (even if I don't agree with them), I can't even think of a rationale for this. Can someone explain?

[Horror Fiction a Reality?]

Bentley Little's "The Store" is a strange sick parody about the addiction to cheap at any cost. Closing up shops of the small business owner (was doesn't Wal-Mart sell?....oh yeah, humanity), unfriendly environmental practices- our city was so happy to have a Wal-Mart open here, they negotiated to waive the obligations they have for replanting and fees per tree costs assigned to any other person building in the city. They clear cut acres for the "store" and yet, people who want to build homes pay thousands to develop. That is real life.
The story is a fun read, creepy, but easy to make the parallels. I highly recommend it!

[Tim Worstall]

"where does the company's ferociously anti-union attitude come from?"

Gosh, I dunno, maybe they understand the subject perhaps?

Unions exist to raise the pay and conditions of their members (nothing wrong with that, I hasten to add, the right of association is just as important as the one to free speech). That increase in real incomes has to come from someone else, probably the investors. Management, as the agents of the investors (remember that fiduciary duty thing) are thus simply doing their job by being hostile to unions.

No?

[Sir Charles]

Nina,

The hostility to the so-called "secret ballot" elections conducted by the NLRB is that they give the employer the opportunity to mount a full scale campaign against the union, usually replete with the illegal firings of union supporters among employees. Additionally, the legal process surounding the election means that the employer can tie the matter up for years between the NLRB and the courts. I was involved in a case involving the illegal discharge of workers and won their reinstatement SEVEN YEARS after the were fired. Do you suppose my legal victory meant anything at that point in terms of the organizing campaign?

Don't get sucked in by these disingenusous arguments against card check. The Wal-Marts of the world want to continue to the present system not to protect worker's freedom, but because they know that they can completely game the system to stop unioniztion.

[Sir Charles]

Tim,

Employers should have no say whatsoever in the decision of employees on whether to unionize or not.

[Kathy G.]

Tim, most employers, in the U.S. at least, are indeed strongly anti-union. And the research shows that unions are associated with lower profits, so there's reason for them to feel that way.

But Wal-Mart is unusual for the depth of its anti-union sentiments. As I noted in my post, they are unusually vigilant in their attempts to squelch union activity. They devote enormous resources to union busting, including a special hotline and a response team that is flown in on a corporate jet to respond onsite to reports of union organizing activities at any of their stores.

There's no question that they are much more hardcore about this than most other workplaces in the U.S. As noted in my post, when one Wal-Mart store unionized its butchers, the entire chain phased out butchers and started stocking prepackaged meat instead.

Corporate culture does have a lot to do with how different companies respond to attempts at union organizing. Costco, for example, is another low-price retailer, but about 18% of its workforce is unionized. And even in the nonunionized shops employees have better pay and benefits than the Wal-Mart employees do. Turnover at Costco is significantly lower than it is at Wal-Mart. The difference in corporate culture is the reason why those two retailers treat their workers very differently.

[Ninja Zombie]

Sir Charles:

But why eliminate secret ballots? That's what I don't understand. Why not simply push for speeding up the union election process, and perhaps better enforcement of existing laws?

Incidentally, apart from "illegal firings", what's wrong with a campaign against unionization? Unions are free to pay people to listen to pro-union propaganda, just as employers can pay people to listen to anti-union propaganda. Isn't that just free speech?

[Tim Worstall]

"Costco, for example, is another low-price retailer, but about 18% of its workforce is unionized. And even in the nonunionized shops employees have better pay and benefits than the Wal-Mart employees do. Turnover at Costco is significantly lower than it is at Wal-Mart. The difference in corporate culture is the reason why those two retailers treat their workers very differently."

I wrote a long essay on this a couple of years ago. Costco does indeed pay its workers more. It also employs a great deal less labour (as per turnover etc). It's not so much corporate culture as business model, although I agree that you can equate the two.

