Editore"s Note
Tilting at Windmills

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September 30, 2007
By: Kevin Drum

WAL-MART....Megan McArdle applauds Wal-Mart's low prices on generic prescription drugs, and then adds this:

At the same time, they take a huge beating for the wages they pay their workers, and the alleged stinginess of their health care plans. But these two things are flip sides of the same coin: they can afford to provide cheap drugs in part because they have a flexible and inexpensive labor force.

It's the "in part" that critical here. Labor expenses only amount to about 10% of revenues for Wal-Mart. If you increased the pay of every single clerk, greeter, and stocker in the chain by two or three bucks an hour, it would only increase Wal-Mart's prices by about 2%. Their prices would still be the lowest around because it's not labor costs that account for most of their efficiency. It's world class logistics, aggressive offshoring, enormous sales volumes, and ruthless bargaining with suppliers that accounts for most of it.

If Wal-Mart had to offer low wages and lousy benefits just to stay in business, that would be one thing. But they don't. We should expect them to do better.

Kevin Drum 1:24 PM Permalink | Trackbacks | Comments (71)

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Comments

They don't have to offer crappy wages - but they like doing it.

Posted by: craigie on September 30, 2007 at 2:50 PM | PERMALINK

Kevin, Kevin, Kevin...in today's labor market you screw people just because you can. It lets them know who's in charge. It's called The Spite Theory of Management.

Posted by: jimbo on September 30, 2007 at 3:04 PM | PERMALINK

The stinginess is a result of Sam Walton's Scrooge-like personal philosophy. And that mentality has been further ingrained into the corporate culture since his death.

Posted by: keptsimple on September 30, 2007 at 3:05 PM | PERMALINK

Even at $4 a pop, Wal-Mart is still making a profit off those generics.

Posted by: Lux on September 30, 2007 at 3:05 PM | PERMALINK

Kevin, your response is full of fallacies, but I'll give 4 reasons off the top of my head why it's completely wrong-headed.
1. What is important is not wages as a percent of revenue but wages as a percent of the cost of running the business. You are wrong from the get go.
2. According to the Seattle Post at seattlepi.nwsource.com/opinion/wage.shtml "Labor costs account for approximately 20 percent to 25 percent of the total operating costs." So your 10 percent figure is incorrect.
3. A 2 to 3 dollar raise would be far more than a 2 percent increase. The average wage at Walmart is around 7 dollears an hour. Since labor costs is about 25% of costs and 2 to 3 dollars is around a one-third increase in wages, this would mean it's actually closer to an 8 percent increase in cost for Walmart.
4. Liberals would also want to require Walmart to provide free health care to employees driving up the cost of employees much more. In reality the labor laws you want to require of Walmart would drive up the cost of labor probably 15%. This would devastate Walmart and probably drive it out of business.

Posted by: Al on September 30, 2007 at 3:10 PM | PERMALINK

Well Kevin, thanks for explaining that. I see that argument again and again. I'm going to have to save the permalink of this post on a notepad file or something. You should send it around to journalists and whatnot.

Posted by: Swan on September 30, 2007 at 3:12 PM | PERMALINK

Are Al's figures for the costs of labor to be pure wages, or are they also figuring in benefits, the costs of those nifty uniforms and other numbers besides wages? If it's not the latter, then his figure about how much the $2 increase in hourly wage would inflate costs is very wrong.

Posted by: Swan on September 30, 2007 at 3:15 PM | PERMALINK

Megan drives me nuts with her misunderstanding of economics. I know plenty of sharp cookies who went to U of Chicago business school, but Megan just doesn't seem to get (sometimes) basic facts, particularly about quantitative relationships.

See the whole 'white roofs to reduce global warming' debate, where twice on her blog she showed she didn't understand the basic calculation. Yet she kept repeating the mistake (Mark Kleiman at least had the guts to fix it).

WalMart has low labour costs because it is superbly efficient in its supply chain, and has very high sales per employee.

A 10% increase in costs per employee to provide good healthcare would not cripple WalMart. Employment costs are a relatively low %age of sales (but I'm not sure they are as low as 10%).

However WalMart is cost-obsessed, so it will only do that kicking and screaming. that's what unions are for: no capitalist is in a hurry to raise his cost base (employers of skilled labour, who are competing against other employers of skilled labour, do do this, because they have to. But WalMart doesn't find it hard to hire employees. But I bet its white collar workers have good health plans).

