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submission

“Wal-Mart: More Than Just Low Prices”

By Jordan Fink

English II

Mrs. Berndt

15April 2013

Thesis Statement: Though Wal-Mart’s huge selection and low prices seem to be a consumer’s best friend, its policies toward its workers, unionization, economic and geographical growth may cost the United State’s consumer more than just paying full price for products.

I. Wal-Mart Stores Inc. of America

A. Treatment of Workers

1. Policies Toward Women

2. Policies Toward Unionization

a. Wal-Mart Stance on Unions

b. Anti-union Activities

3. Health Care Policies for Workers

4. Pending Court Cases for Discrimination

B. Impact on Communities

1. Deterioration of Infrastructure

2. Deterioration of Supermarkets in Area

a. Grocery and Pharmacy Control

b. Supplier Pressure

3. Economic Gains

4. Economic Losses in Community

II. Wal-Mart Takeover

A. Expansion in the United States

1. Opposition to new Wal-Mart

2. Wal-Mart Push for New Stores

B. Expansion Abroad

1. Pro-American Product Push

2. Amount of United States Produce

3. Imported Products from China

C. Walton Family

1. Power of Walton Family

2. Wealth of Walton Family

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Wal-Mart: More Than Just Low Prices

Wal-Mart’s policy of “Everyday Low Prices” saves consumers billions of dollars every year, helping to keep the nation’s inflation rate low. But its methods of squeezing out those low prices—paying salaries below the poverty line, building superstores that crush local mom-and-pop shops, and pushing manufactures to the wall for savings are generating a strong backlash (“The High Cost of Low Prices” 168). Though Wal-Mart’s huge selection and low prices seem to be a consumer’s best friend, its policies toward its workers, unionization, economic and geographical growth may cost the United States consumer more than just paying full price for products.

Every week, 138 million shoppers visit Wal-Mart’s 4, 750 stores; last year, 82% of all American households made at least one purchase at Wal-Mart. “They are so much bigger than any retailer has ever been that it’s not possible to compare, “ says Ira Kalish global director of Deloitte Research. New England Consulting estimates that Wal-Mart saved its U.S. customers $20 billion last year alone. Factor in the price cuts other retailers must make to compete, and the total annual savings approach $100 billion (Bianco and Zellner 100).

Though those kinds of statistics may seem mind boggling, Wal-Mart faces a crucial time. The company now faces a revolt of sorts in the form of nearly 40 lawsuits charging it with forcing employees to work overtime without pay and a sex-discrimination case that could rank as the largest civil rights class action every (Bianco and Zellner 100).

According to experts hired by the plaintiffs in the sex-discrimination case men dominate the higher-paying store management jobs, while women perform more than

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90% of the $14,000-a-year cashier jobs. And that’s not all. Women also earn less than men in the same jobs. A study found that women earned from 5% to 15% less than men in each year from 1996 to 2001 (“No Way to Treat a Lady” 63).

An outsider may think that a way to hinder such atrocities in Wal-Mart would be to form a union. And indeed, many Wal-Mart workers feel the same. Employees at more than 100 stores in 25 states are currently trying to unionize the company, and in July of 2002, the United Food and Commercial Workers Union, UFCW, launched an organizing blitz in the Midwest, hoping to mobilize nearly 120,000 workers in Michigan, Kentucky, Ohio, and Indiana (Olsson 55). This is without a doubt the first serious unionization threat Wal-Mart has faced since it’s founding in 1962. For decades, the company’s strategy of placing stores in small towns and rural areas kept it largely free from exposure to unions (“How Wal-Mart Keeps Unions at Bay” 94).

But Wal-Mart has not come into this situation unprepared. At the first sign of union organization in a store, Wal-Mart dispatches a team of union busters from its headquarters in Bentonville, Arkansas, sometimes setting up surveillance cameras to monitor workers (Olsson 55). To protect the bottom line, Wal-Mart is as aggressive at fighting off unions as it is at cutting costs. Employees approached by co-workers about joining a union are “sacred to even talk,” says Ricky Braswell, a “greeter” at Wal-Mart. “They’re afraid they’ll lose their jobs” (Olsson 58). Wal-Mart has made clear that keeping its stores union-free is as much a part of Wal-Mart culture as door greeters and blue aprons. “Union representation may work well for others, “ says Cynthia Illick, a company spokeswoman. “However, it is not a fit for Wal-Mart” (Olsson 61).

