Consumer Values at Low, Low Prices

    In newspaper columns and blogs, it’s been half-jokingly called “the great Satan” and “the most famously offensive, town-destroying, junk-purveying, labor-abusing, sweatshop-supporting, American-job-killing, soul-numbing, hope-curdling retailer in the known universe.” There are scores of Web sites vigilantly dedicated to keeping tabs on its actions. And in the coming months, it will be in court facing off against the city council of Hercules, Calif., just one of a long list of towns that have tried to restrict its growth.

    Jennifer Hsu/Guardian

    But all the vitriol aimed at Wal-Mart doesn’t stop American consumers from spending close to $250 billion there every year, more than at all other grocery retailers combined. It’s all part of a love-hate relationship we have with Sam Walton’s brainchild, which is simultaneously a paragon of efficiency and a hated symbol of corporate manipulation.

    Whether we are prepared for it or not, our bipolar romance with the Wal-Mart way of life may soon come to a head.

    In his autobiography, Walton wrote that “the secret of successful retailing is to give your customers what they want.” What customers want, he reasoned, are low prices and a convenient and pleasant shopping experience. Embracing the relatively new discount-store business model in 1962, Walton’s stores provided exactly that, adopting the motto: “Always Low Prices.”

    Before long, punsters subverted this slogan into “Always Low Wages” — and often for good reason. In California, Wal-Mart’s sales clerks make an average of $10.37 an hour, compared to the state average of $14.82 an hour for large retailers. The pattern is the same nationwide, with a Wal-Mart average wage of about $9 an hour compared to the national average of $13 an hour for all retailers. In some states, a year-round income at the store is below the U.S. poverty threshold, according to www.walmartwatch.com.

    Wal-Mart’s compensation packages are also notoriously lackluster. Some labor groups claim that, after factoring in nonwage benefits, Wal-Mart employees make nearly 50 percent less than employees at comparable retailers.

    The company is also known to be particularly hostile toward unions. Officially, the company stance is that because “[Wal-Mart] believes in maintaining an environment of open communication, we do not believe there is a need for third-party representation.” But labor organizers have long argued that the lack of collective bargaining at Wal-Mart is one of the key factors keeping wages low. Several former employees have alleged that “associates” are misled or intimidated about joining unions.

    The Wal-Mart in Jonquierre, Quebec, Canada unionized in 2004 — and was closed down by the company a few months later. A company spokesman told the New York Times that Wal-Mart closed the store because it had lost money since its opening. He attributed the store’s poor performance to “staff division over unionizing.”

    Wal-Mart denies breaking any labor laws.

    It’s not just Wal-Mart employees who find themselves with the proverbial wolf at the door. In 2003, the mere threat of Wal-Mart expansion in Southern California rippled through the grocery retail sector. Armed with the knowledge that grocery prices generally drop by 10 to 13 percent after Wal-Mart moves into a regional market, California grocery chains owned by Albertsons, Safeway and Kroger tried to negotiate a two-year wage freeze with its unions. A protracted strike ultimately availed the unions little, with new employees receiving greatly reduced benefit packages.

    These pressures mount as American wage earners struggle to make ends meet. Between 1973 and 2003, the bottom 40th percentile of American workers saw an hourly wage increase of about 7 percent — compared to a 28 percent increase for the top 10 percent over the same time period. American males in the bottom 40 percent have actually seen a 5 percent decrease in real wages since 1973.

    While it’s absurd to single out Wal-Mart for the difficulties facing wage earners, its model is representative of a global system of business that values profit over well-being. And while casting “the Wal-Mart effect” as a simple either-or is a gross oversimplification, it illustrates the trade-offs of this system very clearly: You can have low prices, or you can have high domestic wages. American consumers face this choice every day — and speaking with their wallets, they overwhelmingly choose low prices.

    This apparent fixation with dollars and cents raises uncomfortable questions about our national values. Are we making a balanced decision about wage-earning versus low prices, or are we simply chasing the nickels and dimes?

    A 2004 Forbes article framed the problem perfectly: “Where you stand on Wal-Mart … seems to depend on where you sit. If you’re a consumer, Wal-Mart is good for you. If you’re a wage earner, there’s a good chance it’s bad. If you’re a Wal-Mart shareholder, you want the company to grow. If you’re a citizen, you probably don’t want it growing in your backyard. So, which one are you?”

    Indeed, which one are we?

    The problem is that we are usually both. Shoppers enjoy Wal-Mart’s unbeatable prices, even as they cringe at reports of Wal-Mart employees forced onto welfare rolls — indeed, as Sally Lieber reported in the San Francisco Chronicle, Wal-Mart (true to form) has a streamlined process for getting its employees approved for government aid. We all benefit from the responsive worldwide distribution network Wal-Mart has created, but we worry about suppliers being bullied into hopelessly unfavorable deals or forced to resort to cheaper overseas manufacturers.

    How, then, do we reconcile our conflicting wants? If we can’t have our cake and eat it too, what core values do we defend? And all harrumphing about free markets aside, do we really prefer $3 gallon-jugs of pickles over a living wage?

    Fortunately, Wal-Mart’s profitability ($11 billion last year) is not built exclusively on the backs of wage-earners. Its position as the world’s premier retailer allows it to leverage suppliers into providing some of the best deals consumers can get. Wal-Mart also developed a pioneering computerized inventory system that directly links individual stores with their suppliers, greatly improving the speed and efficiency of restocking.

    And Wal-Mart is famous for holding its suppliers to notoriously strict price and delivery requirements. Even disgruntled wholesalers have a sort of admiration for the ruthless efficiency of the company.

    “With a customer like [Wal-Mart], it changes your organization — for the better,” former CEO of Saratoga Beverage Group Robin Prever told Fastcompany.com. “It wakes everybody up. And all our customers benefited. We changed our whole approach to doing business.””

    Ultimately, it is Wal-Mart’s efficiency that has made it successful, and its efficiency should be more than enough to sustain a healthy company. With a near hegemony in retail, Wal-Mart doesn’t need to pay poverty-level wages to turn a profit.

    Sure, there’s nothing inherently wrong with paying employees as little as they are willing to work for. But neither is there anything right with augmenting shareholder profits at the expense of a living wage.

    Whether consumers recognize it or not, every dollar spent at Wal-Mart makes a small statement about the moral fabric of our country. Every purchase at Wal-Mart says that we value cheap goods more than the well-being of our fellow human beings.

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