November 23, 2006

Walmart: The High Cost of Low Prices

Silvis is falling over itself to bring a sprawling Wal-mart to town. It's location is guaranteed to drive out what few small businesses still exist in the east and northern areas outside the Quad Cities, areas that, miraculously, have still managed to hang on to a few small independent businesses.

This piece, "The WalMart you Don't Know" helps put WalMart and it's business practices, and more importantly, it's impact both locally and globally, in perspective.
Wal-Mart is not just the world's largest retailer. It's the world's largest company--bigger than ExxonMobil, General Motors, and General Electric. The scale can be hard to absorb. Wal-Mart sold $244.5 billion worth of goods last year. It sells in three months what number-two retailer Home Depot sells in a year. And in its own category of general merchandise and groceries, Wal-Mart no longer has any real rivals. It does more business than Target, Sears, Kmart, J.C. Penney, Safeway, and Kroger combined.

"Clearly," says Edward Fox, head of Southern Methodist University's J.C. Penney Center for Retailing Excellence, "Wal-Mart is more powerful than any retailer has ever been." It is, in fact, so big and so furtively powerful as to have become an entirely different order of corporate being.

Wal-Mart wields its power for just one purpose: to bring the lowest possible prices to its customers. At Wal-Mart, that goal is never reached. The retailer has a clear policy for suppliers: On basic products that don't change, the price Wal-Mart will pay, and will charge shoppers, must drop year after year. But what almost no one outside the world of Wal-Mart and its 21,000 suppliers knows is the high cost of those low prices. Wal-Mart has the power to squeeze profit-killing concessions from vendors. To survive in the face of its pricing demands, makers of everything from bras to bicycles to blue jeans have had to lay off employees and close U.S. plants in favor of outsourcing products from overseas.

Of course, U.S. companies have been moving jobs offshore for decades, long before Wal-Mart was a retailing power. But there is no question that the chain is helping accelerate the loss of American jobs to low-wage countries such as China. Wal-Mart, which in the late 1980s and early 1990s trumpeted its claim to "Buy American," has doubled its imports from China in the past five years alone, buying some $12 billion in merchandise in 2002. That's nearly 10% of all Chinese exports to the United States.


Here's just a few of the facts many may not be aware of found at "Wake up WalMart":

Your tax dollars pay for Wal-Mart's greed

  • The estimated total amount of federal assistance for which Wal-Mart employees were eligible in 2004 was $2.5 billion. [The Hidden Price We All Pay For Wal-Mart, A Report By The Democratic Staff Of The Committee On Education And The Workforce, 2/16/04]

  • One 200-employee Wal-Mart store may cost federal taxpayers $420,750 per year. This cost comes from the following, on average:
    $36,000 a year for free and reduced lunches for just 50 qualifying Wal-Mart families.
    $42,000 a year for low-income housing assistance.
    $125,000 a year for federal tax credits and deductions for low-income families.
    $100,000 a year for the additional expenses for programs for students.
    $108,000 a year for the additional federal health care costs of moving into state children's health insurance programs (S-CHIP)
    $9,750 a year for the additional costs for low income energy assistance.
    [The Hidden Price We All Pay For Wal-Mart, A Report By The Democratic Staff Of The Committee On Education And The Workforce, 2/16/04]

    Health care subsidies compared to executive compensation

  • Excluding his salary of $1.2 million, in 2004 Wal-Mart CEO Lee Scott made around $22 million in bonuses, stock awards, and stock options in 2004.
    This $22 million could reimburse taxpayers in 3 states where Wal-Mart topped the list of users of state-sponsored health care programs, covering more than 15,000 Wal-Mart employees and dependents. [Wal-Mart Proxy Statement and News Articles GA, CT, AL].

    Your tax dollars subsidize Wal-Mart's growth

  • The first ever national report on Wal-Mart subsidies documented at least $1 billion in subsidies from state and local governments.

