Wal-Mart: The evil retailer

(Beware - this rant is 4 pages long in MS Word)


So, I know, everyone shops at Wal-Mart. They’ve got the lowest prices in town and the most convenience a store could have. But just how good is this big retailer? Not very.

So, let’s just look at things the way they look on first glace. Low prices. The economic firm Global Insight, in a study commissioned by Wal-Mart in 2005, states that consumers save $263 billion total, or $895 per person or $2329 per household. These numbers are huge. So what do we have to say about this?

It’s false. It’s VERY false. Many highly respected economists debate this number, including people such as Arindrajit Dube, Jared Bernstein, and L Scott Bivens. In a June 2006 paper, the latter two write, “A study by the consulting firm Global Insight, which concludes that Wal-Mart’s expansion has saved US consumers $263 billion, is deeply flawed. The statistical analysis generating this widely quoted figure fails the most rudimentary sensitivity checks used in good economic analysis, rendering its conclusions unreliable.”

While Wal-Mart may have insisted on many ways to prevent criticisms like this, they have failed. So, we look at the next largest estimate. A 2002 study by the New England Consulting Group saves consumers a total of $100 billion in a year. That is less than half. And there are further estimates that dwindle all the way down to $16 billion. So how much does Wal-Mart save consumers? It’s hard to tell.

Let’s look at Wal-Mart’s other “good points”

Wal-Mart creates jobs. According to Jason Furman, in “Wal-Mart: A Progressive Success Story” on November 28, 2005, “The one study that was published in a peer-reviewed economics journal found that ‘Wal-mart entry [in a county] increases retail employment by 100 jobs in the year of entry. Half of this gain disappears over the next five years as other retail establishments exit and contract, leaving a long-run statistically significant net gain of 50 jobs’.” Emek Basker in, “The Causes and Consequences of Wal-Mart’s Growth” on November 2006, adds on to this statistic, “The number of wholesale jobs declines by about 30 in the long run, reflecting the fact that Wal-mart is vertically integrated.”

So, looks impressive. But let’s take a look at the real picture here. Kenneth E Stone found in 1997 that during the 10 years after Wal-Mart opens, towns lose about 47% of their retail trade. A more recent study, by David Neumark, Junfu Zhang, and Stephen Ciccarella in October 2006, find “each Wal-Mart worker takes the place of 1.4 retail workers.”

Yet, it just looks like the statistics compete. However, the studies supporting Wal-Mart stop after five year. Kenneth Stone’s study continued through ten years. And then you have to look at Wal-Mart’s high turnover rate. According to “Wal-Mart How Big Can it Grow” from The Economist on April 15, 2004, Wal-Mart has to hire 600,000 people every year because of turnover. This is not job creation, this is job replacement. This cannot be taken into effect.

So what about community benefit? According to an article written by the National Committee for Responsive Philantrhopy, “The Waltons and Wal-mart: Self-Interested Philanthropy” on October 4, 2005, Wal-Mart gives the most among corporations, and increased this giving by 70% from 2002 to 2004, ending at $170 million.

While this may seem impressive, according to a documentary by PBS, “Store Wars: When Wal-Mart Comes to Town”, this is only .4% of their profits. Forbes reports in their “Most Charitable Companies” on November 14, 2005, that Target gives 2.1%, Coca-Cola gives 1.2% Best Buy gives 1.1%, etc. All these companies give so much more.

Another argument is about envirnonmental issues. Wal-Mart has put plans into place about reducing environmental harms, including a $500 million plan according to DNS Retailing Today (which is mostly PR), however, this is a plan. They tried, for example, an eco-friendly store with solar panel lights, etc, and found it unprofitable. They want to increase their profit, that’s all. And other companies may be doing more, so why give Wal-Mart credit for what it doesn’t do?

Now, let’s move to the negative impact Wal-Mart has on this country.

According to various studies by Arindrajit Dube and Steve Wertheim, Wal-Mart’s wages are extremely low. One of their statistis is the average wage for Wal-Mart is $9.68, which is 15% below other large retailers and 30% below unionized grocery workers. Seeing as the dollar amount is from Wal-Mart, it is the average of employees who have worked full-time for a year or more. That includes the high management and CEO positions. This is $4000 below the Federal Poverty line for a family of four, according to 2005 US Census Bureau data.

While those for Wal-Mart argue another statistic in Dube and Wertheim’s study – Wal-Mart’s median wage of $9 is above the median wage of large retailers, $8.34 – note that this estimate is much lower than the average. This puts workers further below the poverty line.

