Tag Archives: Walmart

The Walmart Effect

I’ve written before about Walmart-as-an-object lesson. The last time I looked, the company was averaging profits of $15.5 billion dollars annually, the Walton family’s net worth was over $129 billion dollars, and the company was still declining to pay employees a living wage. Instead, it relies on taxpayer dollars to make up the difference between its workers’ paychecks and workers’ cost of living.

After all, when an employee must rely on food stamps or other safety-net benefits, taxpayers are paying a portion of that employee’s wages.

Walmart (including Sam’s Club) is the largest private employer in the country–and one of the largest recipients of corporate welfare. (Walmart employees receive an estimated $6.2 billion dollars in taxpayer-funded subsidies each year.)

Money not paid out in salary, of course, goes directly to the bottom line, so we taxpayers are also funding shareholders’ profits. 

All this is, as they say, old news–along with the recognition that Walmarts located on the outskirts of small towns have emptied out the retail centers of those communities.

Recently, however, research has added another layer to what I’ve come to see as the Walmart scam.

No corporation looms as large over the American economy as Walmart. It is both the country’s biggest private employer, known for low pay, and its biggest retailer, known for low prices. In that sense, its dominance represents the triumph of an idea that has guided much of American policy making over the past half century: that cheap consumer prices are the paramount metric of economic health, more important even than low unemployment and high wages. Indeed, Walmart’s many defenders argue that the company is a boon to poor and middle-class families, who save thousands of dollars every year shopping there.

Two new research papers challenge that view. Using creative new methods, they find that the costs Walmart imposes in the form of not only lower earnings but also higher unemployment in the wider community outweigh the savings it provides for shoppers. On net, they conclude, Walmart makes the places it operates in poorer than they would be if it had never shown up at all. Sometimes consumer prices are an incomplete, even misleading, signal of economic well-being.

As the article notes, it’s relatively simply to calculate cost savings for consumers, but those cost savings don’t represent a company’s total effect on a community.  When a new Walmart opens, consumers change their shopping habits, workers switch jobs, and competitors shift their strategies–or often, close. 

One research project found that In the 10 years after a Walmart Supercenter opened in a  community, “the average household in that community experienced a 6 percent decline in yearly income—equivalent to about $5,000 a year in 2024 dollars—compared with households that didn’t have a Walmart open near them. Low-income, young, and less-educated workers suffered the largest losses.”

In theory, however, those people could still be better off if the money that they saved by shopping at Walmart was greater than the hit to their incomes. According to a 2005 study commissioned by Walmart itself, for example, the store saves households an average of $3,100 a year in 2024 dollars. Many economists think that estimate is generous (which isn’t surprising, given who funded the study), but even if it were accurate, Parolin and his co-authors find that the savings would be dwarfed by the lost income. They calculate that poverty increases by about 8 percent in places where a Walmart opens relative to places without one even when factoring in the most optimistic cost-savings scenarios.

A second study found that the losses weren’t limited to workers in the retail sector. They affected every sector from manufacturing to agriculture. But why would this be?

When Walmart comes to town, it uses its low prices to undercut competitors and become the dominant player in a given area, forcing local mom-and-pop grocers and regional chains to slash their costs or go out of business altogether. As a result, the local farmers, bakers, and manufacturers that once sold their goods to those now-vanished retailers are gradually replaced by Walmart’s array of national and international suppliers. (By some estimates, the company has historically sourced 60 to 80 percent of its goods from China alone.) As a result, Wiltshire finds, five years after Walmart enters a given county, total employment falls by about 3 percent, with most of the decline concentrated in “goods-producing establishments.”

I wonder what will happen when Trump’s China tariffs force Walmart to raise prices…

For now, Walmart is a monopsony— a company that can pay low wages because workers have few alternatives. This helps explain why Walmart pays lower wages than competitors like Target and Costco.

In a properly functioning capitalist system, we taxpayers wouldn’t be subsidizing monopsonies.

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How Do We Spell Corruption? T-R-U-M-P

Well, I suppose the headline really should read “Trump Administration,” since Trump has managed to assemble a group of people who are both magnificently inept and thoroughly dishonest.

