Wednesday, August 03, 2005

It's Too Easy to Blame Wal-Mart

For such a successful and ubiquitous company, Wal-Mart sure seems to catch a lot of grief. Accused of all manner of crimes from driving out local business to exploiting workers, the retail Goliath has image problems to say the least. But in a New York Times editorial, Harvard business professor Pankaj Ghemawat and business consultant Ken A. Mark argue that Wal-Mart is actually very beneficial to individual communities and the nation at large.

Their analysis centers on the fact that Wal-Mart provides the most inexpensive goods around, saving the American consumer a conservative estimate of $16 billion a year. More importantly, from at least a socially progressive standpoint, the writers’ research shows:

Wal-Mart operates two-and-a-half times as much selling space per inhabitant in the poorest third of states as in the richest third. And within that poorest third of states, 80 percent of Wal-Mart's square footage is in the 25 percent of ZIP codes with the greatest number of poor households. Without the much-maligned Wal-Mart, the rural poor, in particular, would pay several percentage points more for the food and other merchandise that after housing is their largest household expense.

Truly, for the rural poor of America, Wal-Mart has been a boon. And this really brings up a fundamental question: what’s better for an economy and nation, cheap products paired with low-paying low-skill jobs OR high-paying, low-skill jobs paired with more expensive products? Through our purchasing habits, America has currently made the choice for cheap products. Even those workers supposedly exploited by Wal-Mart shop at Wal-Mart. As do their families. As do just about all of us

So, if we want Wal-Mart to pay its employees more, we all will have to pay more at the checkout stand. Which would probably lead most consumers to shop elsewhere at whatever store undercuts Wal-Mart’s new, socially conscious high prices. Thus Wal-Mart would be driven out of business, putting all those well-paid workers out of a job.

My point? The issue of the low-paid worker is not Wal-Mart’s invention, it’s not Wal-Mart’s fault and it’s not Wal-Mart’s problem to solve. We as a society have made the choice that we really want cheap goods. Wal-Mart has merely found the best way to cater to that want.

Bash Wal-Mart if you want, but I think the days of the well-paid, low-skill worker is over. Low skill jobs are no longer career jobs. But that doesn’t mean that we have to live in a society where a significant portion of the population is constantly struggling, even as they work two or three jobs. What it means is that the solution is not in trying to force the system in a direction consumers won’t let it go.

We need progressive thinking that moves away from the idea of forcing low-skill jobs into living-wage jobs. I’ve got a few ideas which I hope to discuss in a future post. But for now, I just ask readers to think about ways we might be able to have plenty of cheap goods and plenty of good jobs

11 Comments:

At 11:55 AM, Blogger Jonathan C said...

Every Friday I work from home and eat lunch with my wife across the street from where she works. There is a fabulous deli owned by a married couple who has owned it for decades. After lunch, we hop next door for some utra fattening but heavenly desert at a bakery started a few years ago as the dream of its young owner.

Every time I eat there, I think that it will be a sad sad day if a Super Wal-Mart opens down the road and forces these small businesses to close.

Call me protectionist if you like, but I worry that we may be sacrificing ownership, self-sufficiency, pride, and community in the name of efficiency and expediency.

It's not Wal-Mart's fault, you're right. I think that as a nation, however, we need to take a step back and ask ourselves if a society where all commerce is impersonal is really the America we want to live.

 
At 12:49 PM, Blogger Alan Stewart Carl said...

Jonathon,

What's interesting is that Wal-Mart will not shut down that deli and bakery if people keep going to that deli and bakery. There's no way for a store like Wal-Mart to offer the personal service or even probably the quality of food those places you eat offer. As long as people continue to value those things, those stores will stay open.

I absolutely agree that we as a society need to ask ourselves how impersonal we want commerce to be. But I think, in many ways, it's not as large of a problem as some people think. Small retail stores still exist in large quantities--but they've had to adapt. It's not enough to throw up a shingle and sell radios--even if you do it with a smile, people aren't going to pay the 20% higher price you have over Wal-Mart.

So successful retailers have specialized in ways Wal-Mart can't. Either by offering goods Wal-Mart can't be bothered with or can't get significant variety of, or by offering a service Wal-Mart can't provide.

