"Whenever I go into a restaurant, I order both a chicken and an egg to see which comes first"

Thursday, July 26, 2012

Walmart Is Good For You

Walmart does what American consumers want – provide quality goods at rock-bottom prices.  This enables people at the lower end of the economic scale to free disposable income for other expenditures such as health, child care, and education.  Despite ill-placed community opposition to Walmart expansion into underserved, poor urban areas, these new stores will be a boon to residents who have always been hostage to overpriced small businesses which, in order to stay in business, operate on the margins – passé food, products near their pull-by dates, and low-nutrition staples with high profit margins.

There is no doubt that these small enterprises will suffer when Walmart enters a neighborhood, but such has been the way of small business for 100 years. The recent example of Eastern Europe is relevant.  Right after the fall of the Soviet Union, kiosks sprang up on street corners in Bucharest, Sofia, and Tbilisi.  They offered a potpourri of items – a bottle of whisky, hairpins, and a few ballpoints.  As incomes rose and demand grew, these kiosks were replaced by small stores which offered a greater selection at a better price.  Eventually these small stores gave way to mini-marts and super-mini-marts which offered even greater selection at lower prices.  Even France, despite untenable subsidies to support small business, has gone the way of the countries around it and supermarkets are in every neighborhood.

Walmart-bashing has been going on for years, despite the company’s reforms.  While it has been attacked for eliminating health care benefits for part-time workers, it maintains a reasonable plan for full-time workers.  While many businesses have taken this step, it is: a) good and common business practice to reduce costs where possible, especially in a recession; and b) the problem is with the American health care system, or lack of it.  If we had universal health coverage to which all Americans contributed and from which all benefitted, the cost to individual businesses – now staggeringly high – would be reduced.  Employees of all categories would benefit and the companies would be more competitive with European firms which are covered by the state.

Part-time workers, far from the exploited masses as they are often described, fall into the ‘involuntary” (work part-time for economic reasons) and ‘voluntary’ (work for avocation, supplement family income, students, etc.).  According to the latest Bureau of Labor Statistics Report (http://bls.gov/news.release/empsit.t08.htm) the number of voluntary part-time workers is over twice that of involuntary workers.

Part-time work is beneficial to both employer and employee.  The employer can hire at low-cost and retain the flexibility to staff up or down depending on the economy and the market.  The part-time employee benefits because he/she can get some kind of employment in a down market, gain experience, and work-related credibility.

Walmart has also been criticized for its low wages, often very little above minimum wage; but it is not alone among businesses trying to cut costs, increase sales, and maximize profits.  Why should Walmart pay employees more than the market demands?  It benefits hundreds of thousands of low-skilled workers who could not get a job elsewhere.  Moreover, despite the immigration hysteria, Latino immigrants like their European counterparts before them work at low-paying jobs where English and urban-type skills are not required, and within a generation speak English, acquire education, and are more employable.  Is economic mobility as fast as can be hoped.  No, but this has more to do with the deficient public educational system, a broken health care system that forces unfair out-of-pocket expenses, and an insatiable consumer demand for cheap products which forces companies to pay low wages. 

In other words, Walmart will rely more on well-paid workers when illegal immigrants return to Mexico (which they are now doing because of the rapid growth rate of that country and the poor economic performance here), when health care no longer becomes a burden, and when disciplined, efficient, and high-productivity workers are the norm not the exception. 

The Guardian article picks on Walmart for yet another reason – abusive practices in the supply chain.  While the customer sees only huge stores with cheap goods, Walmart management sees the supply chain.  It must scour the market for goods at the lowest price at the highest quality; ship them from manufacturer to the consumer in the fastest and cheapest way possible; manage inventory and cash flow as efficiently as possible; and tune labor and capital to a delicate balance.  Of course truckers and warehouse employees are also paid low wages for long hours, but they are subject to the same laws of the marketplace as Walmart – they have turned their backs on corrupt unions and demanded open shops, thus losing the strong-arm protection that they once had; and they are subject to the same vagaries of the marketplace as anyone else. Juan De Lara writing in the Guardian http://www.guardian.co.uk/commentisfree/2012/jul/25/walmart-human-cost-low-price-goods laments:

Reports from warehouse workers and truck drivers in places like Chicago and southern California show how the ruthless pursuit of low-cost goods has also created a downward spiral for workers who distribute consumer goods in the United States.