Posted by: Valuethinker on September 30, 2007 at 3:16 PM | PERMALINK

They aren't selling the drugs at a loss, just not at the unbelievable markups mainstream pharmacies get away with. Wal-Mart still makes good money off of their generic-brand drugs.

Posted by: fumphis on September 30, 2007 at 3:41 PM | PERMALINK

If the workers have better options outside of Walmart, they should take them. Walmart is compliant with all wages laws by paying the workers what they do-in a free society, they should not be required to pay their workers any more than they want to.
also, if i remember correctly, the head of Walmart supports universal healthcare-it will screw small businesses much more than it screws walmart, cost-wise.

Posted by: jamie on September 30, 2007 at 3:42 PM | PERMALINK

Well, Al (or at least this weeks "Al") has demonstrated his lack of reasoning ability.

Wal-Mart pays what it needs to to attract the relatively low-skill labor it needs. Interestingly, Target pays almost identical wages, but because it is not quite as large and crappy-seeming as Wal-Mart, never seems to be the target of these complaints.

I cannot see Wal-Mart volunteering greater-than-market wages for retail workers, so resolution of the issue is likely to be dependent upon two factors:

1. Universal health care will remove medical costs from the employer: by removing one of the largest "costs of living," the effect of this will be substantially progressive.

2. Unionization of retail workers has decreaased substantially over the last 30 years. I hope that one of the benefits of the Democratic era we seem about to embark upon is an increase in incentives to unionization for those at the bottom of the wage/skill ladder.

I am quite impressed with what Wal-Mart is doing: it claims that 40% of all its prescriptions may be fulfilled by its $4 generics. It is about time that some competition enter the pharmaceutical marketplace.

Posted by: Osama Von Mcintyre on September 30, 2007 at 3:46 PM | PERMALINK

Enormous sales volume and ruthless bargaining with suppliers is what's up here.

And, though not technically a loss leader, it functions as such as another bid, at Superstores, to get shoppers from Kroger, Albertsons, all the various Safeway group stores, etc. to come to Wally World.

Oh, Al, you're wrong. As a national healthcare plan would apply to all retailers equally, it would affect WallyWorld just the same as everybody else.

And, Kevin's calculations are all based on the percentage of revenue starting point, so they're correct.

Guess this wasn't one of the two times in 24 hours for your stopped brain to be correct.

Do, do come back and try again later.

Posted by: SocraticGadfly on September 30, 2007 at 3:46 PM | PERMALINK

But a 2% increase in labor costs would end up taken food out of the mouths of the children of the investor class. You don't want starving babies, do you?

Posted by: Disputo on September 30, 2007 at 3:47 PM | PERMALINK

Wal-Mart: Because the American way means, If you can get the drugs you need to live, someone else has to suffer!

Sheeeeeeeeit.

Posted by: Laurel on September 30, 2007 at 3:58 PM | PERMALINK

they can afford to provide cheap drugs in part because they have a flexible and inexpensive labor force.

Um, no...They can do it because they have created a monopsony. Sheesh. Even an econ illiterate like me knows that...

Posted by: Blue Girl, Red State (aka G.C.) on September 30, 2007 at 4:06 PM | PERMALINK

Kevin is not talking about a 2% increase in pay. He is talking about 30%-40% increase for the clerk/labor force. From $7 to $9 or $10.
But at the gross sales line this would be about 2% based on a 10% of sales labor payroll cost. WalMart can afford this.

I wonder how much of a $3.00 pay increase would go right back into WalMArt's coffers. As the employee's spend a significant part of their money in the store anyway. Pay them more and they will spend more at work.

Posted by: joeis on September 30, 2007 at 4:07 PM | PERMALINK

they can afford to provide cheap drugs in part because they have a flexible and inexpensive labor force.

And cotton was cheap because we made enslaved Africans pick it.

The Atlantic would be cheaper if they stopped paying Megan.

Posted by: August J. Pollak on September 30, 2007 at 4:24 PM | PERMALINK

It's world class logistics, aggressive offshoring, enormous sales volumes, and ruthless bargaining with suppliers that account for most of it.

Thus, of course, forcing its suppliers to lower or surpress their labor costs.

Posted by: Martin on September 30, 2007 at 4:25 PM | PERMALINK

This is gong to sound like a defense of Wal Mart-it's not. But: they got to the place where they have this kind of leverage and economy of scale in large part by keeping labor costs low/on the backs of their lowest paid employees. They could afford to fix that now, and they should. but they're not going to on their own.

Posted by: URK on September 30, 2007 at 4:30 PM | PERMALINK

Wait a minute.....just what do you think the goal of "aggressive offshoring" and "ruthless bargaining with suppliers" is supposed to be?

