Writing from Jackson, Mississippi
Currently it is quite fashionable to criticize Wal-Mart as the starting point for everything evil about American business. Critics allege that Wal-Mart earns too much profit, pays its employees too little, doesn’t provide its employees health insurance so they have to rely on the government, it exploits low-paid workers in China, and might even be responsible for avian flu, for all I know.
There is no doubt that Wal-Mart is a powerful force in the economy. The Wall Street Journal on December 3, 2005, wrote “Wal-Mart employs about 1.3 million people, about 1% of the American work force. Its sales, at around $300 billion a year, are equal to 2.5% of U.S. gross domestic product.”
But bigness doesn’t necessarily translate to profitable: “It is not, however, an especially profitable company. Its net profit margins, at about 3.5% of revenue, are broadly in line with the rest of the retail industry. In fiscal 2004, Microsoft made more money than Wal-Mart on just one-eighth of the sales.”
Is Wal-Mart bad for poor people? Writing in The Washington Post on November 28, 2005, Sebastian Mallaby wrote: “Wal-Mart’s critics allege that the retailer is bad for poor Americans. This claim is backward: As Jason Furman of New York University puts it, Wal-Mart is ‘a progressive success story.’ Furman advised John ‘Benedict Arnold’ Kerry in the 2004 campaign and has never received any payment from Wal-Mart; he is no corporate apologist. But he points out that Wal-Mart’s discounting on food alone boosts the welfare of American shoppers by at least $50 billion a year. The savings are possibly five times that much if you count all of Wal-Mart’s products.”
That’s a lot of money saved for consumers. Critics alledge, however, that Wal-Mart suppresses wages. It does, as it turns out. From The Washington Post article again: “Set against these savings for consumers, Wal-Mart’s alleged suppression of wages appears trivial. Arindrajit Dube of the University of California at Berkeley, a leading Wal-Mart critic, has calculated that the firm has caused a $4.7 billion annual loss of wages for workers in the retail sector.” Compare that with the amount that Wal-Mart has saved consumers. “Indeed, Furman points out that the wage suppression is so small that even its “victims” may be better off. Retail workers may take home less pay, but their purchasing power probably still grows thanks to Wal-Mart’s low prices.”
As for health benefits, John Tierney in The New York Times on November 29, 2005 writes: “Wal-Mart is often denounced for getting ‘corporate welfare’ because some of its employees rely on Medicaid for health care and on other government aid. But so do some employees at other companies or at government institutions like public schools. Wal-Mart offers health benefits that are generally comparable to what other retailers offer.”
For those who claim that Wal-Mart receives corporate welfare in any form, I think that readers of this website know my feelings on that. Corporate welfare is wrong.
From The Wall Street Journal again: “But suppose Wal-Mart did look more like the company its detractors would like it to be, with overpaid workers, union work rules, and correspondingly higher prices on goods. It would not only be a less attractive place to shop, and hence a considerably smaller company. It would drive up the cost of living for the millions who shop there, thus hurting those in the bottom half of the income-distribution tables that Wal-Mart’s critics claim to be speaking for. One might expect this fact to trouble the anti-Wal-Mart forces, except that their agenda is very different from what they profess it to be.”
John Tierney of The New York Times again: “It’s easy to understand the motives of some of Wal-Mart’s enemies. Local merchants don’t want to match its prices. Labor leaders know that they’ll lose members and dues if unionized stores suffer. But why would anyone who claims to be fighting for social justice be so determined to take money out of the pockets of the poor?”
Whatever your feelings, Wal-Mart operates in the relatively free marketplace, so it must meet the needs of its customers, or it won’t last very long. From The Wall Street Journal again: “To the extent that mom-and-pop stores are threatened by Wal-Mart, it’s because the same people who supposedly so value their Main Street hardware store find that Wal-Mart’s selection, or prices, or parking lot — something about it — is preferable.”
That’s the free market — people voting with dollars rather than professed feelings — at work.