Wal-Mart Derangement Syndrome?

In today’s LAT, Jonah Goldberg dubs the Left’s obsessions with the subject of the world’s number one retailer “Wal-Mart derangement syndrome.”

More people shop at Wal-Mart every week (127 million) than voted in the 2004 presidential election, according to a company website. They are disproportionately low-income folks who, by some estimates, are collectively saving hundreds of billions of dollars by shopping there.

Compounding the electoral asininity is the glorious hypocrisy of it all. Hillary Rodham Clinton — who returned a donation from the devilish retailer — was on Wal-Mart’s board of directors from the mid-1980s until the 1992 presidential campaign. If the store’s policies are so un-Progressive, how come it never occurred to her to do anything about it until now? Similarly, former would-be First Lady Teresa Heinz attacked the store in 2004, saying it “destroys communities” — which apparently never stopped her from hawking her ketchup there or owning $1 million in Wal-Mart stock. Even Lamont, the golden boy of the new yuppie populism, owns a few thousand bucks of Wal-Mart stock.

Responding at TAPPED, Ezra Klein contends that,

At no point in the column does Goldberg actually state the progressive critique of Wal-Mart. A casual reader would have no clue why liberals worry about Wal-Mart (save that they’re “deranged”). But in case you are interested, it goes something like this: Wal-Mart pays wages barely above the minimum and significantly below the average large retailer. Compared to Costco, or Target, Wal-Mart’s salaries, benefits, and worker relations are atrocious. The question is not “Wal-Mart, yes or no?” but whether Wal-Mart can do better on all these metrics. Obviously, they can. Various analyses have found that raising the price of each product by a penny would allow for far better worker compensation packages.

Further, because of its massive size, “Wal-Mart is an active monopsony.” The problem with this critique, however, is that the facts don’t bear it out. New York Sun columnist Liz Peek argues in yesterday’s edition that, while Wal-Mart has earned the ire of the labor unions and their allies in the Democratic Party, the actual statistics look quite good for the world’s number one retailer.

Wal-Mart employs 1.2 million Americans, is one of the most successful companies in the country’s history, has by itself lowered the cost of living for all Americans, has inspired competitors to do the same, has improved the efficiency of American retailing and manufacturing at a time that most industries were reeling from intense foreign competition, and is currently pushing an extensive array of environmental initiatives.

[…]

Wal-Mart currently has more 615,000 employees in America enrolled in its health-insurance plans, providing coverage to more than one million people. Because of its size, Wal-Mart has been able to use its clout to lower prices paid by its employees for doctor visits and medications, providing, according to a Wal-Mart spokesman, significant savings. One year ago the company offered a new, lower price package to its employees which gave them medical coverage for as little as $11 per month. Such plans are available to both full time and part time employees who have been with the company for at least one year. This is not the norm in the retailing sector, where most part time workers receive no benefits.

In the interview with Charlie Rose, CEO [Lee] Scott asserted that “you can’t hire 1.2 million people in the U.S.if you’re not paying competitive wages. “There seems to be some logic in this, which is bolstered by the recent openings of stores in Kearny, New Jersey and White Plains, New York. For the New Jersey store, eight miles outside New York City, the company received 8,000 applications for 300 jobs. In White Plains, a wealthy community with myriad retail establishments, 4,200 people asked for jobs.

Why would folks line up to work with Wal-Mart? Our view is that despite all the negative publicity, people think Wal-Mart offers unusual opportunity for those willing to work hard. It is a fact that more than 75% of store managers started out as hourly workers. It is also a fact that people have some confidence that the company will be around ten years from now, because it is smart, aggressive and determined to move every aspect of their business forward.

Indeed, as I have argued numerous times here and elsewhere, the mere fact that so many people are lining up to work at Wal-Mart is prima facie evidence that working at Wal-Mart is more attractive to them than their other options.

Now, Klein would presumably argue that Wal-Mart’s “monopsony” status is precisely why these people have so few options. Wal-Mart critics argue that the mom and pop shops, which presumably are able to pay better wages because they charge higher prices, are being run of business by Wal-Mart’s competitive practices. There’s little doubt that this happens, at least on the margins. It’s far from clear, though, that this has pushed wages down. After all, small businesses generally can not afford to pay for health coverage and other pooled risk benefits because of the economies of scale.

Wal-Mart is providing health coverage to its employees at a nominal rate far below what most of us pay. And, while $11$10.11 an hour isn’t exactly a great wage, it’s more than nearly double the federal minimum. And, as Peek notes, the company provides training and opportunity to advance into well-paid management positions.

Further, despite the competitive advantages afforded by Wal-Mart’s size, it is not without significant national competition. Target, Costco, Best Buy, CVS, and various other chains compete directly or in key sectors, not only for customers but for employees. If they are undercutting the labor market, they their labor pool is reduced to those who can not get jobs with those firms. Thus, it is far from clear how Wal-Mart’s “monopsony” status obtains.

Correction: Peek cited a figure of $10.11 as the average hourly wage and $11 a month for health care premiums and I inadvertantly transposed those numbers when first writing the post.

