Stupid Economists Attack Wal-Mart

[Big War Bird]

What follows is a blatant attempt by so called economists to rip a succeesful company and hope that you don't know the first thing about economics.

Wal-Mart Could Hike Pay, Keep Prices Low, Study Says

By Emily Kaiser, Reuters

CHICAGO (June 16) - Wal-Mart Stores Inc. could significantly increase employee wages and benefits without raising prices, and still earn a healthy -- albeit smaller -- profit, research released on Thursday concluded.

Corporations exist to earn a profit, the bigger the better, smaller profits are BAD. These economist hope you don't know this.

The Economic Policy Institute study comes as the world's biggest retailer faces a barrage of criticism from labor unions, politicians and community activists, who say it pays poverty-level wages and drives competitors out of business.

Actually Wal-Mart pays market wages, otherwise people would not bother working there. Poverty is an arbitrary and loaded term. Again they aer banking that you don't know this. As for the driving out competition, we will later see that this is simply not true.

Wal-Mart, which has taken steps to improve its health care and other benefits, argues that its low prices boost consumers' buying power and increase their standard of living. The retailer regularly cites a Global Insight study that found Wal-Mart saves U.S. families more than $2,000 per year.

Gasp, that looks like a business plan! Deliver value for the money.

"The more important question for the future isn't whether Wal-Mart is a force for good or evil in the American economy, but whether the economic benefits provided by Wal-Mart can be preserved even if their labor compensation is dramatically improved," economists Jared Bernstein and Josh Bivens wrote.

They concluded that if Wal-Mart reduced its profit margin to about 2.9 percent, where it stood in 1997, from the 3.6 percent margin it recorded last year, that would free up some $2.3 billion to pay workers without raising prices. That works out to just under $2,100 per non-managerial employee, the researchers calculated.

Here is what every business owner wants to do, cut the profits by 20%! Whether Wal-Mart's profit margin is 2.9 or 3.6 percent, the Walton family would better be served by shutting every store, liqidating its assests and putting it all into a simple savings account, which today is earning well over 4%. Again the authors of this hatchet job hope you don't know this.

There is also some slight of hand here. Wal-Mart's Global Insight study claims it saves each family $2000 a year, while the economist say it could raise worker pay $2100 a year. These economists are hoping you think these numbers mean that Wal-Mart is stealing $100 somehow. But that would only be true if the only people that shopped at Wal-Mart also worked there. Last time I checked a family could shop at Wal-Mart even if you did not have a family member employed there.

They noted that rival Costco Wholesale Corp. posted a profit margin of about 2 percent in 2005. The study did not mention Target Corp., Wal-Mart's biggest competitor in the discount sector, which reported a 4.7 percent profit margin for last year.

Wow a little bit of real journalism here! As it stand now Wal-Mart is the one being driven out of business by Target! Perhaps a these economists could better spend their time by studying why Target is the more profittable company instead of trying hasten the day that everyone in the unemployment has a job reference to a vacant Wal-Mart.

In a telephone interview, Bivens said his research was aimed at refuting "outsized" claims that Wal-Mart saved consumers hundreds of billions of dollars and that its margins were so thin that it simply could not afford to pay employees more without forcing low-income consumers to foot the bill.

"I always thought that they had really, really tight profit margins," he said. "They're really a microcosm of the U.S. economy. They are very, very good at generating income, but it needs to be spread out more equitably."

As I have demonstrated, Wal-Mart's profits are thin, in fact pathetically so.

His research refuted many of the findings from the Global Insight study released last year regarding how much money Wal-Mart saved consumers.

Sadly, none are on display here.

Jim Dorsey, a spokesman for Global Insight, said the research firm stood by the accuracy and methodology of its study, which was independently reviewed.

"Our study produced estimates of Wal-Mart's impact on prices and consumer savings that make common sense and are consistent with the findings of other rigorous, peer-reviewed studies on the subject," he said.

"In its criticism of Global Insight's findings, the Economic Policy Institute's paper does not properly account for the indirect impact of Wal-Mart on prices."

