Why has Walmart not failed due to opposition?

[LavenderBlue]

Here’s a New York Times article on efforts to get Walmart execs to increase pay:

http://www.nytimes.com/2005/05/04/business/04wages.html

Wal-Mart says its full-time workers average $9.68 an hour, and with many of them working 35 hours a week, their annual pay comes to around $17,600. That is below the $19,157 poverty line for a family of four, but above the $15,219 line for a family of three.

…

Wal-Mart argues that, as retailing companies go, it treats its workers better than average. It says 74 percent of its employees work full time, compared with fewer than 40 percent at many other retailers. But critics note that a leading competitor, Costco, pays $16 an hour - 65 percent more than the average wage at Wal-Mart stores and 33 percent more than the $12 average at its Sam’s Club stores. At Costco, 82 percent of the workers are covered by company health insurance, compared with 48 percent at Wal-Mart.

This same company:

http://www.ips-dc.org/projects/global_econ/walmart_pay_gap.htm
Wal-Mart company documents released April 15 reveal that CEO H. Lee Scott, Jr., made $17,543,739 in total compensation last year – nearly twice the average of $9.6 million for leading U.S. CEOs as a whole, according to Business Week. Thomas Coughlin, the Vice Chair of the board who recently was accused by Wal-Mart officials of spending company money on personal items such as alligator skin cowboy boots, has had some of his compensation suspended, but not his $1 million-plus salary.

Wal-Mart’s generous compensation for top executives contrasts sharply with the wages of the people who produced or sold the goods that earned the company $10.3 billion in profits on sales of $285 billion last year.

So while you may save money on some goods you are paying more in taxes to offset Walmart’s refusal to devote a small portion of profits to pay workers more. It’s especially repulsive to hear a man making more than a million dollars a month whine about people who want him to pay his workers a decent wage.

I think the reason efforts have failed is it’s simply very hard to fight a huge corporation like Wal-Mart. They have far more resources at their disposal than an opposition organization.

[dropzone]

Obviously it’s a better bet to work at Costco, though I suspect Walmart’s pay is better where they have competition from Costco, and I am not defending any company that pays less than a poverty wage (I’d think they would be embarassed to have employees on food stamps and in public housing, though I’ve been wrong about that before), but a comparison of Walmart’s pay with that of the stores they drive out of business shows them looking a little better:

@Bureau of Labor Statistics

Many cashiers at the Federal minimum wage, which was $5.15 an hour in 2003. Some State laws set the minimum wage higher, and establishments must pay at least that amount. Wages tend to be higher in areas in which there is intense competition for workers.

Median hourly earnings of cashiers, except gaming in 2002 were $7.41. The middle 50 percent earned between $6.51 and $8.73 an hour. The lowest 10 percent earned less than $5.86, and the highest 10 percent earned more than $10.97 an hour. Median hourly earnings in the industries employing the largest numbers of cashiers in 2002 were as follows:
Grocery stores $7.57
Department stores 7.55
Other general merchandise store 7.27
Gasoline stations 7.18
Health and personal care stores 7.08

Costco pays that well, eh? Wife’s been complaining about her job again. Maybe I should give her a nudge that way.

[John_Mace]

It’s not that simple. I’m not a regular shopper at either, although I have been to both at times. But do the really compete for the same customers? When I think of Costco, I think of “buy in bulk, and/or buy from whatever stock they happen to have at the time”. Walmart is more like a very cheap department store + grocery store.

I can’t seem to get my NYTimes registration to work, but here’s an excerpt from a Business Week article along similar lines:

Combined with a smart business strategy that sells a mix of higher-margin products to more affluent customers, Costco actually keeps its labor costs lower than Wal-Mart’s

In the end, though, customers and investers will decide which company best suits their needs. I couldn’t care less if either or both went bankrupt-- that 's the way the game is played. If Costco’s business model wins out, that’s great. If Walmart’s does, that’s great, too.