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Mary Lou Wagoner, a 53-year-old part-timer at Wal-Mart and employee union organizer, believes she has been “blacklisted” from better paying full time jobs because of her pro-union stance. A couple of times, her paperwork was conveniently “lost,” she says, and she also was passed over for a worker who shouldn’t have been eligible because of a disciplinary action. They’ve done just about anything they can to get me to quit,” she says (“How Wal-Mart Keeps Unions at Bay” 94).

Wal-Mart’s tactics are not completely to blame for lack of union representation. Unions themselves bear some blame, since most run poor sign-up campaigns and don’t spend anywhere near 30% of their budgets on recruitment. Still, companies facing labor drives like Wal-Mart routinely employ all the tactics Wal-Mart has used to get workers to change their minds. Many of these actions are perfectly legal, such as holding anti-union meetings or inundating workers with anti-union literature and videos (“How Wal-Mart Keeps Unions at Bay” 94).

Another common complaint among Wal-Mart employees is health insurance. The average hourly worker at Wal-Mart earns barely $18,000 a year at a company that pocketed $6.6 billion in profit in 2002. Almost 40% of all workers opt not to receive the company’s medical plan, which costs up to $2, 844 a year, plus a deductible (Olsson 55). If one figures that into a bi-weekly pay-check of $550, the Wal-Mart health insurance plan would deduct up to $85 of that paycheck (Olsson 54). Jennifer McLaughlin, a twenty-two-year old cashier at Wal0Mart, puts a unique spin on the Wal-Mart plan. “They’re at the top of the Fortune 500, and I can’t get health insurance for my kid,” she says (Olsson 55).

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After working for three years at Wal-Mart, she [Jennifer McLaughlin] earns only $16,800 a year. “And I’m considered high-paid,” she says. The way they pay you, you can’t make it by yourself…unless you’ve been there for 20 years or you’re a manager [Wal-Mart] pushes you to the limit. They just want to see how much they can get away with without having to hire someone else,” says McLaughlin (Olsson 54). Workers in other stores feel the same as Jennifer. Workers in twenty-seven states are suing Wal-Mart for violating wage-and-hour laws; in the first of the cases to go to trial, an Oregon jury found Wal-Mart guilty of systematically forcing employees to work overtime without pay (Olsson 55).

There are other signs that not only workers, but also America is turning against Wal-Mart. A case in Texas pinned an $18 million fine on Wal-Mart for withholding evidence in a kidnapping case where it was proven that Wal-Mart had inadequate security. In another case against Wal-Mart, a court awarded $624 million to a Mexican company that sued Wal-Mart for breaking an agreement to set up a joint business through a subsidiary. The case was settled before punitive damages could be rewarded (Walsh 17).

With repeat violations of workers’ compensation laws, child labor laws (1, 400 violations in Maine alone), and surveillance of employees, it’s no wonder turnover in Wal-Mart stores is above 50% a year, with many stores having to replace 100% of their employees each year. Some stores reach as high as 300% turnover a year (Hightower 3).

When Wal-Mart Inc. decides to put a new store up in a town, the effects reach much, much father than just local Shopko and K-Mart stores. Wal-Mart has an effect on the economy of the entire community. One example of the Wal-Mart effect is in Hearn,

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Texas. When a new Wal-Mart store was erected nearly 20 years ago, it forced local traders out of business and then disappeared itself, moving 20 miles up the road. This actually killed the town’s economy twice: first by forcing local stores out, and secondly, by leaving the area with no economic infrastructure (Walsh 15). Stories such as the one in Hearn may seem extremely disheartening considering Wal-Mart plans to open 1,000 more Supercenters in the U.S. alone over the next five years. Retail Forward predicts that for every new Supercenter that Wal-Mart opens, two supermarkets will close or 2,000 all told (Bianco and Zellner 100).

As the number of supermarket shrinks, more shoppers will have to travel father from home and will find their buying increasingly restricted to merchandise that Wal-Mart chooses to sell—a growing percentage of which may be the retailers private-labels goods which now account for nearly 20% of sales. The failure of hundreds of stores will cost their owners dearly and put thousands out of work, only some of whom will find jobs at Wal-Mart, most likely at lower pay. “It will be a sad day in this country if we wake up one morning and all we find is a Wal-Mart on every corner, ” says Gary E. Hawkins, CEO of Green Hills, a family owned supermarket (Bianco and Zellner 100).

