This Labor Day here at the National Consumers League, we’d like to talk about an American company that has surpassed all others in profits and power in the marketplace. We are asking the question: At what cost? Shouldn’t acompany be about more than profits when those ever-growing profits come at the cost of the quality of life of their millions of employees?
You guessed it – the company is the mega-retailer, Walmart. When consumers think of Walmart, what comes to mind? Low prices? Perhaps the corporation’s slogan “Save money. Live better?” This multinational, American-based retailer has cut costs on everyday goods, and purports to have changed the lives of Americans, but has the change really been for the better? Low prices, sure, but these inexpensive items come at a high cost:lost American businesses, outsourcing, and violations of labor laws. Walmart’s practices may hurt consumers more than their “low prices” help them.
Edward Fox of J.C. Penney’s Center for Retailing Excellence observes, “Clearly, Walmart is more powerful than any retailer has ever been. It is in fact, so big and so furtively powerful as to have become an entirely different order of corporate being.” Walmart grossed an astonishing $443 billion last year in revenue and has been achieving similar numbers for the past five years. This success has led Walmart to accrue over $15 billion in profit last year alone. The massive retailer also employs over 2 million workers worldwide, over half of whom are American. With all of its economic power, Walmart is an integral part of the American and the global economy.
It is deeply disappointing then that this mega-corporation has offered low prices by driving down worker wages and by forcing suppliers to meet rock bottom price demands that in turn, force suppliers to cut corners and reduce pay, creating a downward spiral on wages and benefits. For Walmart, it’s all about increasing profits and reducing costs. –Author of the article “The Walmart You Don’t Know,” Charles Fishman says, “Walmart wields its power for just one purpose: to bring the lowest possible prices to its customers.” Walmart’s low prices and ability to draw consumers from large geographic areas means a large market share, and forces smaller businesses tolose customers or go out of business completely.
Much of Walmart’s manufacturing is done in China, where labor laws may appear good on paper – 8 hour days, no forced overtime, etc. –but are rarely enforced in practice. The abuse of worker rights in China is legendary. Just look at the electronic manufacturing giant, Foxconn.Workers there are often not allowed to talk to one another, and often work mammoth numbers of overtime hours with no additional pay. Conditions are so bleak that the company had to install suicide netting to prevent workers from jumping off of factory buildings.
Walmart has been forced to pay millions of dollars to thousands of workers over allegations of wage theft, including the failure to pay overtime and the misclassification of workers. In 2008 alone, the company agreed to shell out between $352 million and $640 million to settle 63 wage and hour lawsuits filed against the company in more than 40 different states.
The company has been cited for not allowing rest or lunch breaks, and threre have been multiple claims that managers at Walmart warehouses harass their employees to keep working even after they have acquired work-related injuries.
Walmart’s stinginess when it comes to paying its workers has consequences. “Because Wal-Mart wages are generally not living wages, the company uses taxpayers to subsidize its labor costs,” noted. Congressman George Miller (CA-7), a member of the House Committee on Education and the Workforce, in a study, “Every Day Low Wages: The Hidden Price We All Pay for Wal-Mart.” : The company shifts much of the burden of healthcare and other costs to employees, said Miller, The lack of a living wage requires more than $2,000 per Walmart employee in taxpayer services, according to the study’s estimate. As Walmart’s profit grows, its impoverished workforce’s need for the welfare system growsand, ironically, so does its need forlow-price items like those sold at Walmart.
We shouldn’t make the mistake of believing that paying low wages, being stingy on benefits, and engaging in different forms of wage theft, are necessary to provide reasonable prices. Many companies – including the Container Store, Costco, QuickTrip, and Trader Joe’s – provide a different, and we believe, far better model. These companies demonstrate that paying fair wages can increase consumer satisfaction, sales, profits, and still keep prices reasonable for consumers.
Walmart’s slogan “Save money. Live better.” is a fiction. Consumers may save money in the short term, but we all pay for the consequences of this company’s litany of unfortunate business practices that pervade its entire supply chain. So this Labor Day, we ask consumers to stop, look, listen and ask questions about the places they shop. If you see incredibly low prices, stop for a second and ask: “At what cost are these prices so low?”