I have written before about the “Walmart tax.”
Walmart generates nearly $500 billion in revenue annually; over the past five years, its yearly profits have averaged $15.5 billion dollars, and the family that owns it has a net worth of $129 billion dollars.
Despite its obvious ability to do so, the company declines to pay its employees a living wage, instead relying upon government programs–taxpayer dollars– to make up the difference between its workers’ paychecks and what they need to make ends meet. In essence, when a Walmart employee must rely on food stamps or other safety-net benefits, taxpayers are paying a portion of that employee’s wages.
Walmart (including its Sam’s Club operation) is currently the largest private employer in the country–and one of the largest recipients of corporate welfare. Walmart employees receive an estimated $6.2 billion dollars in taxpayer-funded subsidies each year. Money not paid out in salary goes directly to the shareholders’ bottom line.
Not only is this greedy and despicable, it is bad business. For one thing, as awareness of this subsidy grows, the numbers of people shopping at Walmart declines. But there are other costs incurred.
One of my graduate students wrote his research paper on corporate philanthropy, and the growth of business practices that recognize a duty to stakeholders other than shareholders: employees, vendors and the general community. As he explained,
The Triple Bottom Line (TBL) is an accounting framework that incorporates three dimensions of performance: social, environmental and financial. This differs from traditional reporting frameworks as it includes ecological (or environmental) and social measures that can be difficult to assign appropriate means of measurement. The TBL dimensions may also be referred to as the three P’s: people, planet and profits (Hall, 2011). The TBL further supports the integration of Corporate Responsibility into the fiber of companies as the bottom line is expanded, to include these additional levels of measurement, suggesting “purpose” shares importance with profit.
One company that has seen the benefits of good corporate responsibility through TBL is Costco, specifically the “people” component. Second to the multi-national titan Walmart, Costco is the largest American membership-only warehouse club. Costco’s average pay, for example, is $17 an hour, 42 percent higher than its fiercest rival, Sam’s Club (Greenhouse, 2005). Costco’s practices are clearly more expensive, but they have an offsetting cost-containment effect: Turnover is unusually low, at 17% overall and just 6% after one year’s employment. In contrast, turnover at Wal-Mart is 44% a year, close to the industry average (Cascio, 2006).
In the case of Costco, their corporate responsibility and voluntary decision to invest in their people have been a direct contributor to their profits. In return for its generous wages and benefits, Costco gets one of the most loyal and productive workforces in retail, and, not coincidentally, the lowest shrinkage (employee theft) figures in the industry. As a result, Costco generated $21,805 in U.S. operating profit per hourly employee, compared with $11,615 at Sam’s Club. Costco’s stable, productive workforce more than offsets its higher costs (Cascio, 2006).
It appears that “doing well by doing good” is more than a slogan.
I shop at Costco, and avoid Walmart. So do most of my friends. In virtually all cases, the choice is intentional: we want to demonstrate support for businesses that value and properly compensate their employees (and aren’t sucking at the public tit, if you’ll excuse the vulgarity).
Walmart may get my tax dollars, but I’m damned if they’ll get my discretionary dollars too.
It seems to me that if the government is now going to treat corporations as people, then we ought to start expecting person-like behavior from them. I don’t think asking for responsible social, environmental and financial performance from a person/corporation is at all unreasonable.
I am currently a Walmart shopper due to its department store layout and their prices. They also have many locations, making shopping convenient. They are NOT the only national or international company who underpays employees. When I worked for the City of Indianapolis, I qualified for food stamps due to my low salary.
Costco is a conglomerate with membership fees depending on the number of options you chose to use. They offer bare-bones shopping conditions and they do not offer many brand name items; most shopping must be done in bulk.
If you don’t like Walmart, don’t shop there. If you prefer Costco; take your bags and boxes to self-serve at the checkout and keep your membership fees up to date. I am shopping less and less at Walmart as they are cutting back on employee assistance in shopping areas and seem to constantly be moving sections and displays. As everywhere else, some prices are going up. They will, in future years, gradually become fewer and further between as K Mart, Target and other smaller cost-saving chains have done but I doubt they will completely disappear from our landscape.
