How Wal-Mart works

Doug forwarded me this New York Review of Books article on Wal-Mart. Its well documented thesis, the exploitation of the working poor is central to the business strategy of the world's largest and most powerful corporation. Some highlights:

As of last spring, the average pay of a sales clerk 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. Despite the implied claims of Wal-Mart's current TV advertising campaign, fewer than half— between 41 and 46 percent—of Wal-Mart employees can afford even the least-expensive health care benefits offered by the company.

...One of the most telling of all the criticisms of Wal-Mart is to be found in a February 2004 report by the Democratic Staff of the House Education and Workforce Committee. In analyzing Wal-Mart's success in holding employee compensation at low levels, the report assesses the costs to US taxpayers of employees who are so badly paid that they qualify for government assistance even under the less than generous rules of the federal welfare system. For a two-hundred-employee Wal-Mart store, the government is spending $108,000 a year for children's health care; $125,000 a year in tax credits and deductions for low-income families; and $42,000 a year in housing assistance. The report estimates that a two-hundred-employee Wal-Mart store costs federal taxpayers $420,000 a year, or about $2,103 per Wal-Mart employee. That translates into a total annual welfare bill of $2.5 billion for Wal-Mart's 1.2 million US employees.

Wal-Mart is also a burden on state governments. According to a study by the Institute for Labor and Employment at the University of California, Berkeley, in 2003 California taxpayers subsidized $20.5 million worth of medical care for Wal-Mart employees. In Georgia ten thousand children of Wal-Mart employees were enrolled in the state's program for needy children in 2003, with one in four Wal-Mart employees having a child in the program.

The article concludes that there is every prospect this strategy and its harsh practices will continue to spread throughout the economy. One industry I often wonder about is the airline industry. We hear that the new upstart airlines are efficient and not burdened by the legacy costs of the older carriers. What are the legacy costs? Better working conditions, higher pay and pension plans. I thought a goal of civil society was a higher standard of living, instead large swaths of our society face a deteriorating one.