The ‘reports’, or one article from The American Prospect, has no solutions other than mass protests, community sensitization, government intervention.  The truckers who operate under the same conditions as Walmart employees with low wages and minimal benefits are being exploited; and since everything else has failed and the government has not come running to the rescue, the only way to rectify the situation is to resort to old-style union activism:

For now, however, Change to Win's strategy is to enlist the entire community of warehouse workers, perms and temps both, on the theory that a significant disruption of the retailers' supply chains will compel them to come to terms, whatever the workers' classification. It's an all-or-nothing campaign. "You have to build a campaign like the janitors had, that gets and enforces a communitywide contract. We'd want a $15 hourly minimum with health benefits," says Tom Woodruff, who heads the federation's organizing center in Washington, D.C. "You'd have to organize it all -- the whole industry out there. Of course, you'd have to be half crazy to do it." http://prospect.org/article/shipping-point

This of course will never work.  Even if the truckers could be organized in a way that even approximated by a tenth the organization of Jimmy Hoffa, today’s consuming public would never stand for ‘significant disruption of the retailers’ supply chains’. 

What is amazing to me is that with the level of imports flowing into this country, swelling our trade deficit by the hour, these truckers are still working for low wages.  That is, Walmart and their customers depend on, rely on the movement of freight.  Who is responsible for the current shift in balance of power from labor to management?  Is it the ‘predatory’ practices of businesses alone? Or do labor and the American consumer share in the cast of the phenomenon? 

Walmart, Nike, Apple and other big multinational corporations have been unfairly attacked for what have been called ‘substandard’ labor practices in China and other countries in Asia.  It is the governments of these countries – and, by the way, China is a big boy now – who set these standards and must balance workers rights and benefits against the rigors of international competition.  If China doesn’t offer Nike a good deal, the company will go to Indonesia.  If the standards are lower there, whose fault is that?

The third force in this calculus is the American consumer.  Successful marketing campaigns have been developed to shame Nike, Apple, and others into assuring ‘fair, just, sustainable’ products, and they have renegotiated contracts with their suppliers and subcontractors to accommodate this concern. Walmart has been somewhat immune from this lobbying because of two factors – first, it subcontracts with tens of thousands of suppliers all over the globe.  Even the best-meaning social activist cannot possibly track labor conditions in all of these.  Second, brands like Apple and Nike are high-end product manufacturers.  If I am paying $200 for a sneaker, then I want to be sure it is produced properly and I don’t mind paying a few cents more.  Walmart is just the opposite – it offers thousands of low-cost products and makes its profit through volume.  In other words a moving target on two fronts.  So it continues to negotiate legal contracts in countries who alone are responsible for the welfare of their workers.

The Guardian article argues against itself in the following passage but inadvertently raises an important point:

Consuming mountains of cheap goods has also produced huge environmental costs, particularly for poor communities located close to distribution hubs. According to the California Air Resources Board, an estimated 3,700 Californians die every year because of medical issues related to the diesel ships, trucks and trains that deliver the goods we consume.

Which way do you want it? Truckers working at higher wages because of increased volume of traffic, belching tons of pollutants into the air? Or depressed demand, lower wages, cleaner environment?

The inadvertent point is that the American consumer, often thought of as the innocent receiver/purchaser of goods, is in fact the prime culprit in environmental pollution and low wages.  We want a kaleidoscopic array of products; and we want continual upgrades, novelty, and change.  We want all this as cheaply as possible, so we support the federal subsidies which keep water cheap, roads and gasoline cheap, energy cheap.  We don’t really care about low-wage workers – at least those of us in Washington or other corridors of power – and want what the consumer wants…And, of course, the shareholder.

The Guardian writer concludes with the most idealistic, pie-in-the-sky, faded ‘Progressive’ litany of idle hopes I have seen in an otherwise serious newspaper:

All of this proves that our seemingly individual and private decisions to buy cheap products can generate huge social costs. But history tells us that blue-collar warehouse work doesn't have to mean poverty wages and bad working conditions. In fact, workers have often turned blue-collar jobs into decent employment by organizing for safe conditions and fair pay. As consumers, we can help these efforts by demanding that Walmart and other retailers adopt ethical labor and environmental standards, for both foreign suppliers and domestic distribution workers. Walmart certainly isn't the only company to employ poor hiring practices, but its massive global reach and sophisticated distribution innovations have made it a powerful force in the global goods movement industry.

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