I do see, understand and agree with Sheila’s comments but; I must shop at stores I can get to, where actual service is provided and pay prices I can afford…until Donald Trump takes over this part of our world.
Basically, I respect and do my little business with companies and corporations that manage to grow without relying on destruction–of other companies, of individuals, of the dignity of labor, of the environment, of the American economy. Walmart fails that test. It destroys mom and pop stores that for decades have been the backbone of communities. Small home grown businesses become part of the local decision making process and contribute a degree of dog-in-the-fight wisdom to self-government. Walmart and Costco alike are dogs NOT in the fight but dogs that wag the village nevertheless, another term for which is shake down. When you see a $10 price on an item in Walmart or Costco or any other box store chain, you should calculate the real price of that item as something closer to $30, because it will cost that much in a long list of additional expenses: environment, balance of trade, product failure, taxes for wage subsidy,…
In rural areas, such as where I live, Walmart is many times the only department type store available. My county has lost the vast majority of good-paying jobs during the past 30 years. The former employers that paid excellent wages and offered excellent benefits were auto-related and those disappeared many years ago. Some residents have been able to hang on to living wage jobs in a couple factories that have not closed because they do not supply the auto industry, but most people that have stayed here have been forced to accept jobs that pay $10 or less per hour.
Walmart’s employee turnover rate here is terrible. They hire young mothers who often have trouble finding babysitters. These young mothers are forced to deal with constantly changing work schedules, so many are not able to show up because they can’t find a sitter at the last minute or can’t find a sitter for the shift they have been assigned. Consequently, they are terminated. Local Walmart work schedules are brutal. I cannot speak for other locations.
In addition, our local Walmart benefits from the poor wages that people in this county earn. Local people are forced to shop at Walmart because it is the only choice in the area. Other options require a 20-30 mile drive. This is a vicious cycle that locks in their customers as slaves to their bottom line.
Larry; I doubt anyone could provide a valid argument with what you say but…the “mom and pop” shopping era is virtually gone, as are the horse and buggy and biplanes, service stations which actually provided services and doctors who practiced medicine when you made an appointment. We gotta to what we gotta do and make use of what is available, like it or not.
I grew up in a neighborhood which offered everything needed to raise a family and included different forms of entertainment. My neighborhood included a cobbler who took our run over, scuffed shoes with torn stitching and holes in the soles and made them virtually new again…we got years of wear as long as they fit. Yes; I would prefer that life again along with downtown Indianapolis with its many stores, large and small to fill our needs and provide entertainment options. Of course; the public transportation during that time made it a simple matter to find transportation near our homes and take us downtown and also available were transfer stubs on tickets to take additional public transportation to other areas of the city. No parking, less pollution, more options, less stress; I could go on. My great-aunt walked one block to get on a city bus once a week to shop downtown…until she died at age 96. Those options are no longer a part of our world; we can only use what is made available. What we did not have during those bygone days is the 1% of mega-millionaires who don’t believe their mega-millions is enough for them to live on.
Here is a Walmart marketing tidbit that I learned from a friend who worked there years ago.
Walmart has a vast market research team that knows what/who their competition is in every market location. They charge considerably higher prices for items in locations that have little or no competition. I was truly shocked to hear this so years ago when I traveled to Fort Wayne I shopped at one of their Walmart stores to check on the prices for items that I would be needing. I already knew the prices for those items at the local store. I made my purchases in Fort Wayne when I saw the huge price differences. Prices were anywhere from 25% to 40% lower in the Fort Wayne store for the items I needed.
In conclusion, they literally rape their rural customers who have no other shopping options.
You should have heard by now that WalMart is voluntarily raising the wages of its employees to $15.00 per hour.
They are partly responsible for the closing of a lot of Mom and Pop stores, but this is also a part of our brave, new world, in which we buy more and more on-line. If you read the business pages of your newspaper, you know that each week another giant, nationwide chain announces store closings. This means lay-offs for even more low-skilled workers and this trend is likely to continue for some time.
We need to start addressing this in our school systems. How about developing a test for 8th graders that tells us where their interests and talents lie? We can build a secondary education model to develop those talents with an eye towards a different kind of work force. The kind that will be employable in the future.
