Study Cites Social Costs of Wal-Mart

[IJ Reilly]

Company workers draw $86 million a year in aid, researchers say. But the retailer says it gives jobs to people who otherwise would not be employed.

By Abigail Goldman
Times Staff Writer

August 3, 2004

Inadequate wages and benefits force workers at Wal-Mart stores in California to seek $86 million a year in state aid, according to a report released Monday by the UC Berkeley Labor Center.

Moreover, if other retailers cut their wages and benefits to the levels offered by Wal-Mart Stores Inc., the cost to California's public-assistance programs would rise by $410 million annually, the study said.

In their report, Berkeley researchers Arindrajit Dube and Ken Jacobs contend that more than other retail workers, Wal-Mart employees rely on a variety of public-aid programs, including food stamps, Medicare and subsidized housing.

"In effect, Wal-Mart is shifting part of its labor costs onto the public," the researchers wrote. "Wal-Mart's long-term impact on compensation in the retail industry has the potential to place a significant strain on the state's already heavily burdened social safety net."

Bentonville, Ark.-based Wal-Mart, the world's largest retailer, maintains that it pays competitive wages and relieves public assistance burdens by giving jobs to many people who otherwise would not be employed.

"It's unfortunate that these UC Berkeley researchers would release a study whose findings are questionable," Wal-Mart spokeswoman Cynthia Lin said. The company employs more than 60,000 people in California.

The public debate about whether Wal-Mart benefits or hurts local communities has grown considerably louder over the last few years, particularly in California, where some communities have opposed the company's expansion plans.

The company's wage and benefit structure was also cited as a reason behind last year's strike and lockout of unionized grocery workers in Southern California; the largest supermarket chains said they needed to revamp costs to compete with the retail giant.

Dube and Jacobs' study took into account statewide data on wages paid by large retailers, the numbers of workers throughout the retail industry who use state assistance programs and information gleaned from lawsuits about Wal-Mart's pay and benefits.

Dube, of Berkeley's Institute of Industrial Relations, and Jacobs, of the school's Center for Labor Research and Education, said they did not contact Wal-Mart in preparing their report.

The report found that Wal-Mart's wages on average were 31% below those of the broader group of large retailers — $9.70 an hour versus $14.01 an hour.

And with less earning power, Wal-Mart workers rely more heavily on state resources, Dube and Jacobs found, costing the state $32 million in health-related expenses and $54 million in other assistance.

The study contends that the average non-management Wal-Mart employee receives $1,952 in public assistance compared with $1,401 for workers at large retailers in general.

"The disproportionate use by Wal-Mart workers of the various healthcare and social safety net programs, and the cost that that brings to the state, is an important consideration for policymakers," Jacobs said in an interview.

Dube and Jacobs noted that other studies have reported similar findings.

In Georgia, a state survey of the state's children's health insurance program found that Wal-Mart employees' families disproportionately relied on the program, accounting for more than 10,000 of the 166,000 children enrolled.

In Congress, a report by Democratic staffers on the House Committee on Education and the Workforce looked at employee eligibility for assistance programs and found that a typical 200-employee Wal-Mart store could cost federal taxpayers $420,750 a year, or more than $2,000 per employee.

Wal-Mart has disputed those findings.

http://www.latimes.com/business/la-fi-walmart3aug03,1,2797374.story

[LeeTom]

You don't need a weatherman to know which way the wind blows, but I'm glad people are doing the research.

Lee Tom

[zimv20]

minimum wage: $5.15
avg. wal-mart wages: $9.70

that's 88% more than minimum wage. i'm no fan of wal-mart, but as long as they're obliging by labor laws, what's the beef?

if $9.70/hr isn't enough to live on, why is the minimum wage where it is?

[blackfox]

If the social cost is extremely overweight people walking around in flip flops, I can't agree more! :)

Zim, I have to say minimum wage should be a local thing. Minimum wage is enough money to keep people from starving in many places. Sure you can't get a cool car, or a new computer on minimum wage, but you can keep employers from taking advantage of your poverty.

But minimum wage is not enough in almost any medium to large city. That is why I am for a lower minimum wage, and then local minimum wages that reflect the local economy.

I am not sure that a local municipal government would have enough leverage against a said company...after all, they could just move to the next town...I prefer the current system with a Federal min. wage that must be met by all states, and then various minimum wages on a state-by-state basis...for example the min. wage in Oregon is $7.05 (WA is $7.16 the highest in Nation)...and the state attempts to counteract any hesititation businesses may have about that by certain incentives and subsidies yadda...yadda...I think it would be too complicated on a large-scale level, although a multi-tiered system would work (like San Fran below)...

