Friday, July 18, 2014

Wal-Mart Benefits America

What can we say about Wal-Mart Stores, Inc., of Bentonville, Arkansas?

First, it is enormous.  The world’s largest public corporation, it has over 11,000 retail outlets in 27 countries – hardly the most of anyone, but their average size makes the company unique.  Its 1.4 million workers make it the largest private United States employer, with over four times as many as second-place IBM.  Ninety percent of Americans live within a 15-minute drive of a Wal-Mart store, they receive more than one-thirteenth of every dollar spent in this country, and the firm’s annual world sales approach half a trillion dollars.  As well as being the country’s, and the world’s, largest retailer overall, it sells more groceries in America than any other.

Second, vast numbers of people not working there benefit from it.  About 100 million people buy from Wal-Mart each week.  A 2005 Washington Post study concluded that the chain’s prices on food alone saved American consumers $50 billion per year, and the company has added many stores since then.  Forty-two percent of Wal-Mart’s sales are made to people with family incomes below $40,000, and one fifth of their customers, double the national average, do not have bank accounts.  Accordingly, many of their shoppers have a special need for savings.

Third, the same sales have caused a steamroller effect on other businesses.  Other research has shown that the negative effect new Wal-Mart stores have on receipts at others, strongest in smaller towns, could be as much as 40 percent, with businesses closer to the company’s locations suffering the most.  A Penn State study concluded that Wal-Mart outlets increased poverty.

Fourth, 80% of the chain’s suppliers are in China, which other studies concluded cost 200,000 American jobs.  Many of its products, though, are not price-competitive or even available when manufactured here, and earlier this month, Wal-Mart officially launched an effort to sell more American-made products, with its “Made in USA Open Call” event. 

So what can we conclude about this gargantuan chain? 

One, if prosperity and poverty measures included and quantified the effect of lower prices, Wal-Mart would attract less controversy.  In 2006, columnist George Will wrote that the chain and “its effects,” including forcing prices elsewhere lower, saved American consumers more than $200 billion per year, more than three times the benefits from food stamps and the earned income credit combined.  Yet poverty statistics do not account for this boon. 

Two, there is little documented reason to show that Wal-Mart stores cost a net number of jobs.  Although many other businesses are often forced out when one arrives, the total amount of retail sales frequently increases to the point where more workers, overall, are needed. 

Three, while Wal-Mart jobs have indeed tended to pay less than those at other retailers, those employers have had much more risk of going out of business.  Although many have criticized the chain for its pay rates and working conditions, demand for its positions, especially at new locations, remains high.  Eight years ago, before the Great Recession, a new Wal-Mart store opening near Chicago received 25,000 applications for its 325 new jobs – bad reputation, low pay, and all – when the city had an official 5.4% unemployment rate.

Four, positions at a large retail chain cannot be compared with those at large information-related companies such as Microsoft, Google, or AT&T.  The corporation’s 2013 $476 billion revenue works out to less than $217,000 per employee, compared with Microsoft’s and Google’s 2008 figures of $664,000 and over $1 million respectively.  Wal-Mart may be even larger and more profitable than either, but with such labor intensity its pay rates can never approximate theirs.

Five, the chain has indeed caused jobs at other retailers to go away.  Yet, with big-box competitors and online opportunities now commonplace, the great majority of the failed local stores would have been in trouble anyway.  As the survivors were well-suited to withstand lower Wal-Mart prices through customization and better customer service, they rated to do the best whether that company was involved or not. 

Other concerns, with doubtful merit, have been raised about the Bentonville company.  Its founder Sam Walton never made a lot of charitable contributions, yet the business now gives close to $1 billion per year.  Its jobs are often physically difficult, but no more than the industry norm.  A 2007 lawsuit charging the chain with sex discriminations in promotions and pay, though many thought it had considerable validity, was unsuccessful, with the judge not allowing it class-action status.  Recently, many commentators have compared Wal-Mart employees with those of Costco, another big-box retailer, who generally earn much more and have better benefits, including health insurance at the lowest levels.  Yet Costco stores, with typically 1/35th as many different items on offer and lots of them sold stacked on pallets, have sales per employee almost three times higher.

Meanwhile, the preponderance of evidence says that this enterprise, even if fearsomely gigantic, is strongly positive.  No company has saved low-income people so much money, and few if any have offered employment to so many.  From bananas to ipads, and in the tradition of the Sears catalogue which it in a sense superseded, Wal-Mart has made it possible for Americans, especially those in need, to consistently, year in and year out, get more for their money. 

The idyllically-remembered Main Streets with “little guy” retailers are gone forever, Wal-Mart or not.  The world is profoundly different now.  We may or may not successfully negotiate the jobs crisis, but for now there is not enough work, and no company has helped the unemployed and underemployed more, whether or not they have had jobs there.  The judgment is not close – the chain is good for America.  That is what we should understand, more than anything else, about Wal-Mart Stores, Inc.            

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