Let me say first, I am certainly not here to defend Walmart’s overall corporate strategy of underpaying workers relative to the enormous profits it enjoys. However, my daughter has been working at Walmart for about two years. She has intellectual disabilities, so there are any number of jobs there that she cannot do, such as cashiering or working at the service desk. There is almost certainly nowhere else in our local community where she could earn $10.50/hr given her limitations, and certainly not for upwards of 25-30 hours a week. I love nothing more than to support small local businesses, and I do. But the fact is, a small family-owned business has to hire people who give them the most “bang for their buck,” who can stock the shelves, help with inventory, interact well with customers, and cashier. They cannot afford to hire someone like my daughter, who would be paid like other employees but can only contribute half the work. I know that Walmart does hire many people with disabilities and for that I do applaud them.
Peggy Hannon – I’ve searched, but can find nothing indicating that Walmart is raising their wages to $15 per hour across the board. The most recent data I could find show that, on average, for all stores in the US, hourly employees make less than $10 per hour. (It’s on http://www.glassdoor.com.) Have I missed an announcement?
Even more disturbing is a state-level tax dodge where they and other big box stores “rent” their signs and property from a Real Estate Investment Trust (REIT), usually located in Nevada or Delaware. The “rent” for their logos, signage, and real estate is typically equal to their taxable revenues, resulting in near-zero tax liability in places like Alabama (see Susan Kennedy’s excellent presentation: http://media.al.com/live/other/Susan%20Kennedy%20presentation%20about%20state%20funding%20loopholes.pdf
That tax dodge hurts school children in Alabama, a state that ranks 50th among states in 4th and 8th grade math on the National Assessment of Educational Progress.
Don’t look now but Amazon accomplishes both tasks and is a threat to our social, financial and economic environment via its growing monopolistic powers.
The following few comments from Yale Law Journal I believe demonstrate the potential for continuing America’s downward spiral toward a third world oligarchy.
In a nutshell, we should proceed with caution before we gut our local economies completely.
A. Willingness To Forego Profits To Establish Dominance
Recently, Amazon has started reporting consistent profits, largely due to the success of Amazon Web Services, its cloud computing business.192 Its North America retail business runs on much thinner margins, and its international retail business still runs at a loss.193 But for the vast majority of its twenty years in business, losses—not profits—were the norm. Through 2013, Amazon had generated a positive net income in just over half of its financial reporting quarters. Even in quarters in which it did enter the black, its margins were razor-thin, despite astounding growth.
B. Another key element of Amazon’s strategy—and one partly enabled by its capacity to thrive despite posting losses—has been to expand aggressively into multiple business lines.227 In addition to being a retailer, Amazon is a marketing platform, a delivery and logistics network, a payment service, a credit lender, an auction house, a major book publisher, a producer of television and films, a fashion designer, a hardware manufacturer, and a leading provider of cloud server space and computing power.228 For the most part, Amazon has expanded into these areas by acquiring existing firms.229
Involvement in multiple, related business lines means that, in many instances, Amazon’s rivals are also its customers. The retailers that compete with it to sell goods may also use its delivery services, for example, and the media companies that compete with it to produce or market content may also use its platform or cloud infrastructure. At a basic level this arrangement creates conflicts of interest, given that Amazon is positioned to favor its own products over those of its competitors.
C. Critically, not only has Amazon integrated across select lines of business, but it has also emerged as central infrastructure for the internet economy. Reports suggest this was part of Bezos’s vision from the start. According to early Amazon employees, when the CEO founded the business, “his underlying goals were not to build an online bookstore or an online retailer, but rather a ‘utility’ that would become essential to commerce.”230 In other words, Bezos’s target customer was not only end-consumers but also other businesses.
http://www.yalelawjournal.org/note/amazons-antitrust-paradox
Jamie; thank you and I agree that supporting Walmart does not mean supporting their corporate strategy. My granddaughter (no disabilities) was hired with no qualifications or experience, stated at above minimum wage salary. Shortly after training and working “on the floor” proving her abilities, she was given a raise; was soon after promoted to cashier with another increase in salary. After almost two years she left their employ due only to a problem pregnancy which required she take frequent rests off of her feet, her choice to leave.