It’s something every day–usually, thanks to the Coronavirus pandemic, buried under the propaganda and disinformation being spewed every day by the buffoon-in-chief.

NBC recently reported on a story first broken by Pro Publica.

On a Tuesday just before Halloween in 2018, a group of federal prosecutors and agents from Texas arrived in Washington. For almost two years, they’d been investigating the opioid dispensing practices of Walmart, the largest company in the world. They had amassed what they viewed as highly damning evidence only to face a major obstacle: top Trump appointees at the Department of Justice.

The opioid crisis was the most pressing public health issue facing the country before the arrival of the current pandemic. What the investigators had uncovered was proof of clearly criminal activity by Walmart–activity that played a significant part in creating and sustaining that crisis.

Opioids dispensed by Walmart pharmacies in Texas had killed customers who had overdosed. The pharmacists who dispensed those opioids had told the company they didn’t want to fill the prescriptions because they were coming from doctors who were running pill mills. They pleaded for help and guidance from Walmart’s corporate office.

Investigators had obtained records of similar cries for help from Walmart pharmacists all over the country: from Maine, North Carolina, Kansas and Washington, and other states. They reported hundreds of thousands of suspicious or inappropriate opioid prescriptions. One Walmart employee warned about a Florida doctor who had a “list of patients from Kentucky that have been visiting pharmacies in all of central Wisconsin recently.” That doctor had sent patients to Walmarts in more than 30 other states.

How did “corporate” respond? By repeatedly forbidding pharmacists from cutting off any doctor. Pharmacists were told to “evaluate each prescription on an individual basis.”  One opioid compliance manager even sent an executive an email (viewed by ProPublica, which confirmed its contents), that Walmart’s focus should be on “driving sales.”

The prosecutor investigating Walmart’s behavior prepared to indict the corporation for violating the Controlled Substances Act.  She had the support of her boss, who also believed the evidence justified what would have been an unprecedented step.(Fortune 500 companies don’t get indicted–gee, I wonder why…)

Before the Texas prosecutors could file their case, however, Walmart escalated concerns to high-ranking officials at the DOJ, who then intervened. Brown was ordered to stand down. On Aug. 31, 2018, Trump officials officially informed Walmart that the DOJ would decline to prosecute the company, according to a letter from Walmart’s lawyer that lays out the chronology of the case.

The Texas prosecutors appealed to higher-ups at DOJ, pointing out that dispensing opioids without a legitimate medical purpose is legally indistinguishable from dealing heroin.

Criminal law says if a person or entity is willfully blind or deliberately ignorant, they are as liable as if they had acted intentionally. Once Walmart’s headquarters knew its pharmacists were raising alarms about suspicious prescriptions, but the compliance department continued to allow — even push — them to fill them, well, that made the company guilty, the Texas prosecutors contended.

This wasn’t a situation where a few employees “went rogue.”  Worse, the company was a repeat offender; seven years earlier, Walmart entered into a settlement with the DEA in which it promised to improve its controls over the abuse of opioid prescriptions.

The DOJ didn’t budge, so prosecutors tried another tactic: criminal charges against individual employees. Trump officials blocked that, too. Then prosecutors tried to bring a civil case, and Trump officials blocked that.

The lengthy story at the link is detailed enough to dispel any doubts about how thoroughly this administration has corrupted the DOJ.

The news of the Walmart investigation comes at a time when the Trump administration is being assailed for legal favoritism and cronyism. Attorney General Bill Barr has inserted himself into multiple investigations of Trump friends and associates. In February, four prosecutors on the case of Roger Stone, a Trump friend and adviser, quit the case in protest after political appointees undercut their sentencing recommendation.

The Trump DOJ has also pulled back on white-collar and corporate investigations and prosecutions. White-collar prosecutions are at a record low. Walmart itself seems to have already benefited from the Trump administration’s approach to corporate misconduct. The company was the subject of a seven-year investigation into bribery allegations in Mexico and around the globe. The Obama administration sought $600 million in fines, according to The New York Times, which broke the story, but failed to reach a resolution with the company. The Trump DOJ settled the charges for $282 million in June 2019.