Wal-Mart said that its stores were good for U.S. working families, and noted that they created tens of thousands of jobs last year, many of them in underserved neighborhoods.

The retailer also criticized the Economic Policy Institute as "funded by big labor."

"We will treat the findings of this study with the same amount of skepticism as other statements made by labor leaders who oppose us," Wal-Mart spokesman Kevin Thornton said. "We are proud of the economic impact we have on communities -- from the job opportunities we provide, to the money we save working families, to the tax revenue we generate, to the contribution we make to local charitable organizations," he added.

Thornton said Wal-Mart's average full-time wage is $10.11 per hour, and the retailer does market analysis to ensure its wages are competitive. He noted that Wal-Mart offers 18 different health care plans that cost as little as $11 per month in some areas.

Bivens and Bernstein concluded: "Wal-Mart does a lot right. It has expanded productivity by being more efficient and leaner than many other companies. Many of the benefits shoppers accrue from Wal-Mart's expansion could be preserved even if the retailer had to meet the expectations of its critics regarding fair worker compensation."

They forgot to add the rest of the quote, "if Wal-Mart stockholders are willing to take it the rear."

[Count of Montesano]

Hmm, WalMart employees actually do better than I thought. That being said, WalMart actively pushes its employees to use government welfare (foodbanks, state health insurance, etc). Large corporations shouldn't burden taxpayers with the basic healthcare services they can afford to provide.

Let's also bring up the fact that the Waltons personally spend as much on artwork for their mansions as it would cost them to provide healthcare for all of their employees in the Southeast.

[Richard the Lionheart]

Wal-Mart is a known abuser of employee rights. It profits off of poverty so in order to continously gain profit, it creates more poverty.The less profit for Wal-Mart the better.

[Big War Bird]

Wal-Mart is a known abuser of employee rights. It profits off of poverty so in order to continously gain profit, it creates more poverty.The less profit for Wal-Mart the better.

That's the funniest thing I've ever heard today. Poverty is not created by employment, but by the lack there of. That some of its employs might still qualify and use public assistance is not Wal-Mart's fault, but speaks to the relative employability of its employees.

[Richard the Lionheart]

That's the funniest thing I've ever heard today. Poverty is not created by employment, but by the lack there of. That some of its employs might still qualify and use public assistance is not Wal-Mart's fault, but speaks to the relative employability of its employees.

Oh yeah? You wanna bet?

Here read this whole article and educate yourself.

http://www.thenation.com/doc/20050103/featherstone

Wal-Mart knows its customers, and it knows how badly they need the discounts. Like Wal-Mart's workers, its customers are overwhelmingly female, and struggling to make ends meet. Betty Dukes, the lead plaintiff in Dukes v. Wal-Mart, the landmark sex-discrimination case against the company, points out that Wal-Mart takes out ads in her local paper the same day the community's poorest citizens collect their welfare checks. "They are promoting themselves to low-income people," she says. "That's who they lure. They don't lure the rich.... They understand the economy of America. They know the haves and have-nots. They don't put Wal-Mart in Piedmonts. They don't put Wal-Mart in those high-end parts of the community. They plant themselves right in the middle of Poorville."

Al Zack, who until his retirement in 2004 was the United Food and Commercial Workers' vice president for strategic programs, observes that appealing to the poor was "Sam Walton's real genius. He figured out how to make money off of poverty. He located his first stores in poor rural areas and discovered a real market. The only problem with the business model is that it really needs to create more poverty to grow." That problem is cleverly solved by creating more bad jobs worldwide. In a chilling reversal of Henry Ford's strategy, which was to pay his workers amply so they could buy Ford cars, Wal-Mart's stingy compensation policies--workers make, on average, just over $8 an hour, and if they want health insurance, they must pay more than a third of the premium--contribute to an economy in which, increasingly, workers can only afford to shop at Wal-Mart.