As why the median wage seems to be competitive, there’s a reason for that also: Wal-Mart drives other retailers’ wages down. A study in 2005 by David Newmark, Junfu Zhang, and Stephen Ciccarella, note that there’s 3.5% lower wage earnings when there’s a Wal-Mart around. Arindrajit Dube, Barry Eidlin, and Bill Lester note in “Impact of Wal-Mart Growh on Earnings throughout the Retail Sector in Urban and Rural Counties” on October 2005, that “the total earnings of retail workers nationwide was reduced by $4.7 billion due to Wal-Mart’s presence.”

Now let’s move to another aspect of workers, the benefits they receive. Even in Wal-mart’s own Supplemental Benefits Documentation FY06, the store notes that Wal-Mart pays twice as much out of pocket for healthcare, and that almost half of Wal-Mart workers’ children are on Medicaid programs. Because Wal-Mart wants to cut costs, they propose more efficient ways of providing health care: “A healthier workforce will lead to lower health insurance costs, lower absenteeism through fewer sick days, and higher productivity.” They wish to do this by designing “all jobs to include some physical activity” and offering “benefits that appeal to healthy Associates”.

Don’t let Pro-Wal-Mart people fool you with another “comparable” statistic. Wal-Mart itself is citing these problems and “fixes”.

The last problem with the worker specifically is that the corporation is anti-Union. They have “A Manager’s Toolbox for Remaining Union-Free” which discusses different union policies. According to Christopher Hayes in Symbol of the System on November 6, 2005, “Managers are trained to call a special hotline at the first sign of suspicious behavior, including ‘employees talking in hushed tones to each other’. After the call, the company’s notorious labor relations division headquartered in Bentonville, Arkansas, will swing into gear, often dispatching a company jet to the afflicted store, bearing members of its crack team of union busters. Management will convene mandatory meetings with each associate and screen anti-union videos.”

Well, say Wal-Mart supporters, unions are dying out. Only 13% of employees are in unions now, and half are government employees, according to “The Limits of Solidarity” from The Economist on September 21, 2006. This is a decrease from over 20% in the 1980s. And there’d be legal trouble if this was a big deal.

Well, it is a big deal According to a USA Today article by Stephanie Armour in 2003, the National Labor Relations Board has filed 28 complaints against Wal-Mart from 2001 to date of publishing. One of these is about meat cutters in Texas that wanted to organize. Wal-Mart then switched to prepackaged meats because of it.

Even if Wal-Mart’s wages and benefits were at or above par, this anti-Union defeats the purpose. How can they be able to continue earning these without the Union guarantee? One of my first points in this section was that workers get 30% less than unionized workers.

Another argument is about poverty. Wal-Mart supporters will bring up a statistic cited by Jason Furman in “Wal-Mart: A Progressive Success Story” on November 28, 2005, that benefits give a 6.5% increase to income for the bottom quintile. However, this statistic is not only about Wal-Mart, but all big-box grocery stores.

A study by Stephan J Goetz and Hema Swaminathan on October 18, 2004 titled “Wal-mart and County-Wide Poverty” states that “The marginal effect of another Wal-Mart store on the average poverty rate was .204, while that of existing stores was .099 percentage points”, meaning that new Wal-mart stores double the rate of increasing poverty (it’d be negative percents if it was decreasing). This is huge, because it attributes only to Wal-Mart.

Not only these huge disadvantages to workers and to poverty-stricken families, but there are others to all Americans, whether they shop at Wal-Mart or not – tax burden. According to a US House of Representatives report headed by Congressman George Miller on February 16, 2004 (specifically the Democratic staff of the Committee on Education and the Workforce), each Wal-Mart store causes a tax burden of $420,750. Each employee, $2,103. This causes $3 billion in taxes that Americans must pay for their public health plans. Soon we will pay more, as according to an EPI study by Jared Bernstein and L Josh Bivens in June 2006, the president has cut $5 billion over five years for Medicaid and another $5 billion for other programs. There will be a $27 billion in cuts for Medicaid over the next 10 years. That will only increase our tax burden.

Everyone pays taxes. Not everyone shops at Wal-Mart

There have been hundreds of labor violations, including locking workers in the store overnight, having them work overtime with no pay, having students work during school, deleting breaks, cited by many studies, including the one by the US House of Representatives mentioned in the last paragraph.

Wal-Mart is not a good company for anyone by any means.