There is also the world-wide condition of some people having a work ethic and performing diligently, the ability to learn new skills; there has also been the disparity in wage levels in all fields and levels of employment. If Walmart workers are the primary target regarding low wages; where do we start with those who get paid the “big bucks” while the support staff does all the work and is never paid what they are worth? This is true in the corporate world and in politics; never more true than today.
Nobody ever said the world is fair and nobody ever promised us a rose garden. Had I ever been paid my worth during the 25 years of employment, 20 if those years for the City of Indianapolis under three Republican administrations; I would not be struggling on $805 monthly in Social Security.
Joe Adams,
Thanks for sharing that report on Alabama Schools!
It was excellent and helped me make a number of connections I was unaware of in terms of how Corporations abuse their employees and Governments underserve their citizens through concerted tax policy.
The privatization of profit accompanied by the public assumption of risk and cost is a fundamental element of 21st-century capitalism. Although this phenomenon reached its zenith in the 2008 financial crisis, it was well established prior to that time (auto manufacturers and fossil fuel companies have long invoked this principle to maximize their bottom lines). The Walton family conducts itself in strict adherence to the current principles of the capitalist system: Raise profits by lowering costs, especial those in the area of wages. None of this will change until the underlying system, which dictates the conduct of those working within it, is altered. As long as a tiny minority control the wealth and power that corporatism bestows, this principle will remain in force. Citizens acting in concert to achieve a more equitable distribution of national wealth (should the Waltons control as much wealth as the lowest-income 42% of Americans?) is the only conceivable solution to this problem. Not to discuss the root cause – our dystopian form of capitalism – is to acquiesce in its continuation. If we don’t challenge this root assumption of our culture, the number of people living without hope will continue to grow. A severely unbalanced economic system is not only unjust, it is also unstable. Let the conversation begin by considering how to allow workers – the real stakeholders in a corporation – a meaningful voice in major corporate decisions.
It has occurred to me that virtually every country in the world today has a similar mixed economy, about half socialist and half capitalist. That could be taken as evidence of the winner having been adopted from all of the various economic theories that were proposed at the start of the last century.
Of course what makes it work is regulation, the power of the people to specify what we will tolerate and what we will not from the capitalistic side.
Capitalism is without a doubt evolving and selecting as expected, responding to an ever dynamic technological and cultural environment.
What’s failed recently here is our wisdom on the regulatory side and, perhaps related, the take over of business by financial accounting in the relentless search for monetization of everything.
Requiring the triple bottom line accounting concept addresses both.
Of course at the moment the regulatory process first needs to be fixed by much less tolerance for mental or fiscal manipulation, read lobbying, propaganda and advertising, as means of deceiving democracy.
Wasn’t our beloved Hillary Clinton a member of the Wal-Mart board of directors years ago?
Affluent Caucasians boycott Wal-Mart–not because of ethics– but because they don’t want to breath the same air as the lower caste.
I do not shop at Walmart for the these reasons. I think it is one of the most obvious, egregious problems for our country that is right in front of people. And when you see the charts that show the largest employers in some states, it is appalling.
I have not darkened the door of a Walmart for 12 years in protest to the way they treat their labor force and how (as Shelia documents) I am forced through certain government programs to maintain their profit margins that accrue directly to Sam’s heirs and devisees, whose combined wealth exceeds that of the combined lower 40 percent of all Americans. This is an obscene result and I, like the rest of us, am knee-deep in a dilemma, i.e., I am in favor of these government programs to help the working poor but opposed to how government largesse works out in practice in padding the profit margins of the superrich. No wonder superrich monopolists quietly favor such government programs; the “government” by its programs and policies in providing welfare for the poor also provide corporate welfare for the superrich under cover of nobility of purpose and is so to speak by far the latter’s best-paying “customer.”
The culprit is not to be found in such welfare programs for the poor and underserved; it is rather the four decades-old and ongoing program of wage inequality, commented upon by Piketty and Stiglitz in their books and papers (along with Piketty’s extensive discussions of patrimonial capitalism, or being born on third base – see Trump, Bush, Romney, Sam’s heirs and devisees et al.). Few of us are born on third base; the vast majority of us are at the plate with two strikes already assessed for our future(s). Those who work at Walmart are by and large standing at the plate with three strikes already assessed against their future(s), victims of chronic wage inequality trying to exist while the money Walmart should be paying them but for chronic wage inequality is diverted to Sam’s heirs and devisees.