Zim, California's min. wage is $6.75 ($8.50 in San Fran), and I am not sure how they came up with the $9.70 figure, but depending, it seems a pretty easy number to reach with an averaging of a large workforce...plus, Cali has a pretty high cost-of-living....

[blackfox]

Actually states like Kansas and Ohio have lower minimum that the federal law. States like mine have non minimum wage law, so the federal law takes over.

Here is a link to minimum wage laws by state. (http://www.dol.gov/esa/minwage/america.htm)
haha...I was just their prior to my post...I guess that is what the red meant...my mistake...

[IJ Reilly]

minimum wage: $5.15
avg. wal-mart wages: $9.70

that's 88% more than minimum wage. i'm no fan of wal-mart, but as long as they're obliging by labor laws, what's the beef?

if $9.70/hr isn't enough to live on, why is the minimum wage where it is?

I think the point of the study is that Wal-Mart is driving down wages in their particular industry, which they are able to accomplish because the costs of doing so can be externalized.

[Thomas Veil]

Add this (http://www.jimhightower.com/air/read.asp?id=11434) to the mix, and you can see why Wal-Mart is becoming so emblematic of what's wrong with America:
Digging into scattered, often-hidden records of state and local governments, (Good Jobs First, a research center) found 244 cases of giveaways, including construction grants, special tax breaks, and job-training money. The average payout to a Wal-mart store was $2.8 million. Imagine being an independent pharmacy, hardware store, grocery or other shop and having to compete with a multibillion-dollar giant that is then handed an extra $2.8 million taxpaid advantage over you.

[Neserk]

Actually, CA min-wage higher than $5.15. It is $6 something and I believe is slated to go up.

$6.75 according to the red link. Indexed at $8.50 starting last Feb. (whatever indexed means).

[Leo Hubbard]

Adults with families and/or rents to pay should not work for minimum wage. High school kids who live with mommy should be making no more than minimum wage, unless they are really really good at whatever it is they do. Raising the minimum wage makes it harder for the kids to get jobs. Having a dual minimum wage based on age would backfire and accelerate age discrimination.

I know McDonalds here in Florida make 7 bucks an hour, which is much more than minimum wage. High school kids, generally, don't work for them, they can make more money mowing yards. So McDonalds is stuck highering adults at the higher pay rate. BTW Wal-mart also pays 7 bucks an hour to start which is no lower than anyone else pays. Plus they have vacation, medical, etc. Their medical sucks but their competition doesn't even offer that much. People pick on them because they are a big target and easy to pick on.

[Neserk]

I also think there should be differentiated pay for adults and minors.

The only problem with that is that then you have to put in laws that prevents companies from hiring too many minors and not enough adults.

Perhaps the real solution is more education (including vocational training) so that only minors and transitioning adults end up in minimum wage jobs ;)

Hmmm...

[pseudobrit]

I also think there should be differentiated pay for adults and minors.

All other things being equal, is an adult's work worth more than a minor's?

[IJ Reilly]

BTW Wal-mart also pays 7 bucks an hour to start which is no lower than anyone else pays. Plus they have vacation, medical, etc. Their medical sucks but their competition doesn't even offer that much. People pick on them because they are a big target and easy to pick on.

From the article:
The report found that Wal-Mart's wages on average were 31% below those of the broader group of large retailers — $9.70 an hour versus $14.01 an hour.


Yes, they get picked on because they're big, but also because their bigness allows them to get away with lowering industry payscales.

[Thomas Veil]

Anyone who thinks Wal-Mart is treating its employees well has never seen the Costco model (http://www.jimhightower.com/air/read.asp?id=11410).

How different is Costco? Starting pay is $10 an hour, workers typically earn $40,000-a-year after three years on the job, the company covers 92 percent of employees' health care costs, and the Teamsters union provides strong bargaining representation for the workers. Also, while CEOs at other major corporations average 531 times the pay of their lowest-paid employees, Costco's top boss takes only 10 times the pay of his typical rank & filer. His annual salary $350,000 – compared to some $5 million a year hauled off by Wal-Mart's honcho.

"From day one," says the chief financial officer at Costco, "we've run the company with the philosophy that if we pay better than average, provide a salary people can live on, have a positive environment and good benefits, we'll be able to hire better people, they'll stay longer and be more efficient." It works. Costco's turnover is minimal, its profits are consistently strong, and its stock price has quadrupled in 10 years.