Costco has higher sales per empoyee, higher margins per employee and higher profits per employee. That's fine, they're using higher cost labour but getting greater productivity than the greater cost out of them. WalMart uses vastly more labour per unit of sales and pays its workers less: this isn't so much a revelation as a simple identity: you employ more low productivity workers this is what is going to happen.

When I actually did the sums I worked out that WalMart could be just like Costco if desired: they'd just have to fire half their workers: that's some 600,000 people I believe.

[Sir Charles]

Nina,

That's just terribly naive. Number one, it is illegal for unions to give any inducement to people in the course of campaigns. Number two, it presupposes that employer's speech is not inherently coercive -- of course it is, they control your livelihood. The union -- not so much.

One is reminded of the addage about freedom of the press -- it is available to anyone who owns a press. It is impossible for an employer to weigh in on the issue of unionization and not have a coercive element to it.

[Barry]

Ninja Zombie, we're all stocked up on right-wingers here, along with leading questions, faux requests for explanations, and GOPEcon 101.

[dsquared]

Kathy - have you seen Liza Featherstone's book?

[TGGP]

Wal-Mart has done more for the poor (even reducing inequality, http://freakonomics.blogs.nytimes.com/2008/05/19/shattering-the-conventional-wisdom-on-growing-inequality/#more-2640 ) than any politician. It is sickening that for the benefit they provided they became public enemy number one for all those who wish to signal their status as above those rubes who would work or shop at the store. And in what other circumstance would its enemies applaud the end of a secret ballot, which in public elections serves to protect the voter from retaliation regardless of who it might emanate from?

Ecrasez l'infame. Sure. After the original l'infame had been steadily weakening relative to the State since Westphalia your predecessors decided to crush it and thereby usher in the murderous waves of nationalism and communism that would shock the worst despot of the ancien regime (and I say that as an atheist with residual anti-Catholic prejudices). I can only hope that I'll be dead before you and your compatriots bless the world with your next improvement.

[a-train]

"_Management, as the agents of the investors (remember that fiduciary duty thing) are thus simply doing their job by being hostile to unions._"

If you define "fiduciary duty" as "maximumizing short term (quarterly) profits." But that does not create wealth. It just gives the appearance of creating create wealth when actually doing the opposite. What we call wealth only has meaning in a stable society. An unfair society does not stay stable for long. The growing perception of our society (correctly IMO) is that it is unfair economically.

Of course, the so-called "winners" love the game. It is a game where the winner takes all or almost all (or more and more) of the benefits. You can tell yourself all you like that the best players deserve what they get, but if there is no game they get nothing. When most people feel they cannot possibly win a game or that a game is rigged, they stop playing. This possibility seems impossible for some to comprehend (i.e. those who subscribe to this idea of human existence as a Darwinian struggle and our social organization as driven by this invisible hand). But as European aristocrats learned, if the "losers" decide to play a different game who is a "winner" changes dramatically.

"_I can only hope that I'll be dead before you and your compatriots bless the world with your next improvement._"

You dread the "next improvement" as opposed to what? No attempt at improvement? (Or do you support a better improvement? One that is 100% certain to be successful?). And what do you think of efforts at "improvement" like abolishing slavery or striving for a more equitable society. Dreadful?

[Tom P Noonan]

only CEO Lee H Scott of Wal Mart is running Wal Mart by lower Wal Mart Employee waged and reduce affordable Health Care and tell Wal Mart Employee vote for John McCain for President in November Elections 2008 and use the privet plaine to go to his Stock holder Meeting and made more Stock then Wal Mart Employee

[TGGP]

Looks like notorious far-right reactionary is on the side of Wal-Mart regarding secret ballots:
http://online.wsj.com/article/SB121815502467222555.html?mod=opinion_main_commentaries

"maximumizing short term (quarterly) profits."
Wal-Mart has been around for quite some time now. Many companies started out losing money for years (Amazon, for example) while building up their business so they could make profits later. Of course, what is "short" or "long" is a matter of opinion and we naturally discount the more uncertain and distant future.