Walmart has recently stated that they are going to be paying their help a minimum wage of $15 per hour, a welcome announcement not in keeping with their business plan history. How to pay for such raises? With big competitive heat from Amazon it may be that Walmart like other brick and mortar stores has decided to attract better customer service with more efficient help and finally understand that wage inequality is abating as policy with a tightening labor market. It also could be because they intend to insert more automation into how they do business, or that they will fare better on taxes and regulation as Trump has promised, or raising prices, or going head to head with Amazon in electronic sales and delivery while making their present stores into warehouse sites for delivery, or anything else they can conjure which will keep the profit margins secure or even enhanced for Sam’s heirs and devisees.
I suspect without knowing that unless Walmart reconfigures its business plan to meet market realities it is ultimately headed for a Chapter 11 experience. Walmart, after all, produces nothing; it is a mere marketing scheme for the goods and services produced by others, and it appears that brick and mortar distributive schemes are about to become horse and buggy efforts outdone by new and better and cheaper electronic distributive schemes. Now if Walmart provides living wages and health insurance and pension plans for their help, I may darken their door once again and/or order electronically. Their call.
I used to shop at Walmart. I haven’t in lots of years. I hate the way they run local businesses off and take over. After they do that, they move to another location, leaving an empty building.
Austin has lots of established mom and pop stores. The rent and prices go up and up and several loved stores have closed. I can shop, go to dentist and drug store and bank in our general area, though.
Comparing all of Walmart to Costco is a bogus comparison. Showing Walmart profits as a raw number (15.5 billion) while omitting the very low profit margin (3%) is also misleading. The Walton family takes their 129 billion dollar net worth and creates over $40 billion in annual payroll. Most people would refuse to sell their product for a mere 3% profit margin and almost no entity in the world produces annual payroll at over 30% of net worth.
Walmart may be great at generating profits for the family, but I have never felt welcome in a Walmart store and I have reached the point where I can choose how I spend my money. Walmart, like the other big box stores, offers a lot of area under roof, with shelves full of things you can’t readily locate, and often the one size you need to buy is out of stock. Then there is the excruciating wait in the checkout line. Shopping in a smaller store, with knowledgeable employees, is much more satisfying, and supports that local economy.
Amazon and others are efficient and fast, but i have a hard time supporting the next mega-monster.
Another way Walmart shifts its burdens to taxpayers is using local police departments as free (for Walmart) security. Just ask the managers at the Beech Grove Walmart.
https://www.bloomberg.com/features/2016-walmart-crime/
Another example. http://www.kshb.com/news/local-news/walmart-in-parts-of-the-metro-ranks-high-on-the-number-of-police-calls
Yet another. You get the idea. http://fortune.com/2016/12/18/minnesota-police-walmart-guards/
Well said. The Walton’s have also used their billions to “reform education” or away from union taught public schools. If they can screw over workers, so should charter school operators.
I haven’t heard anything about a starting $15 wage. I can believe it though, because I know how they’re going to fund it: by cutting hours. You think it’s hard to find a floor associate now; it’s just going to get worse. Someone hired to work in one department is often asked to cover others, without apology. I was asked to do more and more, and customers just piled up and up until I felt like handing out numbers. (“Now serving…”)
I believe that they would love to completely go automated and get rid of labor costs entirely.
Rosemary; I read the articles and remember problems locally at the Beech Grove Walmart. What I find confusing is that Walmart is being blamed for crimes being committed in their stores; police are called for shoplifters in all stores and problems with homeless causing problems cannot be forcefully drug out…we have seen a major fight between two grown women in one of the local Walmart stores. When crimes are committed, police are called, what are store employees supposed to do?
William.
https://mobile.nytimes.com/2007/05/20/us/politics/20walmart.html
Good reading about HRC on the Walmart BOD.