[superbovine]

Add this (http://www.jimhightower.com/air/read.asp?id=11434) to the mix, and you can see why Wal-Mart is becoming so emblematic of what's wrong with America:

no one evers says how much tax dollars wal-mart actually brings into the community via sales tax. anyways, it not just walmart that get these kind of benefits. every community has tax incentives for businesses to setup shop in their town or city not just particular for walmart. its nothing new. Even people like CompUSA had talks between different cities to which one would have the better deal to setup their corporate office. if you don't like to your talk to your local goverment.

As to the fact that walmart hurts independent business, which kind of market enviroment would you rather live in? A free market gives us competetion and lower prices. The other alternative is unacceptable. The fact is the Wal-mart does give consumer lower prices, and price is king. Although if you would rather it the other way around, you can move to North Korea where they have 100% employment.

[IJ Reilly]

Although if you would rather it the other way around, you can move to North Korea where they have 100% employment.

That's a pretty binary view of the world, don't you think? Quite a few communities have made a point of restricting or prohibiting big box retailers like Wal-Mart because they don't want their local retailers to be gutted.

[blackfox]

no one evers says how much tax dollars wal-mart actually brings into the community via sales tax. anyways, it not just walmart that get these kind of benefits. every community has tax incentives for businesses to setup shop in their town or city not just particular for walmart. its nothing new. Even people like CompUSA had talks between different cities to which one would have the better deal to setup their corporate office. if you don't like to your talk to your local goverment.

As to the fact that walmart hurts independent business, which kind of market enviroment would you rather live in? A free market gives us competetion and lower prices. The other alternative is unacceptable. The fact is the Wal-mart does give consumer lower prices, and price is king. Although if you would rather it the other way around, you can move to North Korea where they have 100% employment.

Not really a rebuttal, but you just reminded me of something...

Although a free market implies freedom of choices in the marketplace, these choices are in very narrow fields. And, of course, it is by no means fair. I personally enjoy shopping at independent businesses, even if they are a little more expensive, because I like what they represent and the intangible contributions they give to the community. I do not expect everyone to feel this way, although I wish more did. Although largely by virtue of their volume, WM is able to give consumers lower prices, considerations not involving prices are often shoved out of the equation, affecting the way consumers judge the basic level of workmanship of the products they choose to buy or any consideration of the modes of production that brought it to the shelf.

The fact that a certain business model such as WM's is so successful has the net effect of crowding out other business models which are not solely based on the bottom-line. Perhaps this is competition in the marketplace and unavoidable. I do think, however, that the line needs to be drawn when an individual company, or worse a whole business model, acheives some of it's profit-margin by manipulation of the government or tax-payer funds to subsidize itself. This includes that quoted above about WM, and of the cajoling governments for tax-breaks and incentives not available to other, smaller businesses...while people talk of a "free" market, devoid of government interference and regulation, these activities are exactly those things, although the power has shifted to the businesses in question. The dynamics are roughly the same though...

No real point, I am just annoyed at the hypocrisy of many companies regarding the state or the government involvement. If it hurts their business model, they call foul, but if they can help themselves by it, then all the better...

[friarbayliff]

Besides, the kind of overcompetition that Wal-Mart breeds actually hurts too. Price may be king, but choice is also a factor. If all of the small businesses in a community die off, then choice no longer exists for the consumers. Through this, Wal-Mart can begin to take advantage of consumers.

[zimv20]

'fess up --- how many people here will order an item online after first seeing it in a local shop and/or using local store resources such as talking to an employee?

[blackfox]

'fess up --- how many people here will order an item online after first seeing it in a local shop and/or using local store resources such as talking to an employee?
Interesting point zim, but I have integrity on this issue.

My principles (or guilt), and my like of simplicity and traditional modes-of-purchase, make me buy something from a shop that actually exists, especially if the salesman/woman has been especially helpful. It seems to be only fair to reward a business for a job well-done. The price is often irrelevant or a minor consideration. I do shop around in various stores for price, but the impression I get from a business and it's employees matter most.

I do buy some things via the internet that I cannot find in local shops, although with regards to some items, if they fall under the auspices of a local business I particularily respect/like, I will just have them order it for me instead. I am also vaguely wary of security issues purchasing over the internet, although it is a minor consideration...

I feel that I am probably in the minority, though...