  • A Wal-Mart official stated that “it is common” for the company to request subsidies “in about one-third of all [retail] projects.” This would suggest that over a thousand Wal-Mart stores have been subsidized. [“Shopping For Subsidies: How Wal-Mart Uses Taxpayer Money to Finance Its Never-Ending Growth,” Good Job First, May 2004]

    Community Impact

    Wal-Mart’s growth negatively impact worker’s wages

  • The most comprehensive study of Wal-Mart’s impact showed that the stores reduced earnings per person by 5 percent. This 2005 study by an economist from the National Bureau of Economic Research used Wal-Mart’s own store data and government data for all counties where Wal-Mart has operated for 30 years, It found that the average Wal-Mart store reduces earnings per person by 5 percent in the county in which it operates. [David Neumark, The Effects of Wal-Mart on Local Labor Markets 2005]

    The Cost of Wal-Mart’s entry into a community can be significant

  • According to a 2003 estimate, the influx of big-box stores into San Diego would result in an annual decline in wages and benefits which could cost the area up to $221 million [San Diego Taxpayers Association (SDCTA), 2003]

    Lower wages mean less money for communities

  • When an employer pays low wages to its employees, the employees have less money to spend on goods and services in the community, which in turn reduces the income and spending of others in the community. In other words a reduction in wages has a multiplier impact in the surrounding area.

  • For instance, in 1999, Southern California municipalities estimated that for every dollar decrease in wages in the southern California economy, $2.08 in spending was lost-- the $1 decrease plus another $1.08 in indirect multiplier impacts. [“The Impact of Big Box Grocers in Southern California” Dr. Marlon Boarnet and Dr. Randall Crane, 1999.]

    Wal-Mart hurts other businesses when it comes to town.

  • In Maine, existing businesses lost over 10 percent of their market in 80 percent of the towns where Wal-Mart opened stores. [Georgeanne Artz And James McConnon, The Impact of Wal-Mart on Host Towns and Surrounding Communities in Maine, 2001]
    Food stores in Mississippi lost 17 percent of their sales by the fifth year after a Wal-Mart Supercenter had come into their county, and retail stores lost 9 percent of their sales [Kenneth Stone and Georgeanne Artz, The Economic Impact of a Wal-Mart Supercenter on Existing Businesses in Mississippi, 2002]

  • Over the course of [a few years after Wal-Mart entered a community], retailers' sales of apparel dropped 28% on average, hardware sales fell by 20%, and sales of specialty stores fell by 17%. [Kenneth Stone at Iowa State University, “Impact of the Wal-Mart Phenomenon on Rural Communities,” 1997]

  • In towns without Wal-Marts that are close to towns with Wal-Marts, sales in general merchandise declined immediately after Wal-Mart stores opened. After ten years, sales declined by a cumulative 34%. [Kenneth Stone at Iowa State University, “Impact of the Wal-Mart Phenomenon on Rural Communities,” 1997]

24 Comments:

At 11/24/2006 5:02 PM, Anonymous Anonymous said...

Do you think the area around Walmart in Moline has grown or declined in the last ten years?

 
At 11/24/2006 5:08 PM, Anonymous Anonymous said...

I absolutly have boycotted Wal Mart. I hate that store. Aside from being non-union, I can't stand that people more than likely are living in the clothing racks at night!


I just love how Silvis is bending over backwards to get big ol Walmart that is Killing all the old ma and pop stores but they are 100% anti- hog plant. What a joke That really is the icing on the cake.

 
At 11/24/2006 8:11 PM, Blogger The Inside Dope said...

Anon 17:02.

Wouldn't that area have grown with or without Wal-Mart? Wouldn't it have grown with any other store as well?

 
At 11/25/2006 7:53 AM, Anonymous RI Republican said...

I am no WM fan, however, one cannot debate the fact that a WM in an area promotes additional development - that, no, would not be there without WM (look at NW-Davenport for example, the area had nothing until WM located there).

The article, paints half a story. Yes, cities provide incentives for WM, but the cities gain as well (as described above (NW Davenport).

Employees that work for Hy-Vee, Home Depot and virtually every other retailer in the country do get federal assistance - maybe you need to look at the liberal nature of our welfare-state, rather than blaming an employer.

 
At 11/25/2006 8:13 AM, Blogger The Inside Dope said...

