Kevin Drum compares a recent Wal-Mart advertising campaign extolling its virtues as a family friendly company with the reality that Wal-Mart does everything it can to keep its costs down, including providing poor health benefits. Indeed, the WSJ report Kevin cites doesn’t even mention that Wal-Mart keeps most of its “associates” part-time so as to escape paying benefits. Kevin argues,
For better or worse, part of the social contract in America since World War II has been that large corporations provide decent healthcare for their workers. Refusing to do so is a core part of Wal-Mart’s strategy for squeezing every last nickel out of its workforce, and they deserve all the scorn they get for their efforts to force an entire industry down to their subterranean level.
There’s certainly something to this argument.
How has Wal-Mart managed to get away with this? Shopping at their stores is a horrible experience: there’s no one to knowledgeably answer questions about products, the stocking isn’t particularly efficient, the aesthetics are awful, the stores are gigantic, making finding things difficult, and yet they’re almost always crowded. Why do people put up with this? Because Wal-Mart sells commodity goods for which people are incredibly price sensitive. Their prices are almost always lower than those of their competitors–and not just the vaunted “mom and pop” stores but the other giant chains. Wal-Mart sells hammers cheaper than Ace Hardware, CDs for less than Tower Records, books for less than Borders or Barnes and Noble, tires cheaper than Firestone, and groceries cheaper than Safeway. Far less in most cases. Indeed, even comparing apples to apples, they undercut Target and K-Mart.
Wal-Mart provides mostly entry level, no skill jobs. Being a cashier or shelf stocker isn’t a career, it’s a means to pay the rent while you’re putting yourself through school or for housewives and retirees to supplement their household income for a few hours a week. Or, as is the case locally, for new immigrants to get a foot in the door. Indeed, the WSJ report showing how lousy the benefits are bears this out, noting that the annual turnover rate is a whopping 50%. It also makes clear that Wal-Mart provides cheap catastrophic coverage for even these part-time workers, which is something they’d be unlikely to get elsewhere. The article doesn’t mention the benefits available for its career employees–store managers and up. I’d wager they’re quite competitive.
Wal-Mart should rightly be criticized–indeed, punished–when it breaks the law by hiring illegal immigrants or uses illicit tactics to prevent workers from unionizing, keeping people just under the 40-hour threshold, and so forth. But I’m not sure that it’s a problem that they provide pay and benefits at the level the market will bear. That’s a reality we all face. It’s why, for example, universities routinely get over a hundred applicants with PhD’s for one job paying $40,000 a year or less. People work at Wal-Mart because they can’t find another employer willing to provide them a more attractive wage, benefit, and flexibility package. Once they can get a better offer, they leave. Half of their entire workforce–and presumably, more than half of their non-managerial employees–apparently does that within a year.
Update (1133): By virtually any measure, our standard of living is much higher now than in the pre-Wal Mart era. The market is brutal in the individual case but damned efficient in the aggregate.
The function of Wal-Mart is to generate profits for its ownership. Otherwise, there would be no incentive to run the stores. They’d prefer to simply have people donate money to them, saving the capital-intensive costs of buildings, warehouses, and employees but, alas, that model only works for Andrew Sullivan. So, they instead are forced to provide thousands of jobs for low-skilled people and sell products that people desire to purchase at a price lower than any of their competitors. The consumers are apparently satisfied, in that they flock to Wal-Mart in droves. The employees are apparently better off as well, in that they don the blue vest in preference to the other firms lining up to hire unskilled workers.
Update (1644): OBE posits that most of the students hired by Wal-Mart are likely covered by their parents’ insurance. That’s a valid point. Indeed–while I’ve got no numbers whatsoever and doubt any would be publically available–it’s not unreasonable to presume that some significant portion of Wal-Mart’s employees, like those of other companies, are covered by health insurance through some means other than their employer. Many are certainly covered under their parents’ or spouses’ plans.