[LavenderBlue]

@John Mace

I couldn’t care less if either or both went bankrupt-- that 's the way the game is played. If Costco’s business model wins out, that’s great. If Walmart’s does, that’s great, too.

According to the New York Time article Costco pays workers a living wage. Wal-Mart does not.

Shouldn’t you root for the company that helps workers stay off welfare rather than the company that does not?

I don’t shop at Wal-Mart and I sincerely hope they go out business. Their business model hurts their workers and helps drag down average American wages.

The Business Week article you linked to points this out:
http://www.businessweek.com/magazine/content/04_15/b3878084_mz021.htm

One problem for Wall Street is that Costco pays its workers much better than archrival Wal-Mart Stores Inc.

The Wal-Mart model is drop wages and accept high turnover.

By contrast Costco, (same article http://www.businessweek.com/magazine/content/04_15/b3878084_mz021.htm)

“found that by compensating employees generously to motivate and retain good workers, one-fifth of whom are unionized, Costco gets lower turnover and higher productivity.”

That sounds like a far better way to do business.

The article author also points out that in long run the Wal-Mart business model:

http://www.businessweek.com/magazine/content/04_15/b3878084_mz021.htm

“turns out to be costly in many ways. It can fuel poverty and related social ills and dump costs on other companies and taxpayers, who indirectly pick up the health-care tab for all the workers not insured by their parsimonious employers. What’s more, the low-wage approach cuts into consumer spending and, potentially, economic growth.”

Wal-Mart executives ask consumers like me to subsidize their low wages and high executive salaries. That’s not a recipe for a happy society.

The article you linked to summarizes it neatly:

http://www.businessweek.com/magazine/content/04_15/b3878084_mz021.htm

Wal-Mart defenders often focus on the undeniable benefits its low prices bring consumers, while ignoring the damage it does to U.S. wages. Costco shows that with enough smarts, companies can help consumers and workers alike.

Once the opposition gets more organized I think there’s a good chance Wal-Mart may go the way of K-Mart.

[Shalmanese]

One particularly glaring thing that the NY article raised but failed to draw attention to was that Walmart has a total profit of $10 bn a year and the proposed changes their opposition wanted them to make would cost them $6.5bn a year. In effect, they are asking a company to wipe out 2/3rds of their profit. I would be understandably pissed off too if someone tried to tell me that was a smart business move.

And BRW notes that Costco actually pay less in wages per $ revenue since they emply less people for every store. So if the entire nation wen’t to the Costco model, social security and welfare would actually be hit much harder than if it wen’t the walmart route since you would have a small group of relatively affluent retail workers and a much larger group of unemployed.

[Sam_Stone]

Wal-Mart says its full-time workers average $9.68 an hour, and with many of them working 35 hours a week, their annual pay comes to around $17,600. That is below the $19,157 poverty line for a family of four, but above the $15,219 line for a family of three.

The obvious question goes unanswered: How many of Wal-Mart’s employees are supporting a family of four? It looks to me like that majority of Wal-Mart employees are A) young, B) second income earners. And even if they are the primary breadwinners, the average family size in the U.S. is 3.14 people, so it would appear that Wal-Mart DOES pay a living wage.

Or is it your position that every job in the United States should pay enough to support a large family? There is no room for starter jobs, or low-paying jobs for low margin operating models?

Wal-Mart argues that, as retailing companies go, it treats its workers better than average. It says 74 percent of its employees work full time, compared with fewer than 40 percent at many other retailers. But critics note that a leading competitor, Costco, pays $16 an hour - 65 percent more than the average wage at Wal-Mart stores and 33 percent more than the $12 average at its Sam’s Club stores. At Costco, 82 percent of the workers are covered by company health insurance, compared with 48 percent at Wal-Mart.

Have you ever shopped at Costco? They have a very, very low staff-to-customer ratio. The number of products they sell is much lower, and they are set up like a warehouse. Therefore, their business model is much less price-sensitive to the cost of labor.