By what sort of twisted logic should we blame the state for providing for needy families rather than a huge multi-billion dollar corporation for not paying them enough to begin with?

What kind of right wing nut are you? You love Walmart, but think their underpaid workers shouldn't get anything when their kids are sick? You think these people working at Wal-mart and being paid so little with little or no benefits don't deserve help when they can't make it on what the giant corporation pays them?

Your way of thinking is what's gotten us to this screwed up mess in the first place. Worshiping huge impersonal corporations and heaping scorn and punishment on the working poor.

What's wrong with you?

You think it's just fine that Wal-mart doesn't pay worth a damn and encourages their workers to apply for welfare, but then go one further and bitch about the fact that these underpaid workers get assistance at all?

What kind of person are you anyway?

You're for more profit for Walmart, and no aid for workers who aren't paid enough to live on?

It's either or here. Either Walmart pays their workers a fair wage with fair benefits, or the state has to step in to pick up the slack.

In your dream world of the 1800's, the workers would be abused and underpaid and if they starved or didn't have a place to live, screw 'em.

But that's not what the rest of us want our society to be I don't think.

When you're awash in profits, you should share that with your workers, not push your workers onto welfare so you can put that money in your pocket.

When a company gets as huge as Wal-mart, they're no longer just an "employer". They affect the entire country. And the fact remains that Walmart could provide their employees with better benefits, but purposely doesn't, and even hands out instructional sheets to tell them exactly where to go and how to apply for government assistance.

Wal-mart doesn't spur growth by itself, and it certainly drives many many many businesses straight into the ground, businesses which employed a lot of people and who probably got better benefits as well and weren't encouraged to rely on welfare.

For a company such as Wal-mart with the staggering billions and billions of profits to refuse to pay their employees a living wage or provide decent benefits which would keep them off the public dole is criminal, in my opinion.

You want Wal-mart to be the only store in the country and to wipe out completely 80% of locally owned stores just so you can get cheap tube socks? Be my guest. I'd rather not go that route.

 
At 11/27/2006 1:19 PM, Anonymous Anonymous said...

Until Reagan Administration eviscerated America's century-long tradition of antitrust enforcement.

Clinton Administration targeted a few companies for abusing their pricing power, the Arkansas-based retailer somehow managed to avoid any action. Clinton family and Wal-Mart, on whose board Hillary Clinton served for many years. But even as Staples and McCormick & Co.


Antitrust filed a Sherman Act case against the retailer, one section of which detailed how the A&P had used “several turns of the screw” to coerce Ralston Purina into granting it a discount three and a half times what the cereal packer offered any other firm. Three years after winning that case, the Justice Department was back in court in September 1949 with another Sherman Act suit, this time asking for the dismemberment of the A&P.

 
At 11/27/2006 10:45 PM, Blogger Buffie said...

Just so you know, you know nothing about Walmart. Answer this; if you had to take time off with no notice, and this went on for months, would you still have a job? The answer no. You would be replaced.
My husband is closing in on his one year anniversary with Walmart and he could not ask for a better job. Dec 2 he gets a 60 cent raise with $1.20 to follow along with a promotion.
Three days after he started, his mother passed away. Do you know what Walmart did? They sent two managers to her funeral along with a plant (they could have kept that) they also gave him three days PAID leave.
The next ten months were spent going back and forth to either a hospital or a nursing home to see his dad. Who just so you know, had 5 cardiac arrests and was brain dead for 3 days. His store manager, Don Hazen, told him not to worry about his job, it would be there when everything calmed down. When his dad passed away in Sept. my husband was given a full week off with pay.
So, the next time that you choose to bad mouth someone or something, do yourself a favor and get your facts straight.

 
At 11/27/2006 10:50 PM, Blogger Buffie said...

Also Walmart does share its profits with its associates. In the form of bonuses around tax time. Their is also a good benifit package (well better than the one offered be General Motors).
And FYI they do not have a handout explaining where to go to get government assistance. I don't know who sold you all of the BS that you put out there, but honey you've been taken for a better ride than President Bush has taken the whole country on.
Get a clue.