It certainly pays to have low friends in high places…..

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Attacking The Teachers

There are lots of lessons we can learn from the wave of teachers’ strikes that have erupted around the country. To the extent those strikes have been “wildcat” efforts, we can see the extent to which public sector unions have been neutered by anti-union lawmakers. To the extent that we have become aware of the grievances that prompted these actions, we see the effects of the steady erosion of adequate public funding for public education.

Paul Krugman recently reminded us of the connection between that erosion and Republican tax-cut orthodoxy. Education accounts for more than half the state and local work force, and “at the state and local levels, the conservative obsession with tax cuts has forced the G.O.P. into what amounts to a war on education, and in particular a war on schoolteachers.”

The GOP’s fixation on tax cuts, together with its anti-union ideology (and a particular hatred of teachers’ unions) and in some quarters, a desire to divert public funds to religious schools via vouchers, has resulted in an unremitting assault on public education.

Thanks to a recent report in The Guardian, we learn that opponents of public education fully intend to intensify their ideological attack on public education and the teachers who provide it.

A nationwide network of rightwing thinktanks is launching a PR counteroffensive against the teachers’ strikes that are sweeping the country, circulating a “messaging guide” for anti-union activists that portrays the walkouts as harmful to low-income parents and their children.

The new rightwing strategy to discredit the strikes that have erupted in protest against cuts in education funding and poor teacher pay is contained in a three-page document obtained by the Guardian. Titled “How to talk about teacher strikes”, it provides a “dos and don’ts” manual for how to smear the strikers.

Top of the list of talking points is the claim that “teacher strikes hurt kids and low-income families”. It advises anti-union campaigners to argue that “it’s unfortunate that teachers are protesting low wages by punishing other low-wage parents and their children.”

According to the Guardian, the “messaging guide” has been developed by an organization called the State Policy Network (SPN). SPN is an alliance of 66 rightwing “ideas factories,” that evidently includes members from every state in the nation. SPN also has an $80 million-dollar” war chest” – funded (no surprise) by the Koch brothers, the Walton Family Foundation, and the DeVos family. (If there was any doubt that Betsy DeVos is the antithesis of a person rational lawmakers would install as an education secretary…).

SPN’s previous campaigns have included a plan to “defund and defang” public sector unions. Now it is turning its firepower on the striking teachers….The SPN document urges its followers to attack the walkouts stealthily, rather than criticising them directly. A head-on assault on teachers for their long summer vacations would “sound tone-deaf when there are dozens of videos and social media posts going viral from teachers about their second jobs [and] having to rely on food pantries”, it says.

If moral people find meaning by acting in ways that will benefit future generations–if, as the saying goes,“The true meaning of life is to plant trees under whose shade you do not expect to sit”-how immoral is this effort?

It isn’t just that these people are refusing to adequately fund the public schools that educate the overwhelming majority of American children. They are also busily polluting the environment and endangering the planet on which those trees must be planted. They are despoiling public lands originally set aside for the enjoyment of our children and grandchildren. They are presiding over the decay of the nation’s infrastructure, and they are intentionally encouraging the tribalism and bigotry that undermine the social cohesion necessary for communities to thrive.

I assume they derive satisfaction from the extra dollars these measures are intended to bring them.

I wish I believed in the existence of hell.

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The Walmart Tax

I have written before about the “Walmart tax.”

Walmart generates nearly $500 billion in revenue annually; over the past five years, its yearly profits have averaged $15.5 billion dollars, and the family that owns it has a net worth of $129 billion dollars.

Despite its obvious ability to do so, the company declines to pay its employees a living wage, instead relying upon government programs–taxpayer dollars– to make up the difference between its workers’ paychecks and what they need to make ends meet. In essence, when a Walmart employee must rely on food stamps or other safety-net benefits, taxpayers are paying a portion of that employee’s wages.