I'd also like to say that just because a store is part of a massive corporation doesn't mean there can't be good service and meaningful interaction between the community and the proprietor. My local deli is a 7-11, but the people there know who I and every othere area resident is and it's just as nice to go in there as it was to go into the privately owned deli in my last neighborhood.

I guess my point is that people WANT to interact. And we're going to find ways to do it. Wal-Mart and its ilk didn't kill that spirit. They just drove it to adapt.

 
At 1:53 PM, Blogger Tom - doubts and all said...

I wonder if our society would admit that, in addition to cheap goods, we want low-skilled low-paid workers to go without access to affordable healthcare.

Far too many of Wal-Mart's employees are part timers with little or no benefits.

I, too, like cheap goods, but if providing a minimum of health insurance their employees could afford was a cost of doing business I would readily share the difference with Wal-Mart and its competitors.

Society picks up this cost in emergency room medical care anyway.

 
At 2:13 PM, Blogger Jerry said...

Well said, tom. I wonder if the authors of the study factored in such costs to society when they came up with the $16 billion figure?

(Well, I suppose I could read the study to find out, eh?)

 
At 2:23 PM, Blogger Alan Stewart Carl said...

In the editorial, they said the $16 billion outweighs social welfare costs spent on Wal-Mart employees. But I'm really unsure that you can quantify either number.

I think Wal-Mart could do more for their employees. But I think the problem is bigger than Wal-Mart. There are a lot of companies hiring low-skill workers for service jobs that pay little and have few if any benefits.

One solution I wish people would consider more is removing the burden of providing healthcare off of our nation's companies. Right now, we all pay a hidden healthcare tax in every thing we buy. Our salaries are depressed by it. And our taxes go in large heaping sums to pay for medicaid, hospital visits and so-forth. I have yet to be convinced that government provided healthcare is a good solution, but there's got to be a better way than the incredibly expensive and ineffeciant system in place now.

 
At 2:37 PM, Blogger Jody said...

I have yet to be convinced that government provided healthcare is a good solution, but there's got to be a better way than the incredibly expensive and ineffeciant system in place now.

Health Savings Accounts.

 
At 9:02 AM, Blogger Jerry said...

In the editorial, they said the $16 billion outweighs social welfare costs spent on Wal-Mart employees.

Just read that -- their take on it seems pretty "soft" to me. That is, the way they phrased things, it sounded like they just assumed the costs were lower, and didn't actually study it. Of course, they were on the Op-Ed page, thus very limited by space, so maybe this was just glossing.

In any case, I think you're right -- there are so many variables that any attempt to quantify either number is in vain.

Health Savings Accounts
It seems inherent in this name that only those who have extra money will have health care. What's the provision for those who don't make enough money to have savings?

 
At 10:39 AM, Blogger Jonathan C said...

Jody,

Health savings accounts seem are a good idea, but I fail to see how it would solve long term issues based on perscription costs, continuing end of life care, and catastrophic emergencies. Complicated surgeries run into the six figure range, and many elderly Americans need more than one during the course of the golden years. Not to mention, what will inflation do to those savings accounts? We just can't save that much on our own.

 
At 1:03 PM, Blogger Alan Stewart Carl said...

I'd have to agree with Jonathanon this one. While I certainly think health savings accounts can be part of the soultion they cannot be the whole solution, particcularly the lower down you go on the income chain. Still, health savings accounts are taking us in the right direction I think.

 
At 6:42 PM, Anonymous Anonymous said...

The op-ed was written by a paid consultant for Wal-Mart!

See: http://reclaimdemocracy.org/walmart/price_right_ken_mark.php

 
At 8:40 PM, Blogger flaime said...

But the goods sold at Wal-Mart aren't, in the long run, cheaper. They are of such poor quality that you wind up replacing them far more often than you would replace a well-made item of the same type.
For instance, I have purchased jeans at Wal-Mart. They wear out in a matter of months. I've never had a pair of jeans or a shirt purchased at Wal-Mart last more than a year. Similar clothing purchased at higher priced stores that offer higher quality, on the other hand, last for two, three, even 4 years. Heck, I've got Levi's jeans purchased before their quality was reduced to reduce to the Wal-Mart price that are as much as 10 years old. And they are just as good as the year I bought them.

 

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