Wal-Mart has 1.3 million employees. If they work an average of 30 hours a week, that’s 2,028,000,000 worker hours a year. Wal-Mart’s earnings are about 8 billion dollars a year. From this we see that if you raised every employee’s wage by $4/hr, you would wipe out all of Wal-Mart’s profits, and therefore its reason for existence. Bye-bye to 1.3 million jobs, and bye-bye to the low prices that benefit mostly the working class.

In reality, if you forced Wal-Mart to raise its prices by $4/hr, what would happen is that they’d have to change their business model to allow for less labor. There would be layoffs all over the place. Marginal stores that barely make a profit now would close. Wal-Mart would be forced to increase prices and lower service. In the end, you’d have a smaller, less efficient company where the remaining workers make a little more, but a lot of workers would be out of a job.

None of this would be good.

[msmith537]

@lavenderlemon

I think the reason efforts have failed is it’s simply very hard to fight a huge corporation like Wal-Mart. They have far more resources at their disposal than an opposition organization.

It’s hard for well-meaning idiots to fight a large corporation because companies really don’t care about a bunch of people with home-made placards shouting anti-corporate slogans. How do you “fight” a corporation? Drive it out of business so that it pays no one anything? Sue them for…what? Not paying people more than the bare minimum required by law?

As for the CEO, yeah he makes $12M a year or more. So what? There are 1,700,000 employees at Walmart. Even if he gets payed nothing, that’s only $11 and change per employee.

[John_Mace]

@lavenderlemon

According to the New York Time article Costco pays workers a living wage. Wal-Mart does not.

Shouldn’t you root for the company that helps workers stay off welfare rather than the company that does not?

Nope. Maybe WalMart helps more CUSTOMERS stay off welfare. But that’s besides the point anyway. COSTCO is a warehouse retailer-- it serves a different market than WalMart.

Once the opposition gets more organized I think there’s a good chance Wal-Mart may go the way of K-Mart.

It’s not lack of organization, it’s lack of numbers. You’d have many more protesters (ie, customers) to deal with if you forced WalMart out of business.

[msmith537]

@lavenderlemon

Shouldn’t you root for the company that helps workers stay off welfare rather than the company that does not?

I root for the company that sells me what I want for the lowest price or gives me the greatest return on my investment.

[LavenderBlue]

@Sam Stone

The obvious question goes unanswered: How many of Wal-Mart’s employees are supporting a family of four? It looks to me like that majority of Wal-Mart employees are A) young, B) second income earners. And even if they are the primary breadwinners, the average family size in the U.S. is 3.14 people, so it would appear that Wal-Mart DOES pay a living wage.

If you qualify for welfare and can’t afford to pay for health care that is not a living wage.

Or is it your position that every job in the United States should pay enough to support a large family? There is no room for starter jobs, or low-paying jobs for low margin operating models?

My position is that if you work full time the job should pay enough for you not to need welfare. Wal-Mart fails miserably at doing that. Low paying jobs may have a place in the economy – but they’re hardly the sort of job we should encourage let alone support with subsidies as we do in Wal-Mart’s case.

Have you ever shopped at Costco? They have a very, very low staff-to-customer ratio. The number of products they sell is much lower, and they are set up like a warehouse. Therefore, their business model is much less price-sensitive to the cost of labor.

Wal-Mart has 1.3 million employees. If they work an average of 30 hours a week, that’s 2,028,000,000 worker hours a year. Wal-Mart’s earnings are about 8 billion dollars a year. From this we see that if you raised every employee’s wage by $4/hr, you would wipe out all of Wal-Mart’s profits, and therefore its reason for existence. Bye-bye to 1.3 million jobs, and bye-bye to the low prices that benefit mostly the working class.

This is the same working class that is directly subsidizing Wal-Mart’s profits:
http://www.cbsnews.com/stories/2004/08/07/eveningnews/main634599.shtml

Estimates are the result is a tab to California taxpayers of $82-million a year for health care, food stamps, and other social services.

