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Thursday, May 18, 2006

Walmart Watch: Always Low Wages?

Study finds Wal-Mart contributes to poverty

A study focused on the effects of Wal-Mart stores on poverty rates found that an estimated 20,000 families nationwide have fallen below the official poverty line as a result of the chain's expansion.

The study -- Wal-Mart and County-Wide Poverty -- written by Stephan Goetz, a professor of agricultural and regional economics at Pennsylvania State University, and Hema Swaminathan for the International Center for Research on Women, was published in the latest issue of Social Science Quarterly.

During the last decade, dependence on the food stamp program nationwide increased by 8 percent, while in counties with Wal-Mart stores the increase was almost twice as large at 15.3 percent, according to the study. Although Wal-Mart employs many people living in its communities, for most, the hours worked and the wages paid do not help these families transition out of poverty, the study said.

The study, which sought to identify the independent effect of Wal-Mart stores on changes in U.S. family-poverty rates at the county level, found that one of the greatest effects of a Wal-Mart opening is the closing of mom-and-pop-type operations.

The authors state in the study that "by displacing the local class of entrepreneurs, the Wal-Mart chain also destroys local leadership capacity."

Poverty rates will rise if retail workers displaced from existing mom-and pop-type operations work for Wal-Mart at lower wages because they have no alternatives, all else equal, according to the study.

The demise of mom-and-pop stores leads to the closing of local businesses that supplied those stores, such as wholesalers, transporters, logistics providers, accountants, lawyers and others. Many of these are higher-paying jobs. The study concludes that it is likely that these more highly-educated individuals depart from the rural community in pursuit of better opportunities elsewhere, contributing to the rural-to-urban exodus over the last decade, leaving behind those with fewer opportunities and raising the poverty rate by reducing the number of nonpoor households in the denominator.

Wal-Mart is estimated to employ no more than 2 percent of the average county's work force. The share of Wal-Mart's employment in total county retail jobs is substantially greater than only 2 percent. In addition, the Wal-Mart jobs may be part time as opposed to full time, leading to lower family incomes, all else equal, the study said.

via St. Louis Business Journal


Mnels said...

Something seems fishy in the implication that "mom & pop" stores paid substantially higher wages to employees prior to Walmart. It also assumes that if WalMart hadn't arrived, all those old fashioned stores would have survived. Having worked for both chains and small companies in my youth, I saw no difference except that "mom & pop" jobs typically included a heavy dose of nepotism and the products sold were a lot more expensive. The wages were driven by the market - supply and demand.

The tenor of this seems to suggest we should pay higher wages for unskilled labor, ragardless of the economic value added. A basic human truth is that any behavior that is subsidized will produce more of that behavior. Why would we subsidize unskilled labor? Do we want more of it? Will that help us compete in the future? Does a guy pushing a mop around all day deserve a "living wage"? (I pushed a mop around at KMart in High School - it was... motivating, to say the least). What would then be his incentive to gain marketable skills? Subsidize education and training instead, quit blaiming WalMart.

AKI SYSTEMS 2600 said...

i actually agree with your critiques about the alleged high wages of mom+pops...

though with regard to unskilled labour...i dunno if paying a "living wage" is so unreasonable. particularly for someone who can afford to reinvest in the business. living wages aren't a gift to workers, it is an investment in the business that should produce results - particularly on the sales floor.

big business whines that paying living wages is so detrimental to the bottom line and the low price guarantee on the shelf. i don't really buy it. it is a matter of prioritising differently. walmart, like government accounting has the money to put wherever they like, some just suggest buying less frivolous marketing execs and pay the store level guy just a bit more to be a happier brand asset and produce results at the customer experience level.

cuz frankly, a great in-store experience ain't happening at wal-mart. the chief reason i don't go is - SERVICE SUCKS.

but why does it suck? it don't suck at other stores, and prices are cheap there.

i submit a more compelling question: could beancounters simply appraise exactly how much value added can be had by paying "unskilled" workers a living wage? will it mean less turnover? seems like a good trade off. will it mean personal accountability and pride in work (thus lesstheft and less costly surpervisors and security cams to force it?) seems like we should do it. will it mean someone at the counter who gives a fuck and wants to make my experience good, so that i may buy? then do it. in the end i know one thing about wal-mart and that is SERVICE SUCKS, AND IT SUCKS CUZ THE WORKERS DON'T HAVE OWNERSHIP. I, MYSELF, DON'T GO TO WALMART CUZ THE EXPERIENCE IS SHITTY. there are numerous models where this is not the case. i shop at those stores. and those store examples rarely seem to bitch about how "doing right" on worker wages is gonna kill the bottom line. they seem to think that doing right enriches the bottom line. clearly, all these arguements are "proven" by whichever way you choose to assess value.

