August 03, 2004

In Defense of Wal-Mart

This pisses me off. From the LA Times (via the Chicago Tribune):

Inadequate wages and benefits force workers at Wal-Mart stores in California to seek $86 million a year in state aid, according to a report released Monday by the UC Berkeley Labor Center.

Moreover, if other retailers cut their wages and benefits to the levels offered by Wal-Mart Stores Inc., the cost to California's public-assistance programs would rise by $410 million annually, the study said.

In their report, Berkeley researchers Arindrajit Dube and Ken Jacobs contend that more than other retail workers, Wal-Mart employees rely on a variety of public-aid programs, including food stamps, Medicare and subsidized housing.

"In effect, Wal-Mart is shifting part of its labor costs onto the public," the researchers wrote. "Wal-Mart's long-term impact on compensation in the retail industry has the potential to place a significant strain on the state's already heavily burdened social safety net."

Sigh. The thing that irritates me most about this is that the commies over at Berkeley know better. Wal-Mart's profit margin is extremely thin; they make a lot of money not because they mark everything up, but because they are such maniacs about controlling costs. If they raise their wages and benefits, they must raise their prices or operate at a loss. If they raise their prices, the good citizens of California pay more for their stuff. And if that happens, do you really believe that the State of California would cut taxes because there was less demand for social services by all these Wal-Mart employees? I think not. Wal-Mart employees would get richer, but everybody else would get poorer.

Also, it's not the top-hatted plutocrats who shop at Wal-Mart. It's people for whom saving 50 cents on a gallon of milk is a big deal. In fact, given that a general price increase at Wal-Mart basically amounts to a regressive tax (assuming the poor shop at Wal-Mart in greater proportion than the population at large), then the concerned citizens over at Berkeley really should explain why they are advocating against the interests of those they purportedly seek to protect.

Posted by Mr Green at August 3, 2004 09:01 PM

I'd be interested to see this study broken down by Urban, Suburban and Rural areas. I know the quality of the Wal-Mart has a direct relationship to the type of area it is in. Most of the Wal-Marts in the Urban/Suburban (SW Chicago) areas I’ve been in are little better then K-Marts, dirty and run down, not a place I would shop voluntarily. Go 25 miles West or South and it’s like a completely different store by a different company, Morris, IL is an example. You get into the Rural southern states and most of them could be 10-15 years old and still look better then Most 2-3 year old Targets in this area. I think a lot of this stems from the fact that Wal-Mart doesn’t vary they're pay much from area to area. In Rural areas Wal-Mart is a good job for most people and you’ll find people that have been with Wal-Mart for 10+ years as a cashier or another non-management job. Most won’t say it’s the best job in the world, but it’s better then most others job in the area working in a factory of some kind for the same or sometimes less pay. Contrast that with Urban/Suburban areas where most of the non-management positions are held by teenagers. Or the position is something to get an adult by until they can find something better, during which time they’re more then likely on some kind of public aid. So another good question would be how many of the people on public aid in Cal. are working there short term while going to school to better themselves?

Sorry… turned into a ramble there, but I think you get the idea.

Posted by: Randy K. at August 4, 2004 01:07 PM

WM started out as a rural alternative to Kmart. Heck, Sam Walton took most of is ideas from Kmart and Ben Franklin stores.

It's only been in the past few years that they are going more urban, the formula was to always stay near the outskirts of a town. Used to be they would keep the Supercenters 60 miles apart, min. Now they've added the neighborhood markets to the mix, feeling that is perfect for the "City". Worked well in the tests in Dallas and I'm seeing them more and more in my travels.

You're right on the beating up of the vendors. I managed that account for years, on the retail execution side, and I've never worked harder in my life. You want to do business with WM you bring low, low prices - and you can because they have one of, if not THE best distribution systems in the world. That shaves cost. They buy in volume. Large large volume. That shaves cost. They can't and won't raise prices. Part of their success is the fact that you can walk into any WM and find the same pricing with in cents.

As to the older stores looking so bad, that is being addressed. I would almost expect those mentioned in the comments above to be closed soon.

Sorry for the ramble. I loved working this account, stay up on what's going on and get a tad bit carried away!

Posted by: Tammi at August 7, 2004 11:32 AM