The Wal-Mart Manifesto

The Wal-Mart Manifesto

The Wal-Mart Manifesto

Gossip, speculation, and scuttlebutt about politics.
Feb. 24 2005 12:14 PM

The Wal-Mart Manifesto

The retail giant's CEO says his company pays workers handsomely. He doesn't want you to believe him.

H. Lee Scott Jr., the chief executive officer of Wal-Mart, argued in a speech yesterday in Los Angeles (click here to listen to it) that Wal-Mart is a force for good in the economy. Scott is hardly the first corporate chairman to echo "Engine" Charlie Wilson's claim that what's good for General Motors is good for America. And many independent observers have noted that Wal-Mart's relentless downward pressure on overhead has been a boon to American consumers. (In a recent New Yorker column, James Surowiecki took this further, arguing that the retail economy has become a sort of dictatorship of the consumer, and that Wal-Mart, which earns only pennies on each dollar of sales, is merely doing what it must to stay alive.)

What's fairly new in Scott's speech (a related ad campaign was launched last month) is Wal-Mart's rising on its hind legs to tell the world that it is good to its employees. I'd thought it was a settled matter that Wal-Mart had achieved its miraculously low prices by squeezing its employees. Not so, said Scott:

Wal-Mart's average wage is around $10 an hour, nearly double the federal minimum wage. The truth is that our wages are competitive with comparable retailers in each of the more than 3,500 communities we serve, with one exception—a handful of urban markets with unionized grocery workers. … Few people realize that about 74 percent of Wal-Mart hourly store associates work full-time, compared to 20 to 40 percent at comparable retailers. This means Wal-Mart spends more broadly on health benefits than do most big retailers, whose part-timers are not offered health insurance. You may not be aware that we are one of the few retail firms that offer health benefits to part-timers. Premiums begin at less than $40 a month for an individual and less than $155 per month for a family.

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The apparent purpose of the speech was to counter political resistance to the building of Wal-Mart "supercenters" in California. But if Scott saw much danger that Wall Street might believe his rosy picture of labor relations, he wouldn't paint it, because that would create an investor stampede away from Wal-Mart stock. What we have, then, is a unique rhetorical form: Nonsense recited by someone who is relying on most of his listeners to understand that he is spouting nonsense. Wal-Mart took the trouble to send this speech out to writers "who are in a position to influence a lot of others," according to a cover e-mail I received from Mona Williams, Wal-Mart's vice president for corporate communications. I took Williams' email as a plea to expose the dishonesty in Scott's remarks (Stop us before we kill again!) disguised as a plea to give Scott's remarks a fair hearing. I will try to oblige.

Wal-Mart's average wage is around $10 an hour.

As Tom Geoghegan, a labor lawyer in Washington (and author of Which Side Are You On?: Trying To Be For Labor When It's Flat On Its Back) points out, the relevant number isn't the average, which would be skewed upward by the large salaries of relatively few highly-paid company executives—Scott, for example, receives, by one reckoning, 897 times the pay of the average Wal-Mart worker—but the median. In the Dec. 16 New York Review of Books, Simon Head, director of the Project on Technology and the Workplace at the Century Foundation, stated, "the average pay of a sales clerk [italics mine] at Wal-Mart was $8.50 an hour, or about $14,000 a year, $1,000 below the government's definition of the poverty level for a family of three." That the current minimum wage of $5.15 per hour leaves families even farther below the poverty line is a depressing topic for another day.

The truth is that our wages are competitive with comparable retailers in each of the more than 3,500 communities we serve, with one exception—a handful of urban markets with unionized grocery workers.

Wal-Marts have traditionally targeted rural areas where unions are weak, so of course the pay would be lousy at comparable retailers nearby. What Scott doesn't mention is that Wal-Mart is now so large—its workforce, Head points out, is "larger than that of GM, Ford, GE, and IBM combined"—that it drives down wages at other retailers, too. As Geoghegan observed to me,

Wal-Mart is the behemoth that forces everyone else's wages down and then says, "Hey, we're no worse than anyone else."  They turn everyone else into Wal-Mart and then say, "Are we any worse than the other Wal-Mart wannabees?"  Now that everyone has to play their game, they like to come across as the industry's statesman.  It's disgusting.

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The disparaging reference to "urban markets with unionized grocery workers" is a reminder that Wal-Mart has successfully resisted virtually all efforts to unionize its stores, even in labor-friendly blue states.

Few people realize that about 74 percent of Wal-Mart hourly store associates work full-time, compared to 20 to 40 percent at comparable retailers.

Yes, but what exactly is a "full-time worker"? Typically, full-time is defined as 40 hours a week or more. At Wal-Mart, it's defined as 34 hours a week. So of course Wal-Mart has more "full-time" workers. Fewer hours worked, I need hardly point out, means that Wal-Mart's "full-time" employees are less likely than employees elsewhere to be able to afford premiums for any health insurance they're offered. According to Head, fewer than half of Wal-Mart's employees can afford even the company's least-expensive health plan.

I won't bother enumerating the many, many times Wal-Mart has been accused of violating its own professed policies regarding child labor, working employees off the clock, promoting women, and so on, but you can find that here.

Halfway through his speech, Scott took an amazing U-turn. He stopped arguing that Wal-Mart paid its workers handsomely and instead argued that of course the pay is lousy at Wal-Mart. Pay is always lousy in the retail sector:

Retail sector wages have been about 25 percent lower than economy-wide wages for the last 15 years and this gap is at least as large in other advanced nations. Auto wages, by contrast, have been 40 to 50 percent higher than economy-wide wages.

The discrepancy, Scott argued, is due to the fact that the auto industry is capital-intensive while the retail industry is labor-intensive. But if Scott took this argument at all seriously, he'd have to concede that his own pay should be reduced drastically below its current level. In 2003, the most recent year for which I can find data, Scott sucked down $29 million (including stock-option grants). That same year, G.R. Wagoner, president and CEO of General Motors, hauled in about half that amount, $15 million. Following Scott's logic, I don't see how he can avoid knocking his own pay down to around $10 million.

And if Scott wants to argue that he works for the nation's biggest company? We all know how to answer, don't we? All together now: "Dude! It's only retail!"