Well, I shop at Walmart but with some reluctance. However, I have a friend who worked a tech job at several firms. As a result of mergers and buy outs he lost his job (s) AND health insurance. His wife, a book editor, was self employed. Their self pay insurance was incredible. They retired just as Obamacare was coming in. Prior to that the husband got a Wal-Mart job FOR THE FRINGE BENEFITS, primarily the HEALTH INSURANCE. They saved a lot of money getting better coverage for less money. He was certainly underemployed, but still. Considering that most Wal Mart employees are basically unskilled, and per another friend many employees are older women supplementing Social Security, W-M is not the bad guy rich people believe. I worked in high school at Sears, every bit as big as W-M, now almost dead. I sold and supported Word Perfect (Andre Peterson is a great guy), Harvard Graphics, Visicalc, etc. When MS Windows 286 and MS Office came out the above companies were quickly wiped out. With Amazon, etc. I think there is a 50% chance that Wal-Mart will be dead or bought by Alibaba w/in 5 years. Lets not carve up W-M on the theory they are forever rich when tomorrow might be the end.( consulting business for above).
I avoid WalMart like the plague for so many reasons. I patronize Costco and occasionally a dollar store. It’s detestable that WalMart undercut small town retailers with predatory low pricing, only to raise prices after running local Mom and Pop stores out of business. John D. Rockefeller would love the Waltons.
To add insult to injury, the Walton family money – via campaign contributions – supports the candidates who OPPOSE the government support programs that provide a safety net for their employees. “Predatory” seems too kind.
My friends got jobs at a Florida Walmart to supplement their Social Security; Linda worked as cashier, Dick with his disability was a “greeter”. They were both satisfied with the job, the supplemental salaries and the health care. When she was diagnosed with cancer and could no longer work, Walmart allowed the employees maintain paying for her insurance for a few months. When she worsened and needed to move back to Indiana for full care by her daughter, Walmart found a job for Dick at the nearest Walmart. She died only 3 months later; Walmart kept Dick on their employee list but allowed him time to grieve and to make what arrangements he needed. They told him to let them know when he was ready to move back to Florida and his job was waiting for him.
About those rich Waltons…all owners of those huge corporations are wealthy, they all pay lower tax rates (and it will get lower thanks to Trump and the Republicans), many huge businesses still do not offer benefits such as health care for employees. Walmart has become the ugly poster child for corporations; the butt of all jokes and accusations of mistreatment. Even blamed for being victimized by customers who shoplift and pick fights in their stores. If you don’t like Walmart, don’t shop there…this is still America and you have freedom of shopping choice. Till Trump, Koch brothers, et al, and the Republicans find a way to change it and pick our shopping options as they are picking “our” wars.
The compiled data today by Prof. Kennedy and contributors are at least amusing. We can know such a great deal about the finances of Costco and Walmart but we are allowed almost nothing of the Trump Dynasty and Corporation. When will we know? At the very least the Trump Corporation and subsidiaries enjoy untold subsidies and inestimable perks. Maybe some entity knows but who? Congress has the power to find out. When will we know? We cannot even know if the value of all this income is itemized and declared while we seem to be certain that deductions are itemized if not padded. The most startling assault is that we are not even allowed to know and that Congress and the Press seem to be co-conspirators.
Now that the majority of Electors from the States and Territories have flooded the Washington Swamp and have abandoned the rest of us we are stuck with the hopelessness of waiting for the next election when the totality of their control will likely make it tough for us to “Hoover” them into the dustbag of history. C’mon minority parties, bring on your First Squad and keep up the Opposition Defense now and through 2018 and 2020.
A previous contributor has brought up Amazon,I wonder how many among those boycotting Wal-Mart also boycott Amazon? I would bet most do not. It’s empty virtue signaling among those calling themselves liberals. They boycott Wal-Mart–not because of business tenets– but because of Wal-Mart’s clientele. As if black working class folks and immigrants do not shop at Wal-Mart. This post and the accompanying comments from some have been disingenuous and absolutely transparent.
Today’s Liberal has absolutely no principles. None. That is why the New Democrats are losing appeal –even among those of us on the genuine Left–and deservedly losing seats within government . Today’s liberal cannot construct an honest list of principles….They have none. They believe in nothing but empty symbolism. Hell,Trump will probably be lionized on the Ellen DeGeneres show in a few years from now…..Just like GW Bush was not long ago.