 
At 11/27/2006 10:53 PM, Blogger The Inside Dope said...

Buffie, I have my facts straight.

Nothing I wrote has anything do do with how they treated your husband and it's stupid to judge the policies and real economic effects of a mega-corporation based on one unverified anecdote.

And I suspect that if you husband had been a loyal employee of a mom and pop business that Wal-mart drove out of business, he likely would have been treated with as much sensitivity and kindness as well.

I hardly think your tale is typical for all Wal-mart employees either.

Thanks anyway.

 
At 11/27/2006 11:01 PM, Blogger The Inside Dope said...

Buffie, there's a reality out there that might differ from your isolated experience.

The facts I've provided are not in disupute and there is a wealth of further information which has been documented and proven.

You can love working for Wal-Mart. That's just fine for you.

But that doesn't mean that the company is good for the country or the areas is takes over.

As a matter of fact, they have a massive multi-million dollar arm that is devoted exclusively to monitoring for any hint of union organizing and spying on employees and other's it suspects of such activities. They also have a massive campaign to counter the negative facts about them, of which your comments well may be a part.

For instance, it was revealed that a blogger on the Wal-mart site that posed as a happy couple driving a motor home from Wal-mart to Wal-mart and reporting pro-Wal-mart stories along the way was a set up. Neither ever mentioned any connection to Wal-mart, but it was revealed that the motor home was bought and their trip paid for, and a salary paid to this couple (the guy happened to be a reporter for a major paper) to produce this phoney Wal-mart "travelogue."

I think you'd do well to do a little more investigation of Wal-mart yourself Buffy.

For starters, go rent "Wal-mart: The high cost of low prices" and watch it.

Then report back and tell me your impression.

 
At 11/28/2006 10:49 PM, Blogger Buffie said...

I don't report to anyone, least of all you. I don't work for Wal-mart my husband does. I run my own business less than 2 miles from Walmart and am not hurting. Neither is the town that I live in, it has actullay gained more business since Walmart become a supercenter.
My husband has worked for them for less than a year (1 year Dec 6) and is making more than my brother in law (who makes surgical equipment) and who has been with his company for going on 3 years.
And my name is spelled BUFFIE, get it right.

 
At 11/29/2006 2:14 AM, Blogger The Inside Dope said...

Buffy,

What's your husband do there? Something tells me he's not a greeter and doesn't represent the average Wal-mart employee at all.

It still have to note how foolish it is to take the case of one employee out of hundreds of thousands and try to argue that it means the entire company and all their policies are just great.

Glad you're getting enough $ from Wal-mart to keep you and hubby happy. Congratulations.

Watch "The High Cost of Low Wages" or the Frontline documentary "Is Wal-Mart Good for America?" and see what you think.

Or if you're a reader, for $6 you can download a digital version of an article from the Columbia Journalism Review "Watching Wal-Mart: four documentaries, four perspectives.(Is Wal-Mart Good for America?; The Age of Wal-Mart; Wal-Mart: The High Cost of Low Price; Why Wal-Mart works (and Why that Makes Some People Crazy)" here.

Or not.

 
At 11/29/2006 2:16 AM, Blogger The Inside Dope said...

Excuse me... make that BUFFIE

It slipped by again and I don't want to have to redo the whole comment again.

 
At 11/29/2006 7:56 PM, Anonymous Anonymous said...

He is an associate in the meat department that goes in and does his job everyday. There are many employees at Walmart that make over $15 per hour.
I don't even care if you post this comment because you are an a** that is so set with what he thinks is right that nothing else matters. Just know that I believe that you got the name of you blog right "the inside dope" and that is just what you are.
(I didn't feel like loging in just to submit this.)

 
At 11/30/2006 4:10 AM, Blogger The Inside Dope said...

You can choose to be willfully ignorant, as apparently you have. You ignore the fact that using your husband's experience as somehow a reason to ignore much larger problems with Wal-mart.

You can't see the forest for the trees, in other words.

In a big way, you're the one who's exhibiting the "a**hole that thinks they know it all." attitude here, refusing to even acknowledge or discuss the points brought up in the post or my comments about the real and large problems with Wal-mart.