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James Joyner
About James Joyner
James Joyner is Professor and Department Head of Security Studies at Marine Corps University's Command and Staff College and a nonresident senior fellow at the Scowcroft Center for Strategy and Security at the Atlantic Council. He's a former Army officer and Desert Storm vet. Views expressed here are his own. Follow James on Twitter @DrJJoyner.

Comments

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  3. Blogniscient says:

    Michelle Malkin | 8/25/2006 6:47:55 Hot Airs Ian Schwartz was in Baltimore tonight and captured video of hip-hop mogul Russell Simmons endorsement of GOP Senate candidate Michael Steele… [IMG Right] Wal-Mart Derangement Syndrome?

  4. James,

    While I agree with most of your analysis, I’m not sure where you’re getting the “$11 per hour” from. The quotes you’ve shown list Wal-Mart workers as paying $11 per month for health insurance, which may have triggered some confusion – or I may have just totally missed something myself.

  5. madmatt says:

    Walmart workers in michigan get $6.00 an hour which is just above minimum not $11.00 as you said. Also I would love to hear about the benefits one gets for that $11 a month.

  6. Bill K says:

    I don’t have enough knowledge of Wal-Mart’s inner workings to bash them in response, but I do know that “lining up” to work for a place does not make one a de facto good employer. If you throw a Wal-Mart into a place with a high unemployment or poverty rate you, of course, are going to get a ton of applications. It doesn’t matter if they paid minimum wage or $15.00 a hour. In fact, if they paid $3.00 an hour they probably would get more than enough applications to fill the stores roster. It is a very weak point in my opinion.

  7. James Joyner says:

    Russ: The figure is actually $10.11 an hour. It’s from Peek’s article linked in the post.

    Matt: The figure is a national average, not a starting salary for cashiers.

    Bill: True that. Then again, the alternative is what? Presumably, without Wal-Mart offering these jobs, those people would either be unemployed or working for even less.

  8. Bandit says:

    Who’s being forced to work or shop there?

  9. Bithead says:

    The biggest fear the Democrats have as regards Walmart is the idea that it’s situation proves union-fed wages raise costs to the point of non-competitiveness.

  10. tom says:

    It is very bad economic theory to say that a company that augments the demand for labor by hiring 1.2 million people is driving down wages. An argument might be that if those 1.2 or so million people weren’t working for Wal-Mart they would be working somewhere else like a “Mom and Pop” stores. But what would one think happen to wages at the “Mom and Pop” stores if suddenly 1.2 million applied for jobs there? Wages would certainly be bid down at those “Mom and Pop” stores if the demand for labor was decreased by 1.2 million. In fact, the argument in favor of the inefficient producers (“Mom and Pop” stores) over Wal-Mart smacks of the protectionist argument against free trade that favors the inefficient domestic producer over more efficient foreign competition.

    Wal-Mart is a retail establishment and retail jobs are relatively low paying. Wal-Mart is not hiring engineers, chemists and nuclear scientists. Some seem to think that Wal-Mart is under paying low skilled and semi skilled workers and pocketing the profits. Well, those who think that this is the case should start up there own business and hire these under paid workers and try to reap the profits. The fact that these critics don’t do this is not because they don’t want to make profits by hiring under payed workers, but it is because they cannot because these workers are not under paid!

  11. vnjagvet says:

    If WalMart had a bad reputation as an employer, it would have to pay more money to attract a staff of reasonably polite competent employees without whom its clientelle would be lost.

    Clearly it is neither its employees nor its customers nor its stockholders who are unhappy.

    Other than them, who cares?

  12. I must be deranged. I am not a fan of Wal-Mart. By contrast, when AT&T was really AT&T, I loved them. I loved AT&T not because they were large or successful or a regulated monopoly. I loved getting what I paid for, consistent quality, reliable products and a sense of supporting made in America pride.
    Not what I would expect from Wal-Mart. Fair or not, there seems to be a widespread impression that Wal-Mart is ruthless and sinister. Deserved or not, it may be a case of perception becoming reality.

  13. […] Visit this link at Outside The Beltway for a good read about Wal-Mart. […]

  14. Pagar says:

    Democrat politicians think they have an easy way to repay the unions for all their delivered votes and
    financial contributions. The politicians and the
    union bosses win big. The Walmart employees, the Walmart stockholders, and the American public loses.

  15. Steve Verdon says:

    I suggest that Ezra Klein buy a basic economics textbook that covers monopsony and monopoly. The definition is one buyer or seller depending on which one you are working with. Since there are places like Costco, Target, and other retailers the idea that Wal-Mart is a monopsony isn’t just inaccurate it is idiotic.

  16. Scott Harris says:

    I spent $500.00 this weekend at Walmart that would have cost me at least $600.00 elsewhere. I like having that extra $100.00.

  17. Blame Wal-Mart…

    Diet Coke with Splenda is Wal-Mart’s fault. Keep this up and I may join the legions of liberals and communitarians suffering from Wal-Mart derangement syndrome….