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.