[zimv20]

I feel that I am probably in the minority, though...
you probably are.

i posed the question, but i'm guilty of "abusing" the microcenter in town. though i have dropped probably some $25k there (not all personal purchases, some are made on behalf of clients), i'll still play around w/ the macs then order one from apple.com.

regarding walmart -- i am not a fan of that company, though i do respect their ability to turn a profit. if they're operating w/in the law, but destroying (some aspects) of communities, how much of our anger should be directed their way? how much should be directed towards the officials in the communities who bring them in? how much should be directed towards the consumers who on one hand damn their practices, but on the other shop there because "price is king?"

fwiw, i've spent $0 at walmart.

[IJ Reilly]

I think we're getting far afield from the point of the study cited in the article. The fundamental question raised in my mind is whether a company like Wal-Mart should be able to become profitable at least in part by externalizing some of their costs of doing business onto the society at large. I'd analogize this to the manufacturer who's profitability relies on dumping toxic waste products onto a river.

[pseudobrit]

I think we're getting far afield from the point of the study cited in the article. The fundamental question raised in my mind is whether a company like Wal-Mart should be able to become profitable at least in part by externalizing some of their costs of doing business onto the society at large. I'd analogize this to the manufacturer who's profitability relies on dumping toxic waste products onto a river.

IOW, should we continue to subsidise their aggrandizement with taxpayer dollars and lowered standards of living?

[zimv20]

The fundamental question raised in my mind is whether a company like Wal-Mart should be able to become profitable at least in part by externalizing some of their costs of doing business onto the society at large.
it depends on how they're doing it. i don't have a problem w/ their low wages -- taken as a considering in and only of itself -- if those wages follow the law.


I'd analogize this to the manufacturer who's profitability relies on dumping toxic waste products onto a river.
is that legal?

[pseudobrit]

is that legal?

Only if there's no law against it. ;)

[zimv20]

Only if there's no law against it. ;)
why i oughta...

i see i'm going to have to learn how to skate :-)

[pseudobrit]

why i oughta...

i see i'm going to have to learn how to skate :-)

I have a game tonight. So you'll have to wait your turn. ;)

[IJ Reilly]

is that legal?

At one time, it certainly was. Poisoning the commons used to be seen as a perfectly acceptable way of making a living.

[zimv20]

At one time, it certainly was. Poisoning the commons used to be seen as a perfectly acceptable way of making a living.
i understand your point. at at some point, laws were passed to prevent this.

in the case of walmart, they are abiding by the current laws (afaik). if their legal practices are deemed unfair, i again ask who should be the target of this negative attention. shouldn't we be leaning on legislators to change the laws, or the walmart customers who support a business that destroys their communities? or the city councilmen who approved the building permit in the first place?

about that last point -- chicago recently granted permission for WM to build its first chicago store, in a poorer, economically neighborhood on the west side. this permission was granted against the wishes of the community.

WM promises jobs, the community fears for its identity. who's to blame?

[IJ Reilly]

I'm not speaking legalistically, or even placing blame. Before laws were created to protect the commons, the public had to come to understand that the existing system of environmental exploitation wasn't sustainable. Similarly, I predict eventually we're going to have to reckon with the public costs of driving wages down to the point where a large and growing segment can't provide themselves with the basics of living, let alone upward mobility. Based on what I'm hearing in studies of this kind, I'm guessing that the Wal-Mart model is no more sustainable than it was to use the rivers as open sewers.

[zimv20]

I'm not speaking legalistically, or even placing blame. Before laws were created to protect the commons, the public had to come to understand that the existing system of environmental exploitation wasn't sustainable. Similarly, I predict eventually we're going to have to reckon with the public costs of driving wages down to the point where a large and growing segment can't provide themselves with the basics of living, let alone upward mobility. Based on what I'm hearing in studies of this kind, I'm guessing that the Wal-Mart model is no more sustainable than it was to use the rivers as open sewers.
so you know, i'm basically agreeing w/ you.

there is something fundamentally wrong w/ people working above minimum wage requiring and getting social welfare. i don't think black and white fixes such as raising the minimum wage or cutting social welfare is going to fix that.

i have no simple answers, but imo the erosion of the middle class is a symptom.

[IJ Reilly]

so you know, i'm basically agreeing w/ you.

there is something fundamentally wrong w/ people working above minimum wage requiring and getting social welfare. i don't think black and white fixes such as raising the minimum wage or cutting social welfare is going to fix that.

i have no simple answers, but imo the erosion of the middle class is a symptom.

I thought you might be, but you managed to tease out my real set of concerns by your questioning. I'm always one for trying to figure out the question before attempting to suggest an answer.

