by Whitney J. Davis
Daily Lobo columnist
Wal-Mart has spent the last few years in the public bull's-eye.
Some claim Wal-Mart is being attacked simply because it is the biggest retailer with the highest profits. Although being the biggest comes with much more public scrutiny - and thus more responsibility to be socially aware - being the best is not necessarily a corporate death sentence in our capitalism-loving society. However, the case against Wal-Mart does in fact have strong points.
The company has been accused of - and in many cases forced to pay damages for - mistreatment of workers, discriminatory hiring and promotion policies such as refusing to promote women and other minorities, and forcing employees to work off the clock. For example, in 2001 women managers at Wal-Mart earned on average $14,500 less than their male counterparts. In their 2006 annual report, Wal-Mart reported the company faced 57 wage-and-hour lawsuits across the country. Many activist groups, such as Wal-Mart Watch, Wake-Up Wal-Mart and Wal-Mart Alliance for Reform Now, complain that Wal-Mart is far below industry standards in regard to wages and health care plans, which some say has led to increased demand for public assistance programs. These groups say this increased demand translates into higher costs for taxpayers.
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Lee Scott, Wal-Mart's CEO, said in a 2005 speech that "in some of our states the public program may actually be a better value - with relatively high income limits to qualify and low premiums." This clearly states that Wal-Mart encourages employees to apply for public assistance.
Although it is true that Wal-Mart pays its employees less than the average, it is important to point out that it is not a crime to pay minimum wage. It is also not required by law to provide health care plans for employees. The question that both the wage and health care issues raise is whether Wal-Mart is being held to a higher standard because it is the most prominent retailer. I would have to agree with Wal-Mart supporters on this, because it is being held to a higher social standard than other discount retailers.
Although this may not be fair, this standard is created and maintained by public opinion, and many of the people who make up public opinion are also potential Wal-Mart customers. Wal-Mart is now listening to that public opinion more than ever. It has begun to raise wages - by about 6 percent in about 30 percent of its stores, according to a recent article in the New York Times - and says it has made its health care program more comprehensive. Even with these improvements, many of Wal-Mart's full-time and part-time employees live below the poverty line - which in 2001 was a yearly income of $14,630 for a family of three - and have no health insurance.
Wal-Mart has also been vilified for putting smaller retailers out of business. This claim is very popular in that it appeals to the standard, hard-working American who is just trying to make ends meet. Although it is true that Wal-Mart moves into communities and subsequently smaller retailers shut down, this cannot be considered evil in the land of opportunity. A free-market economy is demand-driven. When one firm can deliver a product more efficiently than another, demand will shift toward the more efficient company. This is very basic economics. According to consumers, cheaper is better.
The evil emerges when we look a little closer at exactly how Wal-Mart enters these communities. Wal-Mart depends on government subsidies in about one-third of its retail projects, according to Wake-Up Wal-Mart. As Wal-Mart's total retail project expenditure is around $3 billion, this means Wal-Mart asked for and received in the neighborhood of $1 billion from the U.S government to help fund business activities. Interestingly, when smaller retailers have appealed to the government for subsidies, they have overwhelmingly been denied.
This particular inequity was a focus of the recently released anti-Wal-Mart movie, "The High Cost of Low Price." One particular case mentioned in the movie was Esry Grocery, a small family-run store in Cameron, Mo. When Wal-Mart moved into the community, the owners of the grocery appealed to the government to get similar subsidies as Wal-Mart. As expected, they were denied. This is a clear case of unfairness translated into market inefficiency.
Although Wal-Mart should be applauded for innovations in logistics, it has been given an unfair advantage through government subsidies. Couple this with questionable business practices and failure to meet social ethical standards, and there is reason to challenge Wal-Mart's success.
Wal-Mart recently began a political-style ad campaign in order to revamp its image. The campaign will be tested in a handful of states and then expanded to a national scale. Wal-Mart is obviously starting to feel the public pressure for some of its business decisions, but now I have to ask if an ad campaign, costing millions of dollars, is the solution. After all, consumers' concerns should not be alleviated with government-subsidized money, which could be spent addressing problems rather than placating the public.