Walmart (including its Sam’s Club operation) is currently the largest private employer in the country–and one of the largest recipients of corporate welfare. Walmart employees receive an estimated $6.2 billion dollars in taxpayer-funded subsidies each year. Money not paid out in salary goes directly to the shareholders’ bottom line.

Not only is this greedy and despicable, it is bad business. For one thing, as awareness of this subsidy grows, the numbers of people shopping at Walmart declines. But there are other costs incurred.

One of my graduate students wrote his research paper on corporate philanthropy, and the growth of business practices that recognize a duty to stakeholders other than shareholders: employees, vendors and the general community. As he explained,

The Triple Bottom Line (TBL) is an accounting framework that incorporates three dimensions of performance: social, environmental and financial. This differs from traditional reporting frameworks as it includes ecological (or environmental) and social measures that can be difficult to assign appropriate means of measurement. The TBL dimensions may also be referred to as the three P’s: people, planet and profits (Hall, 2011). The TBL further supports the integration of Corporate Responsibility into the fiber of companies as the bottom line is expanded, to include these additional levels of measurement, suggesting “purpose” shares importance with profit.

One company that has seen the benefits of good corporate responsibility through TBL is Costco, specifically the “people” component. Second to the multi-national titan Walmart, Costco is the largest American membership-only warehouse club. Costco’s average pay, for example, is $17 an hour, 42 percent higher than its fiercest rival, Sam’s Club (Greenhouse, 2005). Costco’s practices are clearly more expensive, but they have an offsetting cost-containment effect: Turnover is unusually low, at 17% overall and just 6% after one year’s employment. In contrast, turnover at Wal-Mart is 44% a year, close to the industry average (Cascio, 2006).

In the case of Costco, their corporate responsibility and voluntary decision to invest in their people have been a direct contributor to their profits. In return for its generous wages and benefits, Costco gets one of the most loyal and productive workforces in retail, and, not coincidentally, the lowest shrinkage (employee theft) figures in the industry. As a result, Costco generated $21,805 in U.S. operating profit per hourly employee, compared with $11,615 at Sam’s Club. Costco’s stable, productive workforce more than offsets its higher costs (Cascio, 2006).

It appears that “doing well by doing good” is more than a slogan.

I shop at Costco, and avoid Walmart. So do most of my friends. In virtually all cases, the choice is intentional: we want to demonstrate support for businesses that value and properly compensate their employees (and aren’t sucking at the public tit, if you’ll excuse the vulgarity).

Walmart may get my tax dollars, but I’m damned if they’ll get my discretionary dollars too.

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Ideology is Expensive

Here’s another entry for my growing pile of public policies that cost more money than they purport to save. (Of course, the more illuminating question is: who bears the costs and who gets the savings. The answer to that question explains a lot.)

According to the Economic Policy Institute,

“.. if the minimum wage were boosted from its current level of $7.25 per hour to $10.10, as proposed by the Fair Minimum Wage Act of 2014, more than 1.7 million Americans would no longer have to rely on public assistance programs. This would produce $7.6 billion per year or more in savings for the federal government, according to the study.”

The report noted that approximately half of all people earning under $10.10 per hour–or some 11.9 million Americans–receive some form of means-tested benefits from the government. That would include benefits like the Earned Income Tax Credit, food stamps and other forms of welfare.

We the People pay for those benefits. Walmart, McDonalds and other major low-wage employers don’t. The money companies save by paying their employees poverty wages goes directly to their bottom lines. The arguments for continuing to have taxpayers subsidize the (very handsome) profits of such employers is that, if the minimum wage were to be raised, these companies would choose to raise prices rather than (horrors!) see any erosion of those huge profit margins.

Maybe.

I don’t know about the rest of you, but I’d prefer paying an extra nickel for a cheeseburger, and putting that 7.6 billion dollars per year toward something that advanced the common good. I’d rather repair our crumbling infrastructure, educate our children, develop a vaccine for Ebola…there are lots of priorities I’d place ahead of subsidizing the continued wealth of the Walton family and McDonald’s shareholders.

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