Aggressive offshoring means looking for the lowest possible wage levels from suppliers. "Ruthless bargaining" is aimed at driving down costs charged by suppliers and that inevitably translates to suppliers squeezing their labor rates or ironically....ruthless offshoring themselves. Tis a vicious cycle, but the end game is always the same.....low wages, long hours and no unions.

Posted by: dweb on September 30, 2007 at 4:48 PM | PERMALINK

1. It is a misperception to believe that Wally World has become profitable by providing so many wonderfully priced products to its consumers. Sam never pretended to be about providing bargains. Instead, he developed a bait and switch program to lead people into believing that they were really receiving bargains. Wally World does provide a very low quality/feature good at the beginning of each product section (usually on the endcap.) The prices are very good for this product. However, most people need more feature or understand the quality trade off. However, they believe all the products are priced in the same manner. Studies have shown that in excess of 80% of the products are at or slightly above locally prevailing pricing. These nondiscounted items provide the bulk of sales as well.

2. Wally World can afford to provide its loss leaders because of the market power that it has for many of its suppliers. They are continually forced to cut pricing (note, it will not necessarily mean they can cut costs)with unfortunate results for many suppliers as well as the US work force. The benefit of its oligopolistic behavior just moves more profits to its bottom line and not to the consumers pocket.

3. Labor costs are just another means of lowering costs while increasing profits without a similar benefit to consumers.

Posted by: JMOHR on September 30, 2007 at 4:53 PM | PERMALINK

If the poor do without medicine so McArdle can screw without fear of unwanted pregnancy, what's not to love?

Posted by: An Randy on September 30, 2007 at 4:56 PM | PERMALINK

Henry Ford paid his workers more in 1914. The WSJ went ape, arguing philosophically, as is their wont today, against it. But "The move proved extremely profitable; instead of constant turnover of employees, the best mechanics in Detroit flocked to Ford, bringing in their human capital and expertise, raising productivity, and lowering training costs."

Pity Wal-Mart does not have any business giants to do the analysis and make the decision.

Posted by: Bob M on September 30, 2007 at 4:57 PM | PERMALINK

Throwing out labor costs as a percentage of revenue without other context is not an honest way of discussing the issue. I work in retail - not Walmart - and I can tell you that the margins are relatively small - 10 - 20%. So for every $1mil in revenue you are talking about $100k - $200k in profit. I agree that retail workers should be paid more - but it is dishonest to make it sound like you could give everyone an across the board $3 per hour raise and not have a significant affect on profits. In my opinion the issue is whether corporations serve only their shareholders or if we should require a duty to other stakeholders - such as employees.

Posted by: jane on September 30, 2007 at 5:00 PM | PERMALINK

"ruthless bargaining with suppliers"

have been supplying the discount stores for 25 years and they are far from the most ruthless negotiators.

Demanding - yes. but they are pretty fair.

Posted by: jharp on September 30, 2007 at 5:01 PM | PERMALINK

Good post, Kevin. Paying decent wages doesn't put companies out of business.

In addition, your post makes me wonder what prices a non-profit giant like the US government--with its enormous potential sales volume--could get from the drug companies if it could bargain for lower priced drugs.

Posted by: PTate (back in MN, sigh) on September 30, 2007 at 5:26 PM | PERMALINK

PTate (back in MN, sigh): your post makes me wonder what prices a non-profit giant like the US government--with its enormous potential sales volume--could get from the drug companies if it could bargain for lower priced drugs.

Since you're back in MN, you need look no further than the country slightly north of you.

Posted by: alex on September 30, 2007 at 5:30 PM | PERMALINK

I can tell you that the margins are relatively small - 10 - 20%.

10% to 20% profit margin is small?

Please, tell me where I can put my money to get such a small ROR.

Posted by: Disputo on September 30, 2007 at 5:33 PM | PERMALINK

For great anti-Wal-Mart satire: www.waldemartwatch.com

Posted by: Andrew Slack on September 30, 2007 at 5:55 PM | PERMALINK

I question your figures, Kevin, but I can't reliably dispute them because I don't have the figures.

Everybody has always loved to hate the 800 pound gorilla. Wal Mart comes along to become the 1000 pounder, so people scream even louder about them.

The nearest local Wal Mart opened here about 12 years ago & have never had jobs go begging. Most of the people I know of who went to work there from other retail jobs went there because of better wages & benefits. I find their everyday prices for items I use often to be the lowest across the board. The stores that do offer better wage/benefits packages charge more for their merchandise. At my standard of living, I can't afford to support their lifestyles.

