Tag Archives: Walmart

An Interesting–and Damaging–Comparison

Walmart routinely defends its practice of paying poverty-level wages by pointing to its low prices. Sure, taxpayers end up subsidizing Walmart employees who qualify for Medicaid and food stamps, but the company’s low, low prices mean that even Walmart employees can afford those tube socks!

That assertion–that low pay is what allows Walmart to offer goods at low prices–just took a hit.

The most recent issue of Consumer Reports contains a very interesting comparison of grocery prices. Titled “Getting More from Your Store,” the article had the usual number of helpful hints; what really caught my eye, however, was the chart comparing prices for the same brand of purchases like flour, coffee, tall kitchen bags, toilet paper and similar items. The folks from Consumers compared the costs of store brands, Costco, Walmart, various regional chains and Walgreens for each item. Store brands, unsurprisingly, were cheapest overall.

Next was Costco.

Costco pays its employees roughly twice as much per hour, on average, as Walmart, and also provides health insurance. Yet Costco was cheaper than Walmart for eleven of the twelve items sampled. The totals for the “basket” of twelve items were: store brands, 49.59; Costco, 55.49, Walmart 70.52. The regional chains averaged 72.93 and Walgreens came in at a whopping 96.90.

Um…tell me again why taxpayers are subsidizing Walmart employees?

A Candid Cashier

Saturday, my husband and I made our “oh-my-god-Thanksgiving-is-Thursday-and-the-cupboard-is-bare” Costco run.

As we were checking out (with more wine than two elderly citizens ought to be purchasing), the pleasant and chatty young man putting our purchases into the basket noted some purchase (I didn’t notice which one) and said “You are obviously smart shoppers.”

I laughed and responded that at least we were smart enough to shop at Costco, rather than Walmart or Sam’s Club.

At that, the cashier looked up and said, “You can say that again! I worked at Sam’s Club for 13 years, and it was terrible. I hated it. I’m so glad to be here. You can’t imagine the difference.”

I’ve read plenty of comparisons between Costco and Walmart, and their treatment of employees, but this was qualitatively different: heartfelt testimony volunteered by someone who clearly had a basis for comparison.

Later in the day, I came across this paragraph in a story about the widening gap between rich and poor in America:

Few companies are as emblematic of the New American System as is Walmart. The company that in 2011 generated more revenues than any other, the company that is now the largest food retailer in the world is the same company that recently encouraged donations of food to its own employees. It’s also a company that, putting aside any losses generated when it replaces smaller, local stores, causes a net loss to every community it enters in the form of increased tax revenues needed to support its underpaid employees. Walnart not only counts on taxpayer dollars to subsidize its “low cost” stores, it counts on those same taxpayer dollars to drive its business. Walmart employees not only need food stamps to get by, Walmart is the largest place where those food stamps are redeemed. It’s a cycle that grinds employees (and communities) relentlessly down, while driving Walmart revenues just as consistently up.

In principle, I don’t mind having my tax dollars used for welfare. But I do object–strenuously–to the use of my tax dollars to subsidize Walmart’s (outsized) profits. If Walmart insists on screwing over thousands of people like the cashier I met yesterday, the company needs to do so on its own dime, rather than on the back of taxpayers. (But of course, that wouldn’t work. Walmart needs public assistance in order to continue paying the below-living wages that generate its generous profit margins.)

Ironically, as I’ve previously noted, Costco’s profits per square foot exceed Walmart’s by a significant percentage, even though Costco pays its employees far more, treats them better and provides health insurance.

Costco will be closed on Thanksgiving, so that its employees can spend time with their families. Walmart–of course–will be open.


Bottom-line Ideology Bites

The news-magazine show Sunday Morning had a fascinating piece this week on a new approach to debt collection. The story reported on a collection company that refuses to employ the typical tactics–harassing phone calls, threats and the like. Instead, the collectors work respectfully with the debtors, helping them to renegotiate what they owe and manage their finances more prudently. The founder’s basic premise: people would pay their bills if they had the money, and hounding them is unlikely to give them the means to pay.

According to the company’s owner, his firm is twice as profitable as those using the more traditional tactics.

Respect for people–what a concept!

Respect for the worth of one’s employees can also boost profits, no matter how counter-intuitive some “hard headed” businesses might find that simple premise.

I’ve written before about the difference between the approach of Costco and Sam’s Club to  their workers. Costco pays its workers, on average, twice as much per hour as Sam’s Club, and provides them with health insurance to boot. Yet it is far more profitable.

There is a self-defeating belief among some businesspeople to the effect that a healthy bottom line depends on cutting costs wherever possible, especially personnel costs. There is plenty of evidence to the contrary: employee turnover and disaffection can cost more than skimpy payrolls can save. That is a lesson that even Walmart appears to be learning. The company recently announced that some 35,000 part-time workers will be returned to full-time status–entitling them, not so coincidentally, to heath coverage as required by  the Affordable Care Act.

As Forbes reported, Walmart’s unwillingness to pay most of its workers a living wage has left the company without enough full-time workers to properly run a retail outlet. The result has been that the company has placed dead last among department and discount stores in the Customer Satisfaction Index for the last six years.

Furthermore, again according to Forbes, Walmart sales have been “sinking dramatically”–a state of affairs that even Walmart has concluded is the result of its relentless effort to avoid paying decent wages and offering health insurance.