To make this model work, Wal-Mart must keep labor costs down. It does this by making corporate crime an integral part of its business strategy. Wal-Mart routinely violates laws protecting workers' organizing rights (workers have even been fired for union activity). It is a repeat offender on overtime laws; in more than thirty states, workers have brought wage-and-hour class-action suits against the retailer. In some cases, workers say, managers encouraged them to clock out and keep working; in others, managers locked the doors and would not let employees go home at the end of their shifts. And it's often women who suffer most from Wal-Mart's labor practices. Dukes v. Wal-Mart, which is the largest civil rights class-action suit in history, charges the company with systematically discriminating against women in pay and promotions [see Featherstone, "Wal-Mart Values: Selling Women Short," December 16, 2002].

Wal-Mart doesn't pay it's employees enough...instead it encourages them to go on welfare. You know what this means? This means that Wal-Mart is getting rich off of our tax dollars. Yeah that's right, they're ripping off all of America, not just their own workers.

[Erik]

Wal-Mart doesn't pay it's employees enough...instead it encourages them to go on welfare. You know what this means? This means that Wal-Mart is getting rich off of our tax dollars. Yeah that's right, they're ripping off all of America, not just their own workers.

This still means they just play the system to the best of their abilities, and you can't realy blame them for that.
The only ones to blame are the US government (or the people who voted for them) for allowing this to happen.

[Richard the Lionheart]

This still means they just play the system to the best of their abilities, and you can't realy blame them for that.
The only ones to blame are the US government (or the people who voted for them) for allowing this to happen.

The corporate elite control the government. It's all about special interests. Corporations such as Wal-Mart pay off politicians all the time.

The problem lies in two areas.

1) The Government

2) The Corporations

[HMMcKamikaze]

The thing is, that if Walmart were to raise wages and provide health benifits for employees, the price of goods would raise quite a bit. I wish there was some way they could do that, but i dont know if its possible.

If you look at it one way the employees deserve more pay, but in another way many of them wouldnt have a job if it werent for Wal Mart, they would even possibly be homeless, so providing the basic necessities for life is better than nothing.

[Richard the Lionheart]

The thing is, that if Walmart were to raise wages and provide health benifits for employees, the price of goods would raise quite a bit. I wish there was some way they could do that, but i dont know if its possible.

If you look at it one way the employees deserve more pay, but in another way many of them wouldnt have a job if it werent for Wal Mart, they would even possibly be homeless, so providing the basic necessities for life is better than nothing.

Did you read what I just posted? Wal-Mart creates more poverty in order to be profitable.

[HMMcKamikaze]

Did you read what I just posted? Wal-Mart creates more poverty in order to be profitable.

I was writing my post while you posted yours.

But i disagree in a sense, but its rather double sided. People who work there are stuck under the poverty line, and they will always be like that working there, but if they didnt work at Wal Mart, chances are that they wouldnt be in a better position.

Im not trying to advocate Wal Mart's stinginess, im merely saying that even the little that they do give is helpful for many people.

[RusskiSoldat]

There's a reason we have things like minimum wage: corporations can't be trusted to pay their employees adequately.
In order to get to the top in life, you have to sacrifice a lot.
Empathy and morals being among that lot.

[conon394]

Big War Bird

Very trenchant points, of course labor is just one more input. Wal-Mart should rationally push for the return of black slavery and more generally the legality of indentured servitude, lowering its cost structure... The point being that a particular corporation’s profit maximization stratagy is not necessarily the same as a the “people’s” goals

Corporations exist to earn a profit, the bigger the better, smaller profits are BAD. These economist hope you don't know this.

True of course, but as Henry Ford (paraphrased) once noted if you don’t pay your employees a decent wage who is going to buy your products?

[Big War Bird]

Big War Bird

Very trenchant points, of course labor is just one more input. Wal-Mart should rationally push for the return of black slavery and more generally the legality of indentured servitude, lowering its cost structure... The point being that a particular corporation’s profit maximization stratagy is not necessarily the same as a the “people’s” goals



True of course, but as Henry Ford (paraphrased) once noted if you don’t pay your employees a decent wage who is going to buy your products?