They have a winning business model for the times, which sucks because it destroys so much of their locally owned competition. I dread to see what will happen to their prices & wages if that competition disappears.

I also wonder just how many people on here know what Wal Mart pays its floor employees? The poster who mentioned $7/hr.? I bet your estimate is way low since they were paying that 10 years ago locally. Btw, our minimum wage in Florida will exceed $7 by the first of the year, & it is higher in several other states. Fifteen years ago, when I was thinking of going to work at Sam's Club, their start pay was $8. It would be interesting to know exactly what we are all hollering about, wouldn't it?

Posted by: bob in fl on September 30, 2007 at 6:51 PM | PERMALINK

Disputo, isn't profit margin usually the diference between the cost of goods and the sales price? After deducting operating expenses, I bet their net profit is in the single digits. I think a business like Walmart probably counts on turning its inventory many times per year in order to survive on the narrow profit margin.

Posted by: AK Liberal on September 30, 2007 at 7:03 PM | PERMALINK

I suppose pointing out that nearly any other retailer sells cheap generic drugs as well is a bit late...

Yes, much hurrah for communities that don't have access to any other pharmacy because Wal-Mart is so efficient that they allow their pharmacists to refuse to fill prescriptions.

PS: Bob in fl is parroting a Wal-Mart fan-note... That's not original content.

Posted by: Crissa on September 30, 2007 at 7:20 PM | PERMALINK

PS: Bob in fl is parroting a Wal-Mart fan-note... That's not original content.

No kidding. That's some pathetic work you turned in, bob.

Posted by: shortstop on September 30, 2007 at 7:29 PM | PERMALINK

That's the truth about the "ruthless bargaining with suppliers." I've had a few experiences with them, and learned the best thing to do with them is to walk away. You sleep better that way.

Posted by: JJF on September 30, 2007 at 7:30 PM | PERMALINK

Disputo, isn't profit margin usually the diference between the cost of goods and the sales price?

Hold it! What you describe above is gross margin, much different than profit, which is what's left after the cost of goods, payroll, rent, utilities, advertising, and every other business expense is deducted from revenues. If gross margin were profit, pigs could fly.

I work in retail - not Walmart - and I can tell you that the margins are relatively small - 10 - 20%. So for every $1mil in revenue you are talking about $100k - $200k in profit.

Boy, I wish. I own a retail business and if we get a profit of 3%, we're breaking out the champagne. I don't know where you get the 10% - 20% profit figure, that sounds like a fantasy business. If retail were that profitable, no store would ever go out of business. Wal-Mart makes lots of profit on sales volume, not on margin.

And Kevin, the off-shoring and ruthless pressure on suppliers you seem to admire has widespread negative consequences to people the world over. There's more to Wal-Mart than low prices for consumers and low wages to workers; the back end of their business practices is equally unlovely.

Posted by: jrw on September 30, 2007 at 7:46 PM | PERMALINK

jane: In my opinion the issue is whether corporations serve only their shareholders or if we should require a duty to other stakeholders - such as employees.

A board's first and foremost responsibility, after fulfilling regulatory requirements, is to their shareholders. A board that does not understand that risks shareholder suits, fines and jail time. (IIRC Henry Ford learned that the hard way when he raised workers' wages, and the courts sided with the shareholders.)

I agree that a corporation should have a responsibility to more than shareholders--that their responsibility extends to all stakeholders, including customers, employees, shareholders and society. Those responsibilities are codified in law (e.g., labor laws to protect employees, environmental and zoning laws to protect society's interests, etc.).

So, "if we should require a duty to other stakeholders" it is going to require legislation. Suggestions?


p.s. I assume the 10-20% margin you referred to is gross Last time I looked net for retail was more like 1-3%.

Posted by: has407 on September 30, 2007 at 8:06 PM | PERMALINK

Wal Mart has been a mixed thing for this country. Their aggressive cost cutting has kept the national inflation level lower than it would otherwise be. This allows to Fed to keep the interest rate lower than they otherwise could get away with (before stoking inflation). So on the one hand our economy can grow faster because of this. Of course the enormous cost pressure is really tough on their suppliers, and they frequently have no choice but to off-shore their production. So WalMart is driving both good and bad things in our economy.