This was a lesson learned by Home Depot in the early 2000s, when its CEO cut full-time staffing in hopes that the savings would boost the bottom line. It worked–briefly. Then customer service declined, and with it, same-store sales. Home Depot reversed course–and profits rose.

As the Forbes columnist noted,

Who  would have guessed that a well-staffed store filled with competent and reasonably paid employees might actually have an impact on the success of a company?

Walmart’s Real Business Plan

I see that Walmart threatened to move out of Washington, D.C. if the city raised its minimum wage to 12.50.

The D.C. council raised it anyway.

Bravo to D.C. for calling Walmart’s bluff. Let’s hope the Mayor signs the measure; evidently, he’s expressed some concerns, since Walmart was proposing to create jobs and to expand into neighborhoods currently underserved by retail.

Those neighborhoods deserve to be served, and jobs are important–but are they worth $6000 of taxpayer subsidy for each person Walmart employs? Because that’s what the research shows: for every job Walmart creates, taxpayers are filling the gap between the low wages being paid and what workers need to survive. Walmart employees are overwhelmingly dependent upon the social safety net for food, housing and medical care.

Walmart has a great business plan: Those of us who pay taxes subsidize Walmart’s costs of doing business. So long as they can get away with paying below-subsistence wages, our tax dollars will continue to fatten their bottom line.

Defenders of these rapacious business practices defend Walmart by pointing to the low prices of their merchandise. Low prices benefit consumers, particularly poorer consumers. But keeping prices low does not require paying poverty wages.

Look at Costco.

 The big box store most famous for its stockpiles of toilet paper and $1.50 hot dogs also has a reputation for paying its workers a higher wage than most of its competitors. The average Costco worker made about $45,000 per year, Fortune reports. By comparison, Walmart-owned Sam’s Club, a Costco competitor, pays its workers $17,486 per year, according to salary information site Glassdoor.com….Costco’s insistence on treating its workers well hasn’t come at the expense of the company’s bottom line. The retailer’s profit jumped 19 percent to $459 million last quarter, while Walmart’s sales suffered during the same period.

So that claim about helping low-income shoppers by offering bargain prices doesn’t fly–Costco manages to keep prices low (and profits high) without screwing over its employees. Or  picking the pocket of the taxpayers.

Washington, D.C. should take a leaf from my mother’s book. When I was a little girl and threatened to run away from home, she’d offer to make me sandwiches for the trip.

Job Creators or a Tale of Two Big Boxes

There are job creators, and then there are job creators.

Debates about economic policies tend to center on concerns about job creation. Corporate CEOs often argue that raising tax rates or the minimum wage will suppress hiring. (I’ve often wondered why we can’t just offer a tax credit for each job created, rather than keeping rates low and hoping that will translate into additional employment. But I digress.)

The question that is too seldom addressed is: what kind of jobs do we want to incentivize? Because all jobs are not equal–not from the standpoint of the employee, and not from the standpoint of the taxpayer.

A recent study released by Congressional Democrats underlines the issue. According to that study, Walmart’s wages and benefits are so low that many of its employees are forced to turn to the government for aid, costing taxpayers between $900,000 and $1.75 million per store. As Mother Jones reports,

Walmart’s history of suppressing local wages and busting fledgling union efforts is common knowledge. But the Democrats’ new report used data from Wisconsin’s Medicaid program to quantify Walmart’s cost to taxpayers. The report cites a confluence of trends that have forced more workers to rely on safety-net programs: the depressed bargaining power of labor in a still struggling economy; a 97 year low in union enrollment; and the fact that the middle-wage jobs lost during the recession have been replaced by low-wage jobs. The problem of minimum-wage work isn’t confined to Walmart. But as the country’s largest low-wage employer, with about 1.4 million employees in the US—roughly 10 percent of the American retail workforce—Walmart’s policies are a driving force in keeping wages low.

Businesses do not have to be conducted this way. Good jobs that don’t require public support are not inconsistent with  healthy profits. A recent Business Week article reports on the very different business approach taken by Walmart competitor Costco.

Despite the sagging economy and challenges to the industry, Costco pays its hourly workers an average of $20.89 an hour, not including overtime (vs. the minimum wage of $7.25 an hour). By comparison, Walmart said its average wage for full-time employees in the U.S. is $12.67 an hour, according to a letter it sent in April to activist Ralph Nader. Eighty-eight percent of Costco employees have company-sponsored health insurance; Walmart says that “more than half” of its do. Costco workers with coverage pay premiums that amount to less than 10 percent of the overall cost of their plans. It treats its employees well in the belief that a happier work environment will result in a more profitable company. “I just think people need to make a living wage with health benefits,” says Jelinek. “It also puts more money back into the economy and creates a healthier country. It’s really that simple.”

Despite its higher wages and more generous benefits, Costco nets more per square foot than Walmart.

I have increasing numbers of students who believe that all business enterprises are at worst evil and at best unconcerned with anything but the bottom line. They look at Walmart and the many businesses that emulate its rapacious approach; more recently they point to the employers who are cutting workers hours in order to avoid having to provide health insurance under the terms of the Affordable Care Act, and they note the huge disparities between the salaries of CEOs and their employees, and they see those behaviors as an inevitable result of market capitalism. It isn’t.

Costco and many, many other enterprises demonstrate that concern for workers’ welfare is entirely consistent with a healthy bottom line. The problem is not with our markets, it is with our culture, and with public policies that enable and reward despicable behaviors.