The growing perception of our society (correctly IMO) is that it is unfair economically.
Do any you have any polling data supporting that? To me "fair" is an inherently subjective term and I try to avoid it so I can communicate more clearly, but I posted a link earlier indicating that inequality has been decreasing thanks to Wal-Mart. It should also be noted that the self-reported happiness of Americans has less relation to inequality than among Europeans, though liberal Americans (not necessarily the economically disadvantaged) tend to care more about it.
http://www.themonkeycage.org/2008/07/post_97.html

What we call wealth only has meaning in a stable society
The natural state of man is nasty, brutish and short. You can read Demonic Males, Sick Societies or War Before Civilization on that. We spend most of our existence as a species in that steady-state. It is only because of instability and economic growth that we are no longer in it.

But as European aristocrats learned, if the "losers" decide to play a different game who is a "winner" changes dramatically.
In the French Revolution, that turned out to be nobody, not even Robespierre or the peasantry (who made up the bulk of guillotine victims). I suppose Napoleon was a winner for a while. What kind of victory is that?

You dread the "next improvement" as opposed to what?
Spontaneous order. Unplanned, undirected and relying on metis.

And what do you think of efforts at "improvement" like abolishing slavery or striving for a more equitable society. Dreadful?
Would you put the U.S Civil War and Bolshevik Revolution under those categories? I think those were some dreadful incidents. I don't judge events and actors by the intentions (which we all know pave the road to hell) but the results.

[TGGP]

Whoops, forgot to mention that I was referring to George McGovern at the beginning of that post.

[emilie]

why blame the company rather than the consumers? Wal-mart thrives bc many people choose to shop there.

[outback]

Labor costs do matter. Costco does provide their employees more, but on the flip side employ fewer people.

Another example, academia. In my town is a Major State University. They pay high for skilled talent on the faculty and pay above prevailing wages for unskilled/semi-skilled labor which are unionized. Where they cut labor costs is by using large amounts of graduate students to teach introductory courses, thus providing inferior service to the paying customer. If the university could get out of the stranglehold of the unions, they could free up resources to shift more PhDs into the classroom and thus raise the quality of the product. Or they could actually lower tuition.

Labor costs do matter....a lot.

[John Meredith]

"the despotism, moral depravity, and sheer viciousness of American life in the 21st century"

Blimey, is it as bad as all that? I can't help wondering why you don't get out, Kathy. There are lots of nice places that would have you, or at least non-despotic ones (I fear there wil be a bit of moral depravity going on all over, but that's life!). It is still possible to work for a better America from afar.

[Andy]

You do realize that it's grossly misleading to compare revenue to GDP. GDP is a value-added measure; a better comparison would be gross profits,

In Walmart's fiscal 2008 (correspondingly mostly to calendar year 2007) they made $88 billion of gross profit; this is about 0.2 percent of nominal GDP.

PS I would accept the BEA's estimate of GDP over Wikipedia's...

[cfpete]

Kathy G,
Since you live in Chicago, I am inclined to ask why Target is not your choice of morally depraved Big-Box stores to rail against?

[Andy]

If it's so awful working at Walmart why do they receive many more applicants than they have jobs? Where would those people work if Walmart wasn't around? If they raised wages, they'd have to fire some workers--if they did that what would happen to the thousands that lost their jobs?

It's all well and good to rail against "depravity", but the truth is that people have chosen to shop and work at Walmart, and they do it because they prefer the alternatives. Does it bother you so much that so many people disagree with your views?

[David Zetland]

Wal-Mart has done more for the poor (though lower prices and jobs) than all welfare programs combined.

Discuss -- with numbers please.

[josh]

Good for the commenters. The Wal-Mart as the root of all evil meme, is one of the strangest and most counterproductive I can recall.