Similarly with the environment. If they aggressively push energy saving products, such as CFL bulbs and energy-star appliances, they can have a significant good effect. Similarly they (possibly) can apply significant pressure against the rate of cost increase in healthcare. This later remains to be seen, we are too early into this experiment. But perhaps the health care industry is going to start experiencing the kind of severe price pressure that manufacturers have been seeing for quite some time now. It remains to be seen how this vast social/economic experiment is going to work out.

Posted by: bigTom on September 30, 2007 at 8:07 PM | PERMALINK

So good it bears repeating:

they can afford to provide cheap drugs in part because they have a flexible and inexpensive labor force.

Um, no...They can do it because they have created a monopsony. Sheesh. Even an econ illiterate like me knows that...

Posted by: Blue Girl, Red State (aka G.C.)

Once upon a time WalMart was small, and it had its struggles. Low wages were an essential part of the plan back then. But now they are unbelievably rich and powerful, with genuine monopsony power. Yet they can't grow beyond mean wages. It is their "culture".

So yes, they suck. They can afford to share the wealth now, but they won't. It is called greed.

This is why we need unions, labor laws, health care, etc. Left alone, people self-justify their greed and meanness.

Posted by: tomtom on September 30, 2007 at 8:41 PM | PERMALINK

All of this is pretty interesting. I worked part time at one of the local Wal-Mart super stores for almost exactly 5 years and I left about 1 1/2 years ago. I started out at $6.35/hr and I think I was at around $8.00/hr when I left. Luckily I didn't have to depend on these wages for rent and food or I would have been in serious trouble. I also had health insurance through my full-time employer so that was not an issue.

Wal-Mart has made some pretty drastic changes in their compensation with wage caps across the board. Once you reach that cap you will never get another raise. Speaking of raises, they were pretty meager. Employees had one evaluation per year around the anniversary of their hire date and with a sterling review the maximum hourly increase was .55/hr.

What always amazed me was the tremendous amount of waste at the store I worked in and I saw no evidence that other stores were not the same. The amount of supplies relegated to the compactor or the local landfill was astounding.

I have very mixed feelings about my time spent at Wal-Mart. I worked in the garden center and was pretty much left alone, but I took the time and trouble to learn about the plants we carried and their care.

The entire $4.00 generic drug program intrigues me. If Wal-Mart can do this then why can the pharmacies not offer the same? Surely Wal-Mart is not unique in being in a negotiating position with Big Pharma.

Posted by: Tommy Harper on September 30, 2007 at 9:33 PM | PERMALINK

It would be immoral for Walmart to pay more than needed just because they feel like being generous. Walmart employees are agents of the owners. Walmart management owes it to the owners whom they represent to do as well as possible for the owners. If Walmart managers want to play Santa Claus, they can give away their own personal money, not the stockholders' money.

Posted by: ex-liberal on September 30, 2007 at 9:42 PM | PERMALINK

It would be immoral for Walmart to pay more than needed just because they feel like being generous.

A living wage is immoral? Only for a neocon lickspittle. The relative few stockholders trump society in general? How do you figure? Are they not ultimately members of the larger society? If they put their short-term, narrow interests ahead of all of society, aren't they ultimately damaging their own interests in the long run? Depressed wages send ripples through the economy, and have contributed to the current money woes, a la the weak dollar.

So you can pretty much get bent with that libertarian sounding lunacy.

Posted by: Isle of Lucy on September 30, 2007 at 9:52 PM | PERMALINK

>>Megan McArdle

wtf? You don't even work for The Atlantic -- what gives? Why anyone pays any attention to her prattle truly baffles me.

Posted by: jim on September 30, 2007 at 10:07 PM | PERMALINK

I hate Walmart. It makes me nauseous. Creeps and people with the flu shop there.

Posted by: consider wisely on September 30, 2007 at 10:15 PM | PERMALINK

ex-liberal: It would be immoral for Walmart to pay more than needed just because they feel like being generous. ...Walmart management owes it to the owners whom they represent to do as well as possible for the owners.

You confuse legal and moral. It may be illegal--under a strict interpretation of the laws under pressure from aggressive shareholders--to "pay more than needed", but it is certainly not immoral.

That's just the kind of assinine short-term earnings pressure "owners" such as you (*cough*) present--at the expense of long-term value. Go ahead, force more companies private because of idiotic "owners" who haven't a clue as to how to read a balance sheet, or who understand the difference between "legal" and "moral", or how "moral" strategies can work better in the long term when it comes to shareholder value.

Yes, please... force all those companies private. I'll be laughing all the way to the bank.

Posted by: has407 on September 30, 2007 at 10:33 PM | PERMALINK

It would be immoral for Walmart to pay more than needed just because they feel like being generous.

