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OAKLAND TRIBUNE 2004 PUBLIC PAYS THE COSTS OF WAL-MART'S LOW PRICES Oakland Tribune, August 08, 2004
One of my favorite economic axioms: "We have socialism for the wealthy, and a 'pull yourself up by your bootstraps' capitalism for the poor." This thought runs counter to the notion that our economy is based on a Darwinian "survival of the fittest." We bemoan those who we feel are not keeping their economic end up. Politicians conjure images of those receiving public assistance somehow drowning in opulence, funded by the rest of us poor schmucks who get up and go to work everyday. How often do we levy similar critiques of corporations? This brings me to Wal-Mart. The homespun image created by the late Sam Walton has stuck with Wal-Mart even as it has become the largest retailer in the world and the biggest employer in the United States. In California alone, Wal-Mart has some 44,000 employees. Its motto: "Always Low Prices, Always!" values a time-honored American tradition. For all of its economic ingenuity, Wal-Mart appears to enjoy the benefits of capitalism, utilizing the proletarian theory by having medical benefits subsidized by local government. According to a report issued by the University of California Labor Center, the reliance by Wal-Mart workers on public assistance programs in our state costs taxpayers an estimated $86 million annually. In other words, the same poor schmucks who toil to fund public assistance for individuals are indirectly providing the same courtesy to Wal-Mart. Moreover, the study further estimates if other large retailers adopted Wal-Mart's wage and benefits standards, it would cost taxpayers an additional $410 million a year in public assistance. At this rate, Wal-Mart workers' utilization of public assistance nationally could cost the American taxpayer as much as $2 billion per year. In addition, the Labor Center study suggests there is strong evidence that the jobs created by Wal-Mart tend to replace higher paying jobs, as existing retailers are forced to scale back or go out of business. The study found that 54 percent of Wal-Mart workers in 2001 earned below $9 per hour, 21 percent earned between $9 and $9.99, while another 16 percent earned between $10 and $10.99 per hour. Wal-Mart is now expanding into areas in California that traditionally have higher standards for wages and benefits. With the development of "supercenters" that combine retail with groceries, Wal-Mart has become the largest grocery retailer in the country, accounting for 19 percent of the grocery market. Wal-Mart is also the third largest pharmacy in the country, behind Walgreens and CVS. Wal-Mart plans to bring 40 "supercenters" to California by 2006. The potential impact of a Wal-Mart invasion will exact a heavy toll on the traditional supermarket. In the San Francisco Bay Area, non-managerial Wal-Mart employees earn on average $9.40 per hour, compared to the $15.31 for unionized grocery workers. The Wal-Mart employee is 50 percent less likely to have health benefits. Wal-Mart changes the competitive atmosphere by issuing the challenge for a race toward the bottom. Where is the incentive for any of Wal-Mart's competitors not to mimic their business practices, even when a higher wage/productivity model could do well for shareholders and provide long-term interest for the community? Perhaps the more important question is whether or not Wal-Mart's business practices, though profitable for stockholders, meet community expectations. How can we look the other way when the business practices of a company that touts 40 percent of Forbes Magazine's "Ten Richest People in the World" includes shifting a portion of its burden onto the public because it pays low wages and provides substandard benefits? There is, indeed, a reason why Wal-Mart always has low prices. In the words of billionaire investor Warren Buffet, "If there is class warfare, our side is winning." The problem with Wal-Mart is not that it is winning, but that it wins because of us poor schmucks in the middle who are unwittingly assisting its cause. |
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