Wal-Mart: Love it or loathe it

 

Note: This article is a sidebar to this issue's feature story, "Wal-Mart’s Manifest Destiny."

For two years in a row, Fortune Magazine, in a survey of 10,000 business experts, has named Wal-Mart "America’s Most Admired Company." But if businesspeople love Wal-Mart, many working people loathe it: Wal-Mart now faces at least 30 class-action lawsuits from employees and ex-employees. Some experts say Wal-Mart is sued more often than any American entity except the U.S. government.

A report released in February by the U.S. House of Representatives’ Committee on Education and the Workforce, led by Rep. George Miller, D-Calif., provides a scathing critique of the way the company treats its workers. The report charges that Wal-Mart systematically discriminates against women by denying them raises and promotions. It also includes allegations that the company refuses to pay workers for "off-the-clock" or overtime work, and that it violates the Fair Labor Standards Act by reducing work breaks.

In 2001, according to the report, the average Wal-Mart sales clerk made $8.23 an hour, or just $13,861 per year. To qualify for the corporation’s health plan, which has a relatively high deductible, full-time employees must have six months on the job, and then pay a third of the cost. The approximately 30 percent of Wal-Mart workers who work part time, less than 34 hours per week, must wait longer. According to the Miller report, Wal-Mart employees had to pay 42 percent of their health care costs overall in 2001.

Wal-Mart discourages its employee — "associates," in the company lingo — from organizing or joining unions. The corporation provides store managers with a "toolbox for remaining union-free," which helps them spot warning signs that employees are beginning to organize. The toolbox includes a hotline to summon special Wal-Mart anti-union SWAT teams.

Wal-Mart’s less-than-super wages and benefits impact more than just its employees. Everywhere Supercenters are built, other grocers have suffered, losing business, closing stores, or, at the very least, having to delay their own expansions. Wal-Mart in effect forces other businesses to cut their budgets and payrolls to compete with it.

The company passes on some of its labor costs to taxpayers, critics say: Many Wal-Mart employees have to rely on public assistance to get by. A study by the San Diego Taxpayers Association predicted that an influx of big-box stores would result in an annual decline in wages and benefits between $105 million and $221 million in San Diego, Calif., along with an increase of $9 million in public health costs.

Wal-Mart responds that its wages appear low because most Supercenters have not been open long enough for employees to gain seniority. Without unions, it insists, its employees are better able to work toward promotions into managerial jobs. Other companies might offer free or cheaper health insurance, Wal-Mart spokesman Peter Kanelos says, but those plans often have caps on how much they pay out. Wal-Mart’s health plans have no caps, and cover major operations like transplants, Kanelos says. The company paid $2 billion in health care costs worldwide last year.

In a study commissioned by Wal-Mart, the Los Angeles County Economic Development Corporation predicted that Supercenters would have a positive impact on the economy. Customers, by saving money on groceries and other items at Wal-Mart, would "redirect" $3.76 billion per year into other spending in the seven counties in Southern California, thereby creating 36,400 jobs, the study said. Even so, the study acknowledged that the Supercenters would cause the loss of more than 5,000 jobs in the higher-paying unionized chain stores.

Some experts point out that Wal-Mart’s effects on workers and jobs are just one part of its impact on the greater economy. The corporate giant is responsible for pushing U.S. manufacturing jobs overseas and driving small businesses under, at the same time that it sucks up subsidies from local governments desperate for tax revenue, according to Stacy Mitchell, a senior researcher with the Minneapolis-based Institute for Local Self-Reliance (HCN, 12/1/03: Does Wal-Mart really need our tax dollars?). Wal Mart "is leading the way in pioneering an economic system in which everyone connected with it loses," she says.

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