More:
http://aflcio.org/corporateamerica/walmart/walmart_3.cfm
http://www.drudge.com/weblog/3193/walmart_profits_before_people.html

Wouldn’t they benefit far more if the company went out of business and a better and fairer paying retailer took their place?

In reality, if you forced Wal-Mart to raise its prices by $4/hr, what would happen is that they’d have to change their business model to allow for less labor. There would be layoffs all over the place. Marginal stores that barely make a profit now would close. Wal-Mart would be forced to increase prices and lower service. In the end, you’d have a smaller, less efficient company where the remaining workers make a little more, but a lot of workers would be out of a job.

None of this would be good.

Cite? Maybe those remaining workers could do something else instead? Americans are woefully short of nurses for instance. Instead of subsidizing Wal-Mart profits we could send people to nursing school where the starting salary is roughly 50K.

Americans were better off when General Motors was our largest employer. Somehow I think we’d all survive if they weren’t around to push wages down and suck at the public tax trough.

[LavenderBlue]

@msmith537

It’s hard for well-meaning idiots to fight a large corporation because companies really don’t care about a bunch of people with home-made placards shouting anti-corporate slogans. How do you “fight” a corporation? Drive it out of business so that it pays no one anything? Sue them for…what? Not paying people more than the bare minimum required by law?

Why are people who want those who work full time to earn enough to pay their health care costs and stay off welfare “well meaning idiots?”

As for the CEO, yeah he makes $12M a year or more. So what? There are 1,700,000 employees at Walmart. Even if he gets payed nothing, that’s only $11 and change per employee.

He’s the same CEO who is actively keeping down wages for his employees. He’s also vastly overpaid compared even to his own peers:

The Wal-Mart Manifesto

But if Scott took this argument at all seriously, he’d have to concede that his own pay should be reduced drastically below its current level. In 2003, the most recent year for which I can find data, Scott sucked down $29 million (including stock-option grants). That same year, G.R. Wagoner, president and CEO of General Motors, hauled in about half that amount, $15 million. Following Scott’s logic, I don’t see how he can avoid knocking his own pay down to around $10 million.

[Hampshire]

@lavenderlemon

My position is that if you work full time the job should pay enough for you not to need welfare. Wal-Mart fails miserably at doing that. Low paying jobs may have a place in the economy – but they’re hardly the sort of job we should encourage let alone support with subsidies as we do in Wal-Mart’s case.

.

What would be the $/hr wage that would keep someone off of welfare?
Do Target, Kmart, OldNavy, Barnes&Noble, Starbucks, Gap, Sears, etc. pay their full time cashiers and stock handlers this living wage?

And what is the starting pay for a cashier at Walmart vs. Costco? It can’t be that much different.

[LavenderBlue]

@John Mace

Nope. Maybe WalMart helps more CUSTOMERS stay off welfare. But that’s besides the point anyway. COSTCO is a warehouse retailer-- it serves a different market than WalMart.

And sucks up vast resources from those same communities. What’s the good of slightly lower prices if the result is fewer police and parks?

http://www.aflcio.org/corporateamerica/ns05242004.cfm

Last year, however, just as the city started receiving the $800 million in annual sales taxes from Wal-Mart that would help plug its $3 million deficit, the retailer announced it was closing the stores in 2005 and opening a supercenter in a nearby town. Now Cathedral City lacks the dollars to fill critical police and paramedic positions, not to mention funding to water its parks, which have died along with small businesses that couldn’t compete with the behemoth retailer and its low-wage jobs.

http://money.cnn.com/2004/05/24/news/fortune500/walmart_subsidies/

NEW YORK (CNN/Money) - Over $1 billion in government subsidies have gone into transforming discounter Wal-Mart Stores from a regional discount store operator into the world’s largest retailer, according to a report Monday from Good Jobs First, a Washington-based subsidy watchdog group.

