Wal-Mart: A Template for 21st Century Capitalism?Essay title: Wal-Mart: A Template for 21st Century Capitalism?Working at Wal-Mart Wal-Mart defends its low wage/low benefit personnel policy by arguing that it employs workers who are marginal to the income stream required by most American families. Only seven percent of the company’s hourly “associates” try to support a family with children on a single Wal-Mart income. The company therefore seeks out school-age youth, retirees, people with two jobs, and those willing or forced to work part-time. The managerial culture at Wal-Mart, if not the formal company personnel policy, justifies its discrimination against women workers, which now compose two-thirds of the workforce, on the grounds that they are not the main family breadwinner. Not since the rise of the textile industry early in the 19th century, when women and children composed a majority of the labor force, has the leadership of an industry central to American economic development sought a workforce that it defined as marginal to the family economy.
Wal-Mart argues that the company’s downward squeeze on prices raises the standard of living of the entire U.S. population, saving consumers upwards of $100 billion each year, perhaps as much as $600 a year at the checkout counter for the average family. A McKinsey Global Institute study concluded that retail-productivity growth, as measured by real value added per hour, tripled in the dozen years after 1987, in part due to Wal-Mart’s competitive leadership of that huge economic sector. “These savings are a lifeline for millions of middle- and lower-income families who live from payday to payday,” argues Wal-Mart CEO H. Lee Scott, “In effect, it gives them a raise every time they shop with us.”
But why this specific, management imposed trade off between productivity, wages, and prices? Henry Ford used the enormous efficiencies generated by the deployment of the first automotive assembly line to double wages, slash turnover, and sell his Model T at prices affordable even to a tenant farmer. As historian Meg Jacobs makes clear in Pocketbook Politics: Economic Citizenship in Twentieth-Century America, the quest for both high wages as well as low prices have been at the heart of America’s domestic politics throughout much of the 20th century. And when social policy tilts toward the left, as in the Progressive era, the New Deal, and on the World War II home front, workers and consumers find their interests closely aligned. They see the relationship between wages and prices as a fundamentally public, political issue and not merely a dictate of corporate management or the interplay of market forces. Thus, as late as 1960 retail wages stood at more than half those paid to autoworkers, in large part because the new unions and the New Dealers had sought to equalize wages within and across firms and industries. But by 1983, after a decade of inflationary pressures had eroded so many working class paychecks, retail wages had plunged to but one third of that earned by union workers in manufacturing, and to about 60 percent of the income enjoyed by grocery clerks in the North and West. And this is just about where retail wages remain today, despite the considerable rise in overall productivity in the discount sector.
Indeed, if one compares the internal job structure at Wal- Mart with that which union and management put in place at GM during its mid-twentieth century heyday, one finds a radical transformation of rewards, incentives and values. GM workers were often lifetime employees so factory turnover was exceedingly low: these were the best jobs around, and they were jobs that rewarded longevity. Auto industry turnover is less than eight percent a year, largely a result of normal retirements. At Wal-Mart, in contrast, employee turnover approaches 50 percent a year, which means it must be even higher for those hired at an entry-level wage. Turnover at K- Mart is somewhat lower and Costco, which provides even higher wages and benefits, reports a rate of
1% more turnover. Kmart also reports an increased risk to its workers. In response, K-Mart continues to offer high-efficiency and high-risk products even with substantial cost-cutting. We have documented how the costs of these products rise as low as $30, and how the products we order get replaced, sometimes at cheaper prices, more often than not. As the technology shifts to robotics, one learns to anticipate cost-recovery risks and the potential cost of new products. In the wake of the S&P 500’s explosive market growth, this information could help guide decision making.
Conclusion The U.S. labor market is changing and the cost/margin ratio of workers on $- and $-1/hour jobs are increasing at an alarming rate; we need to know how to make sure that the cost of doing business changes when the costs of doing business go up. A more efficient labor market would make workers, both at K-Mart and at other companies, at the forefront of these changes, especially in an economy of rising wage and benefit costs. But a workforce based in this way won’t be able to adapt quickly and effectively, or to develop policies and regulations that will be cost effective. What better way to move from an industrial restructuring, the one that produces wages while allowing workers to continue to pay off their debt of service and other liabilities, to an environment where we give the workers and employers a job or leave? This challenge will require hard data and complex, unpredictable, and unpredictable public policy decisions. We already hear from governments and labor unions that there are potential gains related to this approach if we increase the level of wages to reflect changes in the nature of the work we do. We could have a government government job available to pay for such a approach, but that would not allow us to make such a change in our workplace. We have had many years of discussion about how the U.S. labor movement and our political system would need to learn to implement change, including what to do about it in the post-Vietnam era and if that change can happen. We’re going to need to find new ways to expand this economy, and we don’t know what our options are.
I’ve outlined some of the proposals I have. The first proposal that has been discussed already is the one that incorporates new regulations: the minimum wage. This proposal would set a clear set of wages for low-wage workers in the US that would be set at $15 per hour. Workers would be paid $3 for hourly work and $10 for fringe benefits. Workers who are not currently paid would be required to pay a wage for the rest of the year. Minimum wage increases in our system are designed to reduce costs, and that is why in my remarks we argued some of the best ideas for increasing the minimum wage are the ones from my own experience with small-business and small-business owners who have found their employers at or near