Though the Wal-Mart takeover seems to have no up side, the supercentering of America can be expected to result in huge savings at the cash register. On average, a Wal-Mart Supercenter offers prices 14% below its rivals, according to a 2002 study by UBS Warburg (Bianco and Zellner 100).

Today, Wal-Mart operates 1, 386 Supercenters and is the nation’s largest grocer, with a 19% market share, and the nation’s third-largest pharmacy, with 16% market share. This kind of control presents a problem. Suppliers growing dependence on

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Wal-Mart is “a huge issue” not only for manufacturers, but also for the U.S. economy, says Tom Rubel, CEO of consultant Retail Forward Incorporated. “If [Wal-Mart] ever stumbles, we’ve got a potential national security problem on our hands. They touch almost everything…If they ever really went into a tailspin, the dislocation would be significant and traumatic,” says Tom Rubel (Bianco and Zellner 100).

A popular belief of citizens of a potential town selected for a new Wal-Mart is that a new Wal-Mart will pull money into the town’s economy. A study in Mississippi concludes, “The net increases are minimal as the new big-box stores (Wal-Mart, Kmart, Shopko, Target, etc.), merely capture sales from existing business in the area” (Bianco and Zellner 100). A study in Maine looks into this more in depth. In the study, towns of various sizes with Wal-Mart stores were studied to find the “Pull Factor” of Wal-Mart money into the local economy. The “Pull Factor” is calculated by dividing a community’s per capita sales (retail sales divided by the population) by the state average per capita sales. If the result is 1.00 or more, then it is known more than average sales are being “pulled” into the community. The results speak for themselves.

All 19 Wal-Mart communities:

The consumer retail pull factor declined in 11 of the 19 (57.9%).

The building supply pull factor declined in 13 of the 19 (68.4%).

The food store pull factor declined in 9 of the 19 (47.4%).

The general merchandise pull factor declined in only 7 of the 19 (36.8%)/

The other retail pull factor declined in 12 of the 19 (63.2%).

The automotive sales pull factor declined in 9 of the 19 (47.4%).

The restaurant pull factor declined in 7 of 13 (53.8%).

(“Who Benefits When Wal-Mart Comes to Town” 2).

The study in Maine proves that Wal-Mart does not pull more money into the economy.

Wal-Mart is the world’s largest retailer, with $220 billion in sales, and the nation’s largest private employer, with 3, 372 stores and more than 1 million hourly

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workers. Its annual revenues account for 2% of the U.S. entire domestic product. Even as the economy has slowed the company has continued to mega size, with plans for 800,000 more jobs worldwide by 2007 (Olsson 55). The company seldom submits to community groups that oppose its plans to build new stores. The number of such challenges has increased steadily and is now running at about 100 a year. The Stop Wal-Mart movement has been bolstered of late by a series of academic studies that have debunked the notion that a new big-box store boosts employment and sales and property-tax receipts (Bianco and Zellner 100). Most of Wal-Mart activists are young, middle class people who move to the city and rediscover the virtues of small-town America: neighbors, mom-and-pop stores, and a sense of history and property values not threatened by the constant turmoil of continued urban development (Walsh par.5).

So, with all this Opposition to new Wal-Mart stores, one may think the government could step in and stop the monopolizing of America. But Harry First a New York University law professor sees it differently. “When Wal-Mart comes in and people desert downtown because they like the selection and the low prices, it’s hard for people in the anti-trust community to say we should not let them do that,” he says. And Wal-Mart feels that there is no problem at all. “We don’t turn a deaf ear to any criticism. We’re most sensitive to what the customer has to say, though,” says Vice-Chairman Thomas M. Coughlin. “Your customers will tell you when you’re wrong” (Bianco and Zellner 100).

Wit that being said, Wal-Mart’s plans to expand further are being put into action. This year alone, Wal-Mart hopes to open as many as 335 new stores in the United States: 55 discount stores, 210 Supercenters, 45 Sam’s Clubs, and 25 Neighborhood markets. An additional 130 new stores are on the boards for foreign markets. Wal-Mart currently

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operates 1, 309 stores in ten countries, ranking as the largest retailer in Mexico and Canada. If the company can maintain its current 15% growth rate, it will double its revenues over the next five years and top $600 billion in 2011 (Bianco and Zellner 100).