It is immoral in your estimation to pay a worker one penny more than needed, but it does not present an ethical dilemma for you when the investor class takes in far more than they "need?"

Posted by: Isle of Lucy on September 30, 2007 at 11:05 PM | PERMALINK

JMHOR is absolutely right.... WallyWorld does a lot of bait and switch with pricing. And, for better or worse, Family Dollar, Dollar General, et al, are going to slowly keep gnawing at them from below.

Posted by: SocraticGadfly on September 30, 2007 at 11:24 PM | PERMALINK

A 5 second scan of their Income Statement shows that their net profit is barely over 3.1% of Revenues. That 2-3% will come out of volume sold or profits and can have a significant overall effect. If they could maximize profits with a 2-3% price increase, why wouldn't they do it to maximize their bottom line?

Posted by: Mo on October 1, 2007 at 12:12 AM | PERMALINK

1) Multiply the total number of Wal-Mart employees by the amount of annual dues union employees in that kind of job pay.

2) Multiply the resulting number by the percentage of dues that generally ends up in Democratic Party coffers.

3) You now know everything you need to know about the hostile attitude of Democrats toward Wal-Mart.

Posted by: harry on October 1, 2007 at 1:40 AM | PERMALINK

Walmart's "business plan" is to sell cheap crap to poor people. Period.

They were talking about putting in designer clothes, which is the funniest thing I've heard since Avon tried to improve it's low-rent image by buying Tiffany's.

Posted by: Norman Mainn on October 1, 2007 at 1:52 AM | PERMALINK

What does Washington Monthly pay its low end employees? Any interns (slaves)?

Posted by: Luther on October 1, 2007 at 1:54 AM | PERMALINK

"It would be immoral for Walmart to pay more than needed just because they feel like being generous.

WTF? This guy is so completely out of touch with the real world. As a guy who manages people and sets pay levels I know that morals play into it all the time. People stick around and work better when they feel they are being treated fairly. So you pay them more than needed because fairness brings all sorts of side benefits - less theft, less turnover, better worker relationships, more trust.

Sharing the wealth equitably is now immoral? This guy sounds like a mean self-justifying, propagandized overpaid asshole. I've known plenty in ny day, and you know what? Product per labor dollar tends to lag with these moral midgets.

Generosity, so long as it is equitable and in line with basic business realities, is win win win. A policy of paying the minimum you can get away with denies you the cruciak goodwill you need when there are problems.

Look at Costco. They have way more sales per associate. Could it be because they attract better workers and don't treat them like garbage?

Very convenient to call good management "immoral"

What a jerk.

Posted by: tomtom on October 1, 2007 at 5:02 AM | PERMALINK

Wal-Mart also has an employee turnover rate well over 70%. Their hiring and training costs must be tremendous.

Posted by: Tommy Harper on October 1, 2007 at 5:29 AM | PERMALINK

I use to work for WalMart as an Asst Manager and I can tell you that their health insurance sucks for the coverage you get not to mention the cost that they hold out of your check and another thing you would think that as many stores that they have look at all the profit that they are making and want to pay workers minimum wage, and then when you go in for your orientation"like your going to work for Fort Knox" they explain all the programs and want you making minimum wage to watch out for shop lifters, YA RIGHT. WalMart owners only care about one thing PROFITS in high numbers. WalMart is an addiction just like someone has to have a cig right know some of you think you have to go to WalMart everyday just to buy one thing and then come out with a basket fool, quit shopping at WalMart there are other stores.

Posted by: Al on October 1, 2007 at 7:10 AM | PERMALINK

"WalMart is compliant with all wage laws"

Except for forcing people to work overtime and not paying them, locking them in overnight, and systematic discrimination against women working their way up, just to name a few things. Oh, and the path up for a store manager is to get more work done without more people and more money. Efficient supply chain and computer links to the home office aside, how miraculously does this happen?

Perhaps the phrase you're looking for is "friendly labor environment", or as reality world describes it, "if you ain't cheatin, you ain't tryin".

Posted by: ThresherK on October 1, 2007 at 9:27 AM | PERMALINK

At the risk of sounding like a stereotypical progressive...it's about the STOCKHOLDERS and the CEO pay, folks! Yes, I do disparage SOME rich folks...those who can't find their way to living on moderate wealth (you know a few million) but MUST have millions/billions squared to prove their "worth"...and, especially those who do NOTHING to give back to the world...for them it's just about accumulating (so, What Jesus would do)...that's just GREED!!!!

