Tuesday, March 31, 2009

Just some of my thoughts on Wal-Mart

Wal-Mart doesn't really create jobs, at least they don't quite create them at the rate they state they do. Wal-Mart does in fact create roughly 30 new retail jobs when it opens up a store. That is quite a low number when you take into account that a Wal-Mart store employs nearly 300 people. If you believe the number that Wal-Mart is giving you, you would be under the impression that a new Wal-Mart store would bring upwards of 400 employees within 30 months of opening. You have to take into account the number of people that are let go from other retailers when Wal-Mart moves it, and the at least 4 smaller businesses that Wal-Mart will ultimately put out of business. So really when it comes down to it, Wal-Mart in fact does not create jobs in a way that would help to overwhelmingly boost the total number of retail jobs in an area.

As stated in, Wrestling With Wal-Mart: Trade-Offs Between Profits, Prices, and Wages by Jared Bernstein, L. Josh Bivens, and Arindrajit Dube, Wal-Mart saves the U.S. consumer an average of $263 billion dollars. This number is quite impressive, and many upon first look would unequivocally state that, "Yes, Wal-Mart saves the consumer money." When you look deeper, however you find that indeed, the U.S. consumer is not saving any real money. Somebody is paying for those low prices. It could be the Wal-Mart employee that is making much less than an effective living wage, it could be the distributor that is forced to give Wal-Mart their product at the price Wal-Mart names (or they will lose Wal-Mart as a customer, which could be detrimental to some), or the consumer in subsidies. When you are gong to Wal-Mart to buy a toothbrush at say $.89, you have already paid the difference between that and the other drugstore's price in taxes in the form of subsidies the government give to Wal-Mart to entice them to come to their town. So really, Wal-Mart's prices aren't lower than anyone else's.

It kind of seems like the consumer is having the wool pulled over their eyes as often as Wal-Mart can which leads to a very skewed perception of the state of business at Wal-Mart. People are being told one thing, "Wal-Mart creates many new jobs", or "Wal-Mart is lowering prices", and really none if it is wholly true. It seems to me that big box retailers don't really compete; they just move in and push out the would be "competitors" ("mom and pop" stores). It may take a little time, but ultimately this is the end result, unless of course it is a specialty store, rather a specialty that Wal-Mart doesn't cater to; like a car dealership. Though these days we have CarMax which is sort of like the big box retailer of the auto sales world. It gets to the point where all you have left is strip malls full of nothing but big boxes. Small towns lose up to 47% of their retail trade within 10 years of a Wal-Mart appearing in their towns (The Impact of Big Box Retail Chains on Small Businesses: January 2000, Center for Applied Economic Research). Wal-Mart is pretty much a death sentence for local independent business. It will probably get to the point that the big boxes will start to take out big boxes; Circuit City and Linens n Things are good examples.

People want their low price so people are going to go to where the prices are the lowest, big box stores. Not only are the people in the community going to frequent these stores, but people from adjacent towns and counties are going to travel to these stores as well. This is going to take almost all of an area's, and surrounding area's money and put it all into these big boxes with the lowest prices and leave none for the "mom and pop" store that used to get all of the business in the town with the Wal-Mart and in the one's surrounding it.

I don't know much about business or economics, but I was under the impression that a little competition was the way of business, that that's what makes business, business. Big box retailers have taken this away. We have the freedom to choose, but big boxes have taken a whole category of choices away. It's no longer run down to the corner to get something, it's get in the car a drive 20 minutes to get something. Though as these huge companies expand, don't be surprised if you see a Wal-Mart end up in your backyard.

2. Big box retailers have regularly been accused of questionable labor practices and offering unfair wages; these accusations do of course contain certain truths, especially with Wal-Mart. As we have mentioned before in this class, Wal-Mart does everything possible to keep their costs down. This would include paying low wages, offering expensive benefits that their employees struggle to afford, and cutting corners on the factory/manufacturing side of their business operation.

Over the years Wal-Mart has been caught employing illegal workers locking employees in the store to finish the job that they should have had done during their scheduled shift (forcing employees to work overtime without pay), permitting American teenagers to perform duties that legally they should not have been permitted to do (based on their age), receiving goods from overseas factories that pay next to nothing (some places as low as 8 cents per hour), and some of these factories even employ children. In Bangladesh alone, they found hundreds of children that had been working in a Wal-Mart sewing shop where they were treated very poorly, and paid next to nothing, if anything.

Not only do the above-mentioned factories pay poorly, but they work their employees in terrible conditions as well. In an attempt to keep Wal-Mart, the inspectors, and the public from full knowledge of these deplorable conditions, managers at the factories are being tipped off as to when the inspections will be taking place. Having prior knowledge of the inspections allows the managers to get the factories as close to code as possible, and it also gives the managers a chance to give the workers a "script" to use to answer questions from inspectors. If the workers deviate from the "script", they stand to be harshly punished.

This behavior is deplorable. All of these allegations have resulted in multi-million dollar lawsuits. Wouldn't Wal-Mart save more money if they just cleaned up their act, and treated their employees a little better? It would be great if Wal-Mart cared and took care of their employees because they wanted to. Realistically though, they don't appear to see it that way, all Wal-Mart seems to see is dollar signs. So maybe in Wal-Mart terms this would make a little more sense:

Add an extra dollar an hour in salary, give employees cheaper insurance premiums, pay people for the hours that they work, and just treat everyone as if they are a person and that they matter, all of those options seem like they would be cheaper options then settling avoidable, expensive lawsuits.

No comments:

Post a Comment