Henry Ford nice quote aside, the labor market relity of his time was that rapid industrialization had stretched the labor market to the breaking point. He and other manufacturers had to dramatically raise wages to attract skilled laborers to the factories.

As for your comment on slavery and indentured servitude, well that would go against the free market and free labor principles I am defending Wal-Mart with.

[RusskiSoldat]

A lot of people, really.
How many of us buy products made in Chinese sweatshops?
I'm willing to bet the majority.

[Erik]

Walmart simply plays the system to gain maximum profit.
Like BWB pointed out that is exactly what you expect from any corporation.

If you aren't happy with the result you shouldn't try to change Walmart, you should change the system: introduce minimum wages, create antitrust laws, etc. etc.

A lot of people, really.
How many of us buy products made in Chinese sweatshops?
I'm willing to bet the majority.

Because Americans and Europeans still get payed enough to buy those products.
If everybody in the world got payed as little as the Chineese workers did then nobody would be able to buy anything more than the bare necessities and the entire world economy would collapse (as it did in the 1930's)

[HMMcKamikaze]

Ah yes the government. Theres nothing we can do about it anymore, they have the power of complete control. Only if the nation were to revolt as a whole would they fall, but the government doesnt make any moves controversial enough to incite such rath.

I know there are many benifits, but it seems to me they are slowly fading. Only 3000 jobs switch when a new president is elected, meaning the rest are not chosen by the citizens. So in the end, we dont have the power to truly choose who is governing us.

[Denny Crane!]

Corporations like wal mart are bad news for everyone.

They are bad news for the environment, in general encouraging the use of more and more packaging and transporting goods over long distances. Supermarkets in the main favour imports though quite why I am unsure.

They utilise anti competitive practices such as the aquiring of land banks and monopolisation of wholesalers. As well as forcing low prices to the exclusion of any competitors who cannot buy in the same quantity. At the same time there low prices do not extend to all products and they can be markably higher on quite a range of products. They are slowly closing all independant retailers, at a rate of up to ten per day. This is not good for the economy, small businesses generate more income and circulate more money in the community than supermarkets. When a large supermarket opens there is a net loss of jobs. The British Retail Planning Forum found that every time a large supermarket opens on average 276 jobs are lost

Something which I believe started with the consumer culture and has been pushed further by the chain stores is the idea of perfection in your products. Each item you buy is generally wrapped in plastic to protect surfaces from marks, this goes so far that I actually have to unwrap a dog dish from protective sheets so it is nice and shiny..... for a dog to eat out of. One thing we have to accept is that we live in a world with limited resources and consume 3 or 4 times what we should. Therefore the demands that big business place on government shouldn't matter, the worries of the economy should be secondary to worries about the environment.

Peter


Edit rant on: They are another example of the chain shop culture which has made virtually every city center in the uk identical. I struggle to tell the difference between Leeds, manchester and newcastle the only time you can tell the difference is when you look up and see the tops of the buildings which have different architecture.

[Last Roman]

Man, I just love unregulated big business

[Dromikaites]

Here is what every business owner wants to do, cut the profits by 20%! Whether Wal-Mart's profit margin is 2.9 or 3.6 percent, the Walton family would better be served by shutting every store, liqidating its assests and putting it all into a simple savings account, which today is earning well over 4%. Again the authors of this hatchet job hope you don't know this.

Not so fast! The profit Wal-Mart makes is the result of a very fast inventory turnover. If the Waltons liquidate Wal-Mart and put the money in a bank they would indeed make 4% but 4% on what? While the company is operating it is making $256 billion in sales every year, on which a 2% margin would mean $5.12 billion. Do you really believe they can make $5.12 billion in interest from whatever they would get by selling the assets of the company?!

There is also some slight of hand here. Wal-Mart's Global Insight study claims it saves each family $2000 a year, while the economist say it could raise worker pay $2100 a year. These economists are hoping you think these numbers mean that Wal-Mart is stealing $100 somehow. But that would only be true if the only people that shopped at Wal-Mart also worked there. Last time I checked a family could shop at Wal-Mart even if you did not have a family member employed there.