You've got your husband's paycheck and that's made you deaf, dumb, and blind to the reasons there are serious concern about both the way Wal-mart treats it's employees, the enormous burden they place on taxpayers, and the detrimental economic effects they bring to the communities where they locate.

So with all due respect, excuse me if I say I couldn't care less about your meatcutter's salary or the fact that you think it's just peachy.

That's not the average position at Wal-mart, obviously. I'm sure there are Wal-mart execs making hundreds of thousands a year, but how stupid would it be to hold one of them up as a defense of Wal-mart as if that made everything alright?

Well, as stupid as holding up your husband's happy employement, that's how.

You can like Wal-mart, you can love Wal-mart, but try to avoid being like a cult-member and getting outraged at anyone who brings up real and serious problems with the corporation and it's effect on the American public.

To expect me or anyone else to say, "Oh, you're right, I take it all back." simply because Wal-mart has been a good employer in your husband's case would be pretty foolish.

You're obviously so narrow-minded and unaware of the case against Wal-mart that you can't think or see beyond your own personal narrow interests to look at the much larger picture.

That's too bad.

 
At 11/30/2006 9:28 PM, Blogger Buffie said...

Or you could admit that Walmart is not the only company in this country that pays its employees just above minimum wage or at minimum wage and that they are all at fault.

Then take all of the cushy jobs (your I'm sure is one) and hold them accoutable for making so much and doing so little. The President makes over a million dollars a year plus has all of his travel and other expenditers paid for. Most Presidents, I would say deserve it because they actually do something, but this one is always on vacation.

So in saying that Walmart is the reason why America is hurting is retarded.

I believe that you may have something to hide. After checking your profile, I made the discovery that you don't even have your name on it, afraid to let people know who you are? Afraid that if they know the real you, they might just discover your secret? That you bad mouth a place yet secretly shop there.

Oh, just one more thing. My mother was a book-keeper/accountant when I was a kid (she is dead now), and I received free lunch. What do you say about that? She never worked for Walmart.

 
At 12/02/2006 12:57 AM, Blogger The Inside Dope said...

Buffie, what we have here is a failure to communicate.

I never suggested that Wal-mart alone is the cause or source of all the problems in the country.

I simply suggested that there's a lot of real, valid, and serious concerns about the influence and economic impact of a company the sheer size of Wal-mart as well as their policies.

Sure, they're not the only corporation or company underpaying and over-working their employees, far from it. But they're the world's largest company and employ so many people that they're obviously the company with the most effect on the most workers.

And because of that, they also set the standard for all other similar workers. In other words, America is getting "wal-marted", and yes, it's pretty important what Wal-mart does.

Facts are facts, and there's a lot of facts about Wal-mart that anyone, even you, would find very objectionable and unfair, such as the famous instance of making employees work overtime off the clock, or the extreme example of actually locking employees in the store overnight, etc.

Do you really want one and only one store chain in America? While that might never happen, it might get damn close.

As to you getting free lunches, if you qualified, which I assume you did, then it's good that you got them. I'm sure your mother appreciated it. After all, it's not how much you make alone that determines your situation, it's also your obligations and cost of living. You can be in poverty and make a "good" living if you or one of your family has health problems not covered by insurance, to name just one of many, many ways people may truly be in need even though they make what's considered an OK income.

Sometimes it's their own doing, sometimes it's things beyond their control. But it doesn't help society to allow kids to go hungry, and enough people agreed to chip in and provide at least a decent meal for children that need it.
That's the sort of thing which has gotten a bad name under right wing rule, and I think that's wrong.

And you're just now noticing that I'm anonymous? Apparently it wasn't that important to you until now, and I agree it's not.

Your guesses as to why that is are completely off the mark I'm afraid.

I don't mind paying a little extra to a business that's locally owned or who pays their employees a living wage.

And I certainly don't have anything against a store providing low prices and affordable goods to people. That's all good.

It's just that they could and should share more of their profit with the employees who make it possible.

For instance, the Waltons are worth many, many, MANY billions of dollars. that's billions with a "b".