[mactastic]

The whole structure of how cities build and expand needs to be fundamentally reexamined. Big box stores bring in big box tax revenues to the city. Housing for those below the median income level does not. Similarly, the strain on the local police, fire dept, EMT's etc. is lower with a Wal-Mart or a Home Depot on a 10 acre parcel than the alternative 60 or more homes with families in them. Where do the below-median earners go? To the suburbs. Or the suburbs of suburbs. More gas used, more congestion, and lost time on the freeway; and all to get back to the place they work but can't afford to live in.

Like most forms of government, city and county officials are just as interested in the perks of their jobs as the big boys, and so they can't resist the appeal of the tax dollars in the city coffers.

[poopyhead]

minimum wage: $5.15
avg. wal-mart wages: $9.70

that's 88% more than minimum wage. i'm no fan of wal-mart, but as long as they're obliging by labor laws, what's the beef?

if $9.70/hr isn't enough to live on, why is the minimum wage where it is?

This is an average wage
I worked for walmart (only 2 weeks) and for sams club (3 years) a walmart company
the cashiers and floor people at walmart most likely make no where near this amount while supervisors and especially managers are well compensated
during college i went from making $12 an hour at sams club, i admittedly made more than most, to making $5.15 an hour at walmart (the reason why I quit)
at sams club normal workers made on average $20000 a year while management made between $80000 and $140000 a year plus extensive benefits and bonuses
walmart's wage slaves made much less than comparable sams club employees and managers at walmart were compensated more than managers at sams club due in part the much higher profit margins created by underpayment of workers
walmart hires primarily the poor and unemployabe and strives to keep their workers poor and dependent on the company, even mention unions and theyll fire you

[zimv20]

even mention unions and theyll fire you
afaik, that's illegal. can anyone confirm?

[poopyhead]

afaik, that's illegal. can anyone confirm?

when i was hired at both walmart and at sams club i had to sign a statement against unionization (georgia is a right to work state)
walmart more than anything fears the grocery union and makes all new hires watch at least 2 videos as part of orientation one condemning unions as a whole the other condemning the grocery union
at the time i worked at walmart in early 2000 there was an ongoing battle between walmart and the grocery union

P.S.
I have been black balled so to speak from ever working at a walmart company again because I spoke up for illegal mexican workers at sams club
while i made 12 dollars an hour in the tire shop my mexican friends made 8-10 and were required to work overtime for which they were never paid and were too afraid to dispute
when i confronted the manager over my department i was quickly taken in to a back office where alex smiled and nodded often but said nothing
shortly there after i quit so as to go back to school
within 1 month all mexican workers had been fired
supposedly, according to one of my friends who stayed, for "loss prevention " reasons
i found this to be strange wording because loss prevention in walmart speak is different from shrink (financial loss due to employee theft) leading me to think that their demanding payment lead to their being fired

[zimv20]

when i was hired at both walmart and at sams club i had to sign a statement against unionization (georgia is a right to work state)
walmart more than anything fears the grocery union and makes all new hires watch at least 2 videos as part of orientation one condemning unions as a whole the other condemning the grocery union
at the time i worked at walmart in early 2000 there was an ongoing battle between walmart and the grocery union
fascinating. thanks for the info.

[pseudobrit]

I have been black balled so to speak from ever working at a walmart company again because I spoke up for illegal mexican workers at sams club

Good for you! You know, this is a fairly widespread practice amongst low-end employers (hotel, retail).

Michael Moore did a bit on it for The Awful Truth. Some illegal immigrant workers tried to unionize and the hotel called INS on them. The hotel was in violation of labor laws; it's illegal to retaliate against employees for organising, but their only fines (IIRC) came about because Moore hired another city's code and fire inspectors and found dozens of health and fire violations at the hotels. After Moore raised a stink, the state disciplined the chain, and did not deport the workers.

Maddox (http://maddox.xmission.com/c.cgi?u=walmart) had a good bit about how people direct their anger at illegal immigrants but it's WalMart hiring them (knowing about their status) that breaks the law doubly and encourages illegal immigration:

saying that an illegal immigrant doesn't deserve to be paid the same wages as an American because he doesn't belong here in the first place is like saying that a person trapped in a well shouldn't be saved because he shouldn't have been playing around the well in the first place...

Don't want to pay them full wages? Then don't hire them. If they do equal work, then they deserve equal pay. It's just that simple, and I'm not going to sit back like every other racist piece of **** bitching about having to work harder because there's a little competition for my job, immigrant or otherwise.