@John Mace

It’s not lack of organization, it’s lack of numbers. You’d have many more protesters (ie, customers) to deal with if you forced WalMart out of business.

Agreed.

[LavenderBlue]

@msmith537

I root for the company that sells me what I want for the lowest price or gives me the greatest return on my investment.

That isn’t Wal-Mart. The company sucks up tax dollars and drives down wages.

[John_Mace]

@lavenderlemon

And sucks up vast resources from those same communities. What’s the good of slightly lower prices if the result is fewer police and parks?

http://www.aflcio.org/corporateamerica/ns05242004.cfm

Assuming that that cite is objective, and the facts they present are true, I don’t blame WalMart for taking advantage of stupid politician. I blame the politicians for negotiating a crappy deal for the constituents. I do find it hard to believe, however, that WalMart can use the same strategy over and over again, ripping off municipalities across the country. But then again, there ARE a lot of stupid/corrupt politicians out there…

[LavenderBlue]

@Hampshire

What would be the $/hr wage that would keep someone off of welfare?
Do Target, Kmart, OldNavy, Barnes&Noble, Starbucks, Gap, Sears, etc. pay their full time cashiers and stock handlers this living wage?

And what is the starting pay for a cashier at Walmart vs. Costco? It can’t be that much different.

According to a sidebar in the New York Times article I linked to originally, Wal Mart’s average wages are $9.68 an hour whereas the average retail salary is $12.28 an hour.

At Wal-Mart, Choosing Sides Over $9.68 an Hour (Published 2005)

If you are working full time you should be able to afford health care and shouldn’t be eligible for food stamps. A company that can’t or won’t do that for their employees should hardly be admired let alone subsidized by the taxpayers.

[LavenderBlue]

@John Mace

Assuming that that cite is objective, and the facts they present are true, I don’t blame WalMart for taking advantage of stupid politician. I blame the politicians for negotiating a crappy deal for the constituents. I do find it hard to believe, however, that WalMart can use the same strategy over and over again, ripping off municipalities across the country. But then again, there ARE a lot of stupid/corrupt politicians out there…

As I’ve pointed out several times it isn’t just some stupid politicians. It’s the US as a whole. We all gave Wal-Mart over a billion in subsidies last year. One dollar in ten of every penny earned by the company was essentially stolen from taxpyers.

Reading this thread makes me think that more people are not opposed to the store’s practices because they aren’t aware of just how much subsidies the company gets from the government or what low wages actually mean to their local municipality.

[John_Mace]

@lavenderlemon

As I’ve pointed out several times it isn’t just some stupid politicians. It’s the US as a whole. We all gave Wal-Mart over a billion in subsidies last year. One dollar in ten of every penny earned by the company was essentially stolen from taxpyers.

Can you clarify in one post, with the necessary excerpts to support it, how you arrived at that last conclusion. If you’ve already done this in an earlier post, just let me know which post # to refer to.

And isn’t WalMart a $250B company, or there abouts? If we “gave” then $1B in subsidies, that would be $1 out of every $250, no?

[JohnT]

@lavenderlemon

But if Scott took this argument at all seriously, he’d have to concede that his own pay should be reduced drastically below its current level. In 2003, the most recent year for which I can find data, Scott sucked down $29 million (including stock-option grants). That same year, G.R. Wagoner, president and CEO of General Motors, hauled in about half that amount, $15 million. Following Scott’s logic, I don’t see how he can avoid knocking his own pay down to around $10 million.

Not to paraphrase or anything, but Wal-Mart had a better year.

GM is likely to go bankrupt in the next year or two (current consensus on another message board has it being in severe trouble December/January) and just today it’s entire short-term commercial paper, both GM and GMAC, was declared “junk” by the rating agencies. We’re talking about $300 billion in debt, much of which will have to be sold in the next couple of days as laws and regulations against institutional investors (such as CALPERS) holding junk bonds.