Mnels said...

You are right about the WalMart experience sucking, but it's not about the experience. It's about price. For a large percentage of consumers, that trumps experience. I do think that will change as competitors find ways to add pleasure for minimal price increases. Consumer expectations will change. I suspect WalMart will adapt (or become the next Sears or KMart).

I am not against the living wage idea from a moral standpoint. All my relatives were essentially laborers and they maintained a decent standard of living. I am against it from a practical standpoint. The industrial era is simply over. Basic labor is a commodity. The higher the wage becomes, the more incentive the manufacturer has to automate and eliminate said laborer altogether. I don't make the rules, that's just the truth. I also challenge your assumption that simply paying a higher wage will create more invested, motivated employees. In my experience and as is visible in highly managed economies (France for example), that just aint true. What tends to work better is a simple incentive system where low payed employees are given opportunities and support to increase their job skills which increases their wages and ultimately their economic value. Costco seems a good model here. They rotate employees around the store so they become more flexible/hence valuable (and are reportedly more happy and motivated). They are payed a better than average wage not just for showing up, but for actually improving themselves. That seems pretty solid to me. I think WalMart offers opportunities in a similar fashion. You can find hundreds of testimonials from employees reinforcing the opportunities. However, I know there are also many ex-employees who say bullshit. I think this country is wealthy enough that noone should be permanently stuck doing menial labor. However, I also think basic labor is a good place to start (I had plenty of experience with that), it does have value and it builds character.

AKI SYSTEMS 2600 said...


aight, i hear ya on "What tends to work better is a simple incentive system where low payed employees are given opportunities and support to increase their job skills which increases their wages and ultimately their economic value."

but wal-mart doesn't do that. or at least that is my understanding from the claims of reports from many (mostly women and ethnics) who are filing suit because they followed the rules, worked hard...and still nothing happened. and they don't have enough dough to take the kid to the doctor. so the worker's discomfort carries over to me who simply wants to find out the damn price of the VCR on sale.

and that predicament is just as real as the business reality. and no machine is going to replace that core of the shopping experience.

and while i am not patently against wal-mart like many. i do agree with the protesters that wal-mart CAN do exactly what you say "works" to get workers motivated. but walmart isn't doing these measures. and they can. and doing so is not precluded by wal-mart's "tight margins", doing so is predicated on their deciding that it should be done. just like deciding to put solar panels in the parking lots, or adding security in the parking lot for customers (and less in the storeroom) and stocking healthier food are benefits not precluded by their "tight margins". that "tight margin" excuse is valid more for the mom+pops they replaced. that excuse is just lame for walmart at this point.

and deciding to do right isn't so much a moral obligation as they will soon be forced to do the right thing (i go back to my EXPERIENCE SUCKS rant - as they now begin to recognize that time is ticking on living solely off their bottom-feeder consumer who will accept it cuz they have no choice).

all their new initiatives with newer store design, higher quality products/brands, BUT THE EXPERIENCE SUCKS. and i ain't gonna pay more for a suck experience. and i have the luxury that i don't have to pay less for their suck experience. i can just avoid their suck experience. many of us can, and do. and many of those who previously couldn't avoid it, will soon get that luxury as competitors catch on and solve the problem to get our dollars. so new organic veggies or not, they just won't get me in there til they figure out something to make that lady at the register treat me nicer. i think that means find ways to pay her for her engagement.

now they can engage workers in a program (as you suggest) that she can work up towards and get motivated to smile at me (like the commercial shows)...or they can continue to do the opposite which is keep everybody at part-time status, higher flighty high-schoolers who don't care and put them right up front instead of the storeroom, don't pay any overtime (even if u worked it), offer no medical coverages or even wise investment counseling, and fire everybody who makes a complaint. they can even try to buy a bank so they can cash the checks of their own employees who use money stores anyway, and keep the money in the family. great. keep at it. but any attempts at luring me in to buy those sexy organic veggies will still come back to a commitment to reinvest in the worker to give me a better damn experience.

and while wal-mart is not obligated morally or otherwise to do so...the marketplace will rule out in the end. so by that, it just seems easier to quit blaming the worker and begin now to invest in improving the worker to further the bottom line and get me in there buying all the organics. i think "doing right" can also make for some great capitalism...but accountants aren't trained to look at it like that. so we get what we get. for now.

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