Posted by: Dancer on October 1, 2007 at 9:42 AM | PERMALINK

Unless it was a typo -- which I doubt -- when I looked up WalMart's profits a year or two ago for a letter to an editor they were recorded in the billions of dollars. Yes, make that a "B". It was, if my memory serves me correctly, 10.something Billion Dollars of profit. Those were net profits, not "revenue." Now, please, tell me how it would actually economically hurt this business to raise their employees wages? Because it would not. Not "really." What would happen is that investors would see a drop in earnings and go ballistic. The stock price would drop. Temporarily. Then, when perceptions had readjusted to realities, the company would still go on to be making billions -- with a "B" -- of dollars in profit. Not a "real" economic hit at all.

Posted by: Bobbi on October 1, 2007 at 10:03 AM | PERMALINK

ex-liberal:I'm sure you make minimum wage in order to do your part to help out the poor beleagured shareholders, right?

No?

Then I suggest you shut up.

Posted by: Karmakin on October 1, 2007 at 10:06 AM | PERMALINK

I couldn't fathom to think of how much money Wal-Mart throws down the drain to hire and train the enormous amount of people that move in and out through their rolls every year. Would raising their pay and benefits affect that? Absolutely and I am sure someone in Bentonville crunched the numbers and found out they would still come out behind. But that doesn't mean that it wouldn't help pay for the extra pay costs.

Not to mention Wal-Mart has HUGE problems with employee theft.

CostCo pays employees a very decent sum, and with good benefits, at the start. Wall Street wants them to sell out and cut salaries and raise prices but the owner refuses to do so because he doesn't care about the short term but the 50-year plan of the company. So they have very low prices and make money. They have no shortage of customers and good employee morale. What's the problem here?

I also wonder just how many people on here know what Wal Mart pays its floor employees? The poster who mentioned $7/hr.? I bet your estimate is way low since they were paying that 10 years ago locally. Btw, our minimum wage in Florida will exceed $7 by the first of the year, & it is higher in several other states. Fifteen years ago, when I was thinking of going to work at Sam's Club, their start pay was $8. It would be interesting to know exactly what we are all hollering about, wouldn't it?

What, you think they raise wages against inflation or something? According to the Slate article I link below the average pay for a sales clerk is $8.50 an hour. Better than $7 (though I would guess it is $7 in poorer states like Mississippi and Alabama), but hardly enough to live by.

http://slate.com/id/2113954/

Posted by: Joshua on October 1, 2007 at 10:30 AM | PERMALINK

TomTom: Thank you for the compliment at 8:41 p.m. Econ is not my forte, but it appears to be one of yours, so that makes it even more pleasing to me.

I love your Costco analysis. I live two blocks from a Costco. It has benefited this neighborhood in so many ways.

In the biological sciences, we call such arrangements symbiotic.

Posted by: Blue Girl, Red State (aka G.C.) on October 1, 2007 at 10:53 AM | PERMALINK
It would be immoral for Walmart to pay more than needed …ex-lax at 9:42 PM
According to RepubliContarian dogma, paying a living wage which is good for the employer, is immoral, but invading and occupying a country that never attacked the US is good policy. What an extraordinarily perverse ideology. Posted by: Mike on October 1, 2007 at 11:18 AM | PERMALINK

"You now know everything you need to know about the hostile attitude of Democrats toward Wal-Mart."

Well, sure, if you're a moron incapable of writing anything but partisan drivel. To those of us out here in the real world, though, and who are capable of actually reading and comprehending what Kevin wrote and why he wrote it, the reality is far different. You should join us here some time; you might even like it.

Posted by: PaulB on October 1, 2007 at 11:32 AM | PERMALINK

harry at 1:40 AM: 2) Multiply the resulting number by the percentage of dues that generally ends up in Democratic Party coffers.
3) You now know everything you need to know about the hostile attitude of Democrats toward Wal-Mart.

How much of Wal-Mart's political contributions ended up in Repub coffers? Hmmm?

Do you have an inkling, Harry, are are you just talking out of your dumbass to satisfy your Whoring for the GOP Quota?

Retail Sales: Top Contributors to Federal Candidates and Parties
Election cycle: 2006

Ranked as the No. 1 contributor for the retail sales industry, Wal-Mart Stores contributed almost $1.5 million in 2006 -- virtually all from PACs -- of which 71% went into Repub Party coffers.

Blue Girl: They can do it because they have created a monopsony

Let me tip my hat to you, Blue Girl, as well as tomtom.

