Walmart's Low Prices Bear a High Cost for America

For untold millions, Walmart is not simply a place to shop, but the place. Considering that the quintessential big-box retailer claims to, and often does, offer just about every conventional item necessary for the family at an affordable price, this should be none too surprising.

However, at what cost does this convenience come, and in the grander scheme of things, is what Walmart has to offer really convenience at all? The company’s ownership would most definitely say so, as would throngs of eager consumers. Many economists, social scientists, and former employees, though, have a strikingly different opinion. While one can choose to believe whichever side of the argument he or she likes best, where do the facts lie?

First and foremost, it should be known that every single American taxpayer is essentially footing the bill for Walmart’s mere existence.

According to Reuters, this is because, as a study published last year by the City University of New York’s Hunter College Center for Community Planning showed, company employees receive inadequate health insurance coverage and in turn are left with few other options than to apply for public assistance. Beyond providing a lack of medical benefits, Walmart’s presence in most regions, says the study, "Depresses area wages....pushes out more retail jobs than it creates, and results in more retail vacancies."

Across New York City, especially in the borough of Brooklyn, a groundswell of activism has resulted in widespread hostility toward any Walmarts breaking ground. Such a pressing issue has accomplished a rare feat: putting businesses, public officeholders and private citizens on the same side of an argument.

Speaking to Reuters, New York City Public Advocate Bill de Blasio has referred to the opening of a Walmart as being a "Trojan horse." He went on to say that though Walmart is, "Appealing to a lot of families who are turns into a big problem in the long term because of the net elimination of jobs." Mark Tanis, the proprietor of a local shopping center, is more blunt, "[Walmart] would be a disaster. It would have a detrimental impact on our area." Walmart spokesman Steve Restivo questioned the validity of their concerns, claiming that the establishment of Walmarts around New York City would bring economic revival and better opportunities for grocery shopping. The Walmart corporate apparatus believes that the Center for Community Planning report which lent credence to many New Yorkers' fears is based upon "randomly selected statements from....flawed studies."

In addition to its economic controversies, many harbor ill will toward Walmart for another reason: its company policies pertaining to treatment of employees. According to BusinessWeek senior writer Anthony Bianco in his 2007 book Wal-Mart: The Bully of Bentonville: How the High Cost of Everyday Low Prices is Hurting America, the superstore pays its workers an average hourly wage of $9.68, well below the national retail worker's average of $12.28. Starting wages are even lower.

With all of these problems brought into the equation, one might wonder how Walmart’s competitors stack up in comparison. Jim Stinson, a writer for northwest Indiana’s Post-Tribune, set out to find the answer during the summer of 2006. He discovered that Walmarts in his vicinity actually paid less than most others from coast to coast do, compensating floor workers at roughly $7 per hour.

Target, a decidedly higher end retailing giant, had a starting salary of $7.50. Menards, a midwestern home improvement chain, paid $8.50, a noticeable increase from either Walmart or Target. All of them pay their workers better than Staples, the nationwide big box office supply powerhouse, where the average wage is a paltry $6.05 for new employees. But all four are topped by Costco, perhaps America’s most prominent string of discount warehouses. Costco's base hourly salary rings in at a respectable $10 an hour.

Local politicians also look past big box retailers' financial figures at other important factors such as hiring policy and whether the jobs offered were full or part time. Both of these were key to public officeholders fearing that new stores designed for a one-stop-shopping experience might drive out older community oriented businesses owned and patronized by their constituents.

Dan Klein, as mayor of Crown Point, asked a poignant question, "What value do [big box stores] bring to a community?" Klein went on to say, “When it starts to affect quality of life and community, I don’t agree with it." His counterpart in the neighboring town of Chesterton and a majority of the town council apparently asked themselves a similar question, concluding that the social price tag of big box retailers simply is not worth the time or effort. They rejected plans for big box development and, as of Stinson’s article’s publication, had few regrets.

This still leaves the question of how Walmart compares to its opposite numbers in terms of labor selection and benefits. The stark reality is that a broad share of persons seeking jobs at big box chains tend to be young, undereducated, and struggling financially. Most big box employers tend to hire as many part time workers as possible in order to their overhead at a minimum. Walmart is by far the worst offender, by some accounts the most aggressive, but has no shortage of competitors at its heels.

Target does not offer health insurance to most of its part timers, and full time Target employees must pay stiff premiums for it. Costco employees, on the other hand, pay very low premiums, and as a result, its worker turnover is low. The policy was set by Sol Price, the founder of Price Club, (which was merged into Costco) a pioneer of the big box discount warehouse concept, and a lifelong advocate of left-leaning economics. Target's and Menards' policies are closer to Walmart's, resulting in lower profit margins, always a concern for shareholders.

It would be very difficult for me to say that Walmart is a uniformly terrible institution. It provides scores of men and women with the very thing that they need most: a job. However, it would be equally difficult for me to say that it has been anything remotely resembling positive for the American economy as a whole. There has never been another business entity like it, and it's doubtful that another competitor capable of giving it a run for its money will appear. Walmart is simply too big and too powerful to be toppled; it is the poster child for capitalism without true competition. No government quota or anti-monopoly law could possibly halt the remarkable progress Walmart has made over the last several decades. It has become not just a shopping center, but a cultural icon. This is a fact for the better or the worse, and in my opinion, most definitely the latter.

Assuredly, we can count on seeing those low prices at high expense for years to come.

Originally published in Blogcritics Magazine.

Joseph F. Cotto is a scholar and columnist from central Florida. Most often writing about political affairs, he is a member of the all-but-extinct Rockefeller wing of the Republican Party, taking conservative stances on fiscal and national security issues while being a staunch centrist on social matters. For several years, he was an accredited reporter for Wikinews, Wikipedia's news subsidiary. There, he covered major stories such as the 2008 presidential election and interviewed personalities ranging from former U.S. senators to filmmakers. He is currently at work on a book about American politics.



wage arbitrage

the race to the bottom plus Walmart wiped out, I don't know the total but it's at least in the thousands of Mom & Pop small businesses across the U.S. Small independent hardware stores, dime stores, gardening stores, pet stores and so on and beyond what that did to small businesses, it also severely limited product choice. Walmart can literally make or break a wholesaler and manufacturer and many times did. Squeezing them to every 1/10th of a cent to the point they either went out of business or moved manufacturing to China in order to survive at all.

How Walmart Limits Product Choice

Every Walmart store has a representative from the Peoples Republic of China working in the store. This is how they gave PillowTex got the pillow job.

Burton Leed

Wal-Mart's Upside.

Wal-Mart has created tens of thousands of jobs in Northwest Arkansas. This includes both direct hires and employees of vendors who set up satellite offices in Bentonville. Do your studies take into account all the jobs created in this region?

Surely it's a good thing that a historically disadvantaged region of the country is booming with jobs?

and so we should disregard

and so we should disregard all the good jobs in both mfg and retail that is displaced in other parts of the country like the norhteast?

give me the numbers?

i bet they don't work out all that well with Wal-mart demanding all of its' suppliers shift from US manufacturing to chinese manufacturing

but... i could be wrong but i doubt it

There's also the high cost of subsidies to Walmart.

Walmart is able to undercut small businesses partly because the tax payer subsidizes a substantial portion of the firm's costs. A 2004 study by UC Berkley found that the state of California was spending $86 million annually subsidizing the retailer. Most of this cost was in the form of aid to the retailer's under-paid and under-employed workforce. If you consider the opportunity cost of this lost tax revenue and the other costs, Walmart is the most expensive retailer around. You could even say that the retailer is a giant welfare program for the Waltons.