Again I think you misunderstood the conclusion of that study. It is not $2100 per year, it's $2100 per month they are talking about (as opposed to less than $1300 or 8$/hour at 160 working hours per month).

That being said, I think Wal-Mart would be better regulated by the market than by any laws. It is not as successful as it might seem at first glance. http://www.economist.com/printeditio...ory_ID=2593089

[Big War Bird]

Originally Posted by Featherstone


Wal-Mart knows its customers, and it knows how badly they need the discounts. Like Wal-Mart's workers, its customers are overwhelmingly female, and struggling to make ends meet. Betty Dukes, the lead plaintiff in Dukes v. Wal-Mart, the landmark sex-discrimination case against the company, points out that Wal-Mart takes out ads in her local paper the same day the community's poorest citizens collect their welfare checks. "They are promoting themselves to low-income people," she says. "That's who they lure. They don't lure the rich.... They understand the economy of America. They know the haves and have-nots. They don't put Wal-Mart in Piedmonts. They don't put Wal-Mart in those high-end parts of the community. They plant themselves right in the middle of Poorville.

"Al Zack, who until his retirement in 2004 was the United Food and Commercial Workers' vice president for strategic programs, observes that appealing to the poor was "Sam Walton's real genius. He figured out how to make money off of poverty. He located his first stores in poor rural areas and discovered a real market. The only problem with the business model is that it really needs to create more poverty to grow." That problem is cleverly solved by creating more bad jobs worldwide. In a chilling reversal of Henry Ford's strategy, which was to pay his workers amply so they could buy Ford cars, Wal-Mart's stingy compensation policies--workers make, on average, just over $8 an hour, and if they want health insurance, they must pay more than a third of the premium--contribute to an economy in which, increasingly, workers can only afford to shop at Wal-Mart.

I don't get it, is the author suggesting that poor people should not have a place to buy clothes, food and other goods? Cannot a a provider of such services inform the public that these services are available?

To make this model work, Wal-Mart must keep labor costs down. It does this by making corporate crime an integral part of its business strategy. Wal-Mart routinely violates laws protecting workers' organizing rights (workers have even been fired for union activity). It is a repeat offender on overtime laws; in more than thirty states, workers have brought wage-and-hour class-action suits against the retailer. In some cases, workers say, managers encouraged them to clock out and keep working; in others, managers locked the doors and would not let employees go home at the end of their shifts. And it's often women who suffer most from Wal-Mart's labor practices. Dukes v. Wal-Mart, which is the largest civil rights class-action suit in history, charges the company with systematically discriminating against women in pay and promotions [see Featherstone, "Wal-Mart Values: Selling Women Short," December 16, 2002].

If Wal-Mart is violating the law then fine, that is a just criticism and they should be held to account accordingly.

@Erik

Originally Posted by Big War Bird

As for your comment on slavery and indentured servitude, well that would go against the free market and free labor principles I am defending Wal-Mart with.

How so?
Slave labour is a resource just like any other.

Erm . . . Do you know what free labor means?

@Dromikaitis

Not so fast! The profit Wal-Mart makes is the result of a very fast inventory turnover. If the Waltons liquidate Wal-Mart and put the money in a bank they would indeed make 4% but 4% on what? While the company is operating it is making $256 billion in sales every year, on which a 2% margin would mean $5.12 billion. Do you really believe they can make $5.12 billion in interest from whatever they would get by selling the assets of the company?!

The market capitalization of Wal-Mart is about 200 billion dollars, so selling the company would theorectically yeild this amount, so by this measure a 4% savings account would outperform Wal-Mart's profits on sales . Wal-Mart's net assets amount to $40 billion. At 4% they could make a cool 1.6 billion a year and never have to spend another day in Little Rock.

Of course either the selling or the complete liquidating of Wal-Mart is entirely unrealistic.

For the record the Walton's control 38% of the common stock.