Posted by: Apollo 13 on October 1, 2007 at 11:34 AM | PERMALINK

The Atlantic would be cheaper if they stopped paying Megan.

Not necessarily, but it'd have more value without her.

Posted by: Gregory on October 1, 2007 at 11:52 AM | PERMALINK

norman mainn: Walmart's "business plan" is to sell cheap crap to poor people. Period.


i remember reading one of fidelity investment guru peter green's books in the 1980's...

he thought that wal mart wouldn't be a good investment because their target customer was lower wage earners...

of course...who knew commie china would turn wal mart around...

smell the irony...

Posted by: mr. irony on October 1, 2007 at 12:16 PM | PERMALINK

The useage of dollars per hour for W-M employees is somewhat misleading for anyone attempting to analyse their effects.

In years past, when one would read about a particular amount per hour paid to an employee, they would, as a rule of thumb, multiply that by 40 hours for the week - However, very few at W-M work 40 hour weeks, or even 52 weeks a year - One can be considered full time at W-M and work between 24 and 32 hours per week - This does not take into consideration, the layoffs following Christmas - Many are not called back until sometime in February. The term "steady extras" applies as it, unfortunately, applies to far too many companies. I have known non-union casino employees in Vegas, working regular 40 hour shfts over a period of years, going in for full time employee perks, and being told that they were merely steady extras.

Sadly, though, Target is not much different.

And off to Costco I go today - Thanks, for the mention, supra, of Costco and how it treats it's employees

Posted by: thethirdPaul on October 1, 2007 at 1:18 PM | PERMALINK

I love this nonsense about "investors" when people really mean "speculators".

The investors are the Warren Buffetts who look for long steady growth over many years. This requires steady management. These investors act like the owners they are supposed to be. The sort of people that build pension portfolios that grow year after year.

The speculators are the Gordon Geccos who look for very short term management that will affect the share price now. They won't be shareholders long enough to care. They love disfunctional management, because that minor uptick you just sacrificed employee loyalty for will cause a downturn later, they they can short your stock on.

Any CEO managing for the speculators, you can guarantee will be leaving in a year with a golden parachute, probably having put in two very good short term results, cashed in options, then got paid to leave, as the company is now on its knees with employee and long term investor morale in the toilet.

Posted by: royalblue_tom on October 1, 2007 at 1:27 PM | PERMALINK

If Wal-Mart had to offer low wages and lousy benefits just to stay in business, that would be one thing. But they don't. We should expect them to do better.

Why, exactly?

Posted by: Brian on October 1, 2007 at 2:57 PM | PERMALINK

Because, Brian, when they don't pay their employees a living wage and offer reasonably comprehensive medical benefits, your tax dollars will have to make up the shortfall.

Milton Friedman (may he roast in hell) notwithstanding, having the general public pay a business's costs via their tax dollars while allowing them to retain their profits isn't a successful plan for the society as a whole. And, in the long run, it isn't even a successful plan for the business, although for the few investors who own the majority of the company, it's a pretty good deal for a while.

Posted by: CN on October 1, 2007 at 5:41 PM | PERMALINK
If Walmart managers want to play Santa Claus, they can give away their own personal money, not the stockholders' money.

This would work better than you think. There are about half a dozen Waltons on the Forbes 400, and they're all worth about $16.5Billion each. Even if they were to keep themselves a billion each just to get by on that would still leave about $93billion to distribute to all of the employees who made them so fabulously wealthy.

I think Wal-Mart has something like 1.5 million employees worldwide, so what would that add up to as a lump sum payment for each and every one of them? About $60,000?

Posted by: Joe Bob on October 1, 2007 at 5:59 PM | PERMALINK

RACE!

TO!

THE!

BOTTOOOOOOOOOMMMMMMMMM!

Posted by: osama_been_forgotten on October 1, 2007 at 9:37 PM | PERMALINK
If you increased the pay of every single clerk, greeter, and stocker in the chain by two or three bucks an hour, it would only increase Wal-Mart's prices by about 2%. Their prices would still be the lowest around because it's not labor costs that account for most of their efficiency. It's world class logistics, aggressive offshoring, enormous sales volumes, and ruthless bargaining with suppliers that accounts for most of it.

Aggressive offshoring and ruthless bargaining with suppliers are both part of the low labor costs. You've also left out rampant violations of labor laws and sweetheart deals with the federal government when it comes to "enforcement", but that's part of low labor costs, too.

Posted by: cmdicely on October 2, 2007 at 10:56 AM | PERMALINK




 

 

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