Yet when the Wal-mart employees themselves started a fund to assist fellow employees in need, the family donated less than $10,000 to the fund.

As I said, you really ought to educate yourself about the policies and influence of the company you seem to think is nearly perfect.

Rent or buy a copy of "Wal-mart: the high cost of low prices" and you might see things just a little differently.

 
At 12/02/2006 9:48 AM, Anonymous Anonymous said...

TID,

I don't understand your beef with the economic system that we have in place in the US...the free-market system has done us very well. People from every other type of economy work hard to come here, or copy our free-market system.

WM has succeeded and has made many people extremely wealthy (investors, other companies) and has assisted many communities (that is why communities SEEK them out).

No one put a gun to anyone's head to work for WM - and if the people that are earning minimum wage were capable of earning more elsewhere, they are free to go elsewhere.

No one put a gun to anyone's head and forced them to sell products to WM, again, free markets.

No one put a gun to anyone's head and made them shop at WM. Personally, I am no fan - I will shop Target long before thinking about going to WM - but, again, that is my choice.

WM has changed the way that we shop. WM has allowed the consumer to buy more, for less.

Again, I am not a customer of theirs, but I don't understand your thinking...do you want the government to start legislating how private businesses operate?

 
At 12/02/2006 11:23 AM, Blogger The Inside Dope said...

For the record, I have no problem with the economic system we have.

Thanks.

As to the rest of your argument, I simply disagree. Unregulated free markets are not the answer and never have been.

If you think a race to pay people less and less for more and more in order to benefit fewer and fewer people is just the best, then that's your opinion.

It's not mine.

The argument that people can work elsewhere is also particularly offensive.

It's that attitude that has led to half our economy moving to countries where workers will work for slave wages. That's your precious free market at it's finest.

 
At 12/03/2006 8:22 AM, Anonymous Anonymous said...

Huh?

Your answer clearly indicates that you do not believe in the free market system. In the year 2006, if one is capable of making more than their present employer is paying them - they leave and go elsewhere.

To stick a gun in the ribs of a business and tell them that they MUST pay an inferior worker a set wage (and benefits) is certainly not the free market system. Chicago foolishly tried this and failed miserably.

If one is unhappy with the wage being paid at WM, they need not shop there. If a worker does not like the wage - go elsewhere.

 
At 12/03/2006 10:53 AM, Blogger The Inside Dope said...

So wal-mart can determine that hundreds of thousands of people are "inferior workers" and pay them less?

If the minimum wage failed miserably in Chicago, what's going to happen when it goes nationwide soon?

I can't wait to see your dire predictions of horrible consequences all come to nothing.

And if Wal-mart is the only store in town eventually, where else are people supposed to go for work?

If you truly believe the labor market is wide open and workers have a vast array of choices out there, you're nuts.

People should be paid a living wage and basic benefits, especially when employed by one of the larges corporations on the planet who routinely makes multi-billions in profits.

 
At 12/03/2006 1:50 PM, Anonymous Anonymous said...

I don't know how I feel about WM. The last time that I was there I was asked to leave electronics after commenting on the PS3 and the piece of junk that it is. It doesn't play half of the games that it is supposed to play and I think that the price was way to much for an inferior product.
Later, was asked to leave the store. I made a remark that was heard by serveral customers and a few employees. It was about a remote controlled truck that was almost $300. I stated that if I wanted it I would get it at "name of store" for $100 less. It was oviously not appreciated.
David

 
At 12/04/2006 11:05 PM, Blogger Buffie said...

OMG, I can't believe that theinsidedope and I agree about something. The labor market sucks, it is no where near what it should be. So even if a person is unhappy at their job (where ever that may be) they are better off staying there until they can find something better (if it is out there). My husband looked for 7 1/2 months before he found a job at WM. He is what you would have called a career security officer. If you know of an opening (with a decent pay) let me know (relocation is not a problem).

 
At 12/05/2006 8:51 PM, Anonymous Anonymous said...

I suggest your husband return to school part time and start working towards a career his family can count on!

When the new pig plant opens in Barstow, he may find a better opportunity!

 

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