A Wal-Mart Economy

Before Wal-mart, the trend in the American workplace was to internalize the cost of doing business. American companies tried to compete with everything from higher wages, to better health care benefits, to limiting the work-week to 40 hours. In its ruthless pursuit of cheaper products, Wal-mart has reversed the trend, by externalizes its costs anyway it can. These costs are first explicit in nature, by receiving tax breaks to operate in some cities or the tax dollars that Wal-mart employees utilize for health care/public assistance. The costs are implicit as well; these big box stores destroy local economies, are known as a bad neighbor and are also harmful to the environment.

When General Motors was at the top of its game, it operated in a comparatively gentle, competition-free environment. It could afford to be generous. Today, the Big Three show what happens when a company continually raises benefits while failing to grow. Blaming Wal-Mart for America's wage stagnation is unfair. Retail is an industry not known for developing employee skills. No matter how much it needs workers, Wal-Mart won't offer defined benefit pension plans or health insurance coverage for retirees. And neither will virtually any retailer that relies largely on low-skilled, temporary workers.

The problems with Wal-Mart begin with its supply chain, where many of the workers who make its products pay the price for low-cost items by laboring in sweatshop conditions. Wal-Mart has been in the courtroom many times defending its labor standards in many different countries; they all allege the same thingвЂ"that Wal-Mart ignores its own “standards for suppliers” and tolerates abuse of workers in its supply chain. “As the world’s largest retailer, Wal-Mart has the power to set higher [labor] standards within the industry,” says Maquila Solidarity Network president Ian Thompson. “Instead, it continuously pressures its suppliers to produce cheaper and quicker, encouraging sweatshop abuses.”

These conditions are brought about by the enormous pressure Wal-Mart has put on their suppliers. Their sheer size enables them to negotiate whatever they want. Suppliers rarely dare to request a price increase, and they are very conservative when giving price quotes to Wal-Mart. To lose Wal-Mart as a customer can mean the end of business for many suppliers. It’s hard to combat this downfall when Wal-Mart has so much buying power-- countries send government officials to Bentonville, Arkansas to lobby for production in their country.

The low wages and poor work conditions of Wal-Marts suppliers are mirrored in the Mal-Mart retail stores as well. The majority of Wal-Mart associates make wages that place them below the poverty line for a family of four. A study conducted by the University of CaliforniaвЂ"Berkeley found that from 1992 to 2000, the total earnings of US urban workers in the general merchandise and grocery sectors were reduced by 1.3 percent after Wal-Mart opened stores in their areas. In 2000 alone, studies estimated that Wal-Mart depressed total earnings of retail workers nationwide by $4.7 billion. Wal-Mart also spends $2000 less per employee on average for health care, than its competitors. High premiums and limits on eligibility leads to fewer than half of Wal-Mart workers are insured under the company plan. Full-time, non-management Wal-Mart employees must wait six months to become eligible for the company health plan, and part-time workers must wait two years. Compare this to an average 2.5-month wait for retail companies as a whole. Once Wal-Mart employees are eligible, they decline the plan because they are unable to afford premiums and deductibles. Wal-Mart doesn’t stop at low wages and in adequate benefits; workers in more than 30 states have sued Wal-Mart for not paying overtime wages. A California jury ordered Wal-Mart to pay $172 million to 116,000 of its employees who had been illegally and routinely denied meal breaks. “Lawsuits are pending in six states accusing Wal-Mart of forcing employees to work off the clock, to work without breaks,” states a 2005 report by the nonprofit American Rights at Work.

These low prices that Wal-Mart continually strives for is absorbed by taxpayers вЂ?footing the bill’. When these aforementioned workers can’t afford their health plan the costs will shift from the employer and employee onto the taxpayers. For example, in Georgia, Wal-Mart employees cost taxpayers an estimated $6.6 million in 2002, with nearly 10,000 children of Wal-Mart employees enrolled in the state’s “PeachCare” programвЂ"ten times more than from any other employer. In Wisconsin, the bill for Wal-Mart employees depending on “BadgerCare” ran to $4.75 million in 2004, and the Knoxville News-Sentinal reported in 2005 that 25 percent of all Tennessee Wal-Mart employees were enrolled in “TennCare.” Federal taxpayers spend an average of $420,750 for each 200-person Wal-Mart store because many of its employees receive Section 8 housing assistance, low-income tax credit, low-income energy assistance, free or reduced school lunches, food stamps, and other assistance, according to a study by the Democratic Staff of the House Committee on Education and the Workforce.

Wal-mart is known to destroy local economies when they come to town. “Wal-Mart