So bringing up Mr. Scott’s compensation viz a viz Wagoners does not make Scott look bad, regardless of your position.

[Sam_Stone]

@lavenderlemon

If you qualify for welfare and can’t afford to pay for health care that is not a living wage.

So you’re saying that a single person making $9.18/hr qualifies for welfare?

And just to be clearer, are you saying that NO ONE should work for $9.18/hr? Or is it just Wal-Mart employees that should not be allowed to work for this wage?

My position is that if you work full time the job should pay enough for you not to need welfare. Wal-Mart fails miserably at doing that. Low paying jobs may have a place in the economy – but they’re hardly the sort of job we should encourage let alone support with subsidies as we do in Wal-Mart’s case.

‘Encourage’? Who’s encouraging them? Other than the people who buy Wal-Mart’s products?

If you’re talking about government subsidy, I heartily agree. Government should not be subsidizing business. That’s an issue that has nothing to do with whether Wal-Mart should be allowed to pay its employees ‘only’ close to twice the minimum wage.

This is the same working class that is directly subsidizing Wal-Mart’s profits:
http://www.cbsnews.com/stories/2004/08/07/eveningnews/main634599.shtml

That ‘study’ is totally bogus. The claim is that people who make $9.18/hr have to be subsidized, therefore Wal-Mart is being subsidized by the government. That’s ridiculous on its face for several reasons: First, if Wal-Mart wasn’t there, those people would make NOTHING. Second, the same argument can be made for any business that pays its employees that kind of money. Third, it’s only true if every employee at Wal-Mart is the sole breadwinner for a family of four. Which is demonstrably false.

The other thing wrong with that study is that it totally ignores the fact that Wal-Mart’s primary clientele is people with low incomes, all of whom benefit from Wal-Mart’s low prices.

More:
http://aflcio.org/corporateamerica/walmart/walmart_3.cfm
http://www.drudge.com/weblog/3193/walmart_profits_before_people.html

Wouldn’t they benefit far more if the company went out of business and a better and fairer paying retailer took their place?

So… The ‘better and fairer’ company gets the money to be ‘fairer’ from where? The money fairy? Again, Wal-Mart’s entire operating profit would not sustain an across-the-board pay raise of $4/hr for its employees. So the only way Wal-Mart can pay more people is to A) fire some of them and move to a less labor-intensive model by cutting service, B) raise prices, which hurts other poor people.

Which one would you like?

By the way, a labor cite from AFL/CIO is about as disinterested and impartial as a cite from the Wal-Mart stockholder’s report.

Cite? Maybe those remaining workers could do something else instead? Americans are woefully short of nurses for instance. Instead of subsidizing Wal-Mart profits we could send people to nursing school where the starting salary is roughly 50K.

Ah. So… How come all those employees aren’t studying nursing now? Let’s see… Wal-Mart employs roughly 1.5 million people. If nursing school costs on average $20,000, it would cost 300 billion dollars to put them all through.

Frankly, this is a silly and condescending argument you’re making. YOU know best, right? These people who freely choose to work at Wal-Mart should be stopped for their own good and put into jobs YOU think are better?

Americans were better off when General Motors was our largest employer. Somehow I think we’d all survive if they weren’t around to push wages down and suck at the public tax trough.

Except for, you know, all the working people that had to drive crappy Pintos instead of high quality Toyota Camrys. Don’t they count? Or should other working class people be forced to pay higher prices for lower quality vehicles?

General Motors has fired huge chunks of its work force, and today had its bond rating reduced to ‘junk’ status. It may go under, and we’ll lose ALL those jobs. And you know why? Because of the United Auto Workers, who pressured GM and Ford into providing ludicrously good health and retirement plans which the companies can’t afford. A perfect example of how just wishing for high-paying, high-benefits jobs doesn’t make it so. The unions got greedy, the auto execs caved in to them, and now they’re both going to pay the price.