To maintain the image of being a “Truly American” company, Wal-Mart makes large donations to local charities, the patriotic “Buy American” campaign is in every store, and there are constant claims that Wal-Mart is a responsible corporate citizen. Wal-Mart is worried about its image, because situations like Hearne, Texas will make it seem that Wal-Mart is American capitalism and consumerism at its worst. The company fears that low prices may not be enough to keep the consumers happy (Walsh 17).

Some critics of Wal-Mart also argue that Wal-Mart’s intensifying global pursuit of low-cost goods is partly to blame for accelerating the loss of U.S. manufacturing jobs to China and other low-wage nations. Plus, Wal-Mart imports many products from China. The $12 billion worth of Chinese goods Wal-Mart bought in 2002 represented 10% of all U.S. imports from China (Bianco and Zellner 100). Often times the workers who make these products are underpaid and overworked. Even though China’s minimum wage is $.31 an hour, many production workers are paid $.13 an hour (Hightower 4).

Sam Walton opened his first Wal-Mart Discount City in 1962 and gradually expanded out from his Arkansas base. By 1970, Wal-Mart owned 32 outlets; by 1980 there were 276; by 1990, 1, 528 in 29 states (Olsson para. 8). When Sam Walton opened his store in 1962, he wanted to replicate the feel of a small country store in his big supermarkets. Notoriously frugal, Walton made his executives share their rooms on business trips. Walton himself was renowned for driving an old pick-up truck and thinking of nothing but how to improve Wal-Mart (Walsh para. 8).

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When it comes down to it, Wal-Mart carries clout. Wal-Mart is the world’s most powerful private force for lowering labor standards and stifling the middle-class aspirations of workers everywhere (Hightower 5). It is Wal-Mart’s aim to become the largest corporation in the U.S.; already the retailing machine has become one of, if not the most powerful, companies in the United States (Walsh 9).

With profits of nearly $7 billion, the money must be going somewhere. The Walton family takes its fair share. Helen Walton, 84, the founder’s widow and the Walton’s three sons and one daughter are tied at number four on the annual Forbes 400 Richest People List, each with $20.5 billion. The list notes that if Sam Walton, who died in 1992, were still alive, he’d be worth twice as much s Microsoft’s Bill Gates, who ranks number one on the list with $46 billion (Turner 11).

High on a wall inside Wal-Mart headquarters is a paper banner with a provocative question in big block letters: “Who’s taking your customers?” Beneath it, “Wanted” poster style, hang photos of the CEOs of two dozen of America’s largest retailers: Target, Kroger, Winn-Dixie Stores, Walgreens, and so on. None looks very happy, perhaps because they know that the only way to get off the wall is to fail utterly (Bianco and Zellner 100).

No matter how much one loves or hates Wal-Mart, it is still one of the largest companies in the world. American citizens have to make the choice if Wal-Mart will stay that way forever. But until the, Wal-Mart will continue to raise discussion about its practices and continue to affect economies of towns all around the world.

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Works Cited

Bianco, Anthony, and Wendy Zellner. “Is Wal-Mart Too Powerful?” Business Week 6 Oct. 2003: 100.

Hightower, Jim. “Boycott Wal-Mart.” The Independent Weekly 8 May 2002. 27

Oct. 2003 .

Olsson, Karen. “Up Against Wal-Mart.” Mother Jones March-April 2003: 54-61.

“The High Cost of Low Prices. Business Week 6 Oct. 2003: 168.

Turner, Lance. “Waltons Near Top o Forbes Wealthiest List.” Arkansas Business 29

Sept. 2003: 11-12.

Walsh, Maurice. “America Learns to Hate Wal-Mart.” New Statesman 26 July 1999: 15-

17.

“Who Benefits When Wal-Mart Comes to Town?” Ed. Les Bray. 30 Oct. 2003

Zellner, Wendy. “How Wal-Mart Keeps Unions at Bay.” Business Week 28 Oct.

2002: 94.

---. “No Way to Treat a Lady?” Business Week 3 Mar. 2003: 63.

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