Sunday, February 08, 2009

Poster Child for Enlightened Capitalism: Wal-Mart's Not The Enemy, But Best Friend We Could Ask For


I recently posted about Charles Platt (pictured above), former senior writer for Wired magazine who took a job at an Arizona Wal-Mart and blogged about it here. He now has a longer article in yesterday's NY Post titled "Fly on the Wall: Undercover at Wal-Mart, The Heartland Superstore That May Save the Economy." Here are some excerpts:

Some people, usually community activists, loath Wal-Mart. Others, like the family of four struggling to make ends meet, are in love with the chain. I, meanwhile, am in awe of it.

The company is rebuked and reviled by anyone claiming a social conscience, and is lambasted by legislators as if its bad behavior places it somewhere between investment bankers and the Taliban.

Considering this is a company that is helping families ride out the economic downturn, which is providing jobs and stimulus while Congress bickers, which had sales growth of 2% this last quarter while other companies struggled, you have to wonder why. At least, I wondered why. And in that spirit of curiosity, I applied for an entry-level position at my local Wal-Mart.

Getting hired turned out to be a challenge. The personnel manager told me she had received more than 100 applications during that month alone, chasing just a handful of jobs. Thus the mystery deepened. If Wal-Mart was such an exploiter of the working poor, why were the working poor so eager to be exploited? And after they were hired, why did they seem so happy to be there? Anytime I shopped at the store, blue-clad Walmartians encouraged me to "Have a nice day" with the sincerity of the pope issuing a benediction.

Despite its huge size, the corporation turned out to have an eerie resemblance to a Silicon Valley startup. There was the same gung-ho spirit, same lack of dogma, same lax dress code, same informality - and same interest in owning a piece of the company. All of my coworkers accepted the offer to buy Wal-Mart stock by setting aside $2 of every paycheck.

Almost all the employee rules devolved to the sacred principle of never, ever offending a customer - or "guest," in Wal-Mart terminology. The reason was clearly articulated. On average, anyone walking into Wal-Mart is likely to spend more than $200,000 at the store during the rest of his life. Therefore, any clueless employee who alienates that customer will cost the store around a quarter-million dollars. "If we don't remember that our customers are in charge," our trainer warned us, "we turn into Kmart." She made that sound like devolving into some lesser being - a toad, maybe, or an ameba.

Coworkers assured me that the nearest Target paid its hourly full-timers less than Wal-Mart, while fast-food franchises were at the bottom of everyone's list.

I found myself reaching an inescapable conclusion. Low wages are not a Wal-Mart problem. They are an industry-wide problem, afflicting all unskilled entry-level jobs, and the reason should be obvious. In our free-enterprise system, employees are valued largely in terms of what they can do. This is why teenagers fresh out of high school often go to vocational training institutes to become auto mechanics or electricians. They understand a basic principle that seems to elude social commentators, politicians and union organizers. If you want better pay, you need to learn skills that are in demand.

The blunt tools of legislation or union power can force a corporation to pay higher wages, but if employees don't create an equal amount of additional value, there's no net gain. All other factors remaining equal, the store will have to charge higher prices for its merchandise, and its competitive position will suffer.

This is Economics 101, but no one wants to believe it, because it tells us that a legislative or unionized quick-fix is not going to work in the long term. If you want people to be wealthier, they have to create additional wealth.

To my mind, the real scandal is not that a large corporation doesn't pay people more. The scandal is that so many people have so little economic value. Despite (or because of) a free public school system, millions of teenagers enter the work force without marketable skills. So why would anyone expect them to be well paid?

You have to wonder, then, why the store has such a terrible reputation, and I have to tell you that so far as I can determine, trade unions have done most of the mudslinging. Web sites that serve as a source for negative stories are often affiliated with unions.

11 Comments:

At 2/08/2009 11:50 PM, Anonymous poor boomer said...

Now if Wal-Mart (TM) would sell housing its workers could afford, that would be really impressive.

 
At 2/09/2009 3:25 AM, Anonymous Anonymous said...

maybe if entry level walmart workers had skills other than breathing, walking and talkingĀ  walmart would pay them more.

 
At 2/09/2009 9:23 AM, Blogger Marcus said...

That's a great story but there's something in particular that I have to pick a nit with.

I think it is a really bad idea when people buy stock in the company they work for. Your paycheck is already tied to the success of the company. It is not a good idea to tie your savings to the same thing.

Other than that, double thumbs up for Walmart!

 
At 2/09/2009 10:03 AM, Blogger threecollie said...

My favorite place to shop

 
At 2/09/2009 12:14 PM, Blogger QT said...

Nice to see someone who is open to checking their pre-conceived notions. Peter Drucker wrote that the customer detemines the business. One element that did not emerge from this article was Walmart's pioneering work in barcode analysis. By determining customer preferences, Walmart was able to fulfill the needs of its customers better than its competitors.

While one would think that society values success, ironicaly success has a habit of engendering resistance and often only grudging respect (ie. Microsoft, McDonalds; the U.S. certainly encounters this element in foreign relations).

Have observed this tendency even when it comes to people's attitudes towards objects which are completely devoid of any political, economic, social or moral controversy. Landscaping plants are a perfect example.

Funnily, the most reliable performers are often the most reviled by gardeners ie. petunias, geraniums, daylillies, hollyhocks, periwinkle, lamium, yew, euonymous, juniper; while over-priced, poorly adapted, high maintenance, sickly oddities are prized.

One's frame of reference so often determines what one perceives.

 
At 2/09/2009 1:40 PM, Blogger OBloodyHell said...

I was at the new neighborhood Super Wal-Mart ca. 2am one morning some months ago.

I noticed something the average day customer, when it was busy, would not:

The freezer units in the grocery aisles (all new, of course) all had motion sensors mounted above them, which only turned on the case lights (which were "white" LEDs, mind you, hence very low-power usage, instant-on... unlike fluorescents, and non-heat generating unlike incandescents) when someone walked into the viscinity of the case.

Now, I'm not sure what the costs of keeping case-lights on 24/7 instead of 15/7 would be, but, for a few hundred cases, I'm betting it adds up to quite a bit over time. I'm willing to bet that those cases save quite a bit, and contribute to me being able to pay a few pennies less for everything I buy at Wal-Mart.

...And that's in addition to the obvious Green advantages that come from such a simple thing.

The reason Wal-Mart kicks ass is because their management isn't stupid. Period.

They always look for places to cut costs in a positive, beneficial way.

 
At 2/09/2009 1:45 PM, Blogger OBloodyHell said...

> It is not a good idea to tie your savings to the same thing.

Marcus, that has some value if that's all their savings are tied to -- and I won't argue that it may be the case.

One need only see the example of Enron employees to see the classic problem with "putting all your eggs in one basket".

But I believe that it's a good idea to encourage employees to own a piece of the business they work for -- it gives them a vested interest in the future and success of the company, in a direct manner that is far more evident than that of a salary. Short of getting fired or (not always visible) not getting a raise, there is little for a salary to give in terms of direct feedback on how well a company is doing. Owning stock, you tend to pay more attention to things like that. And, like owning a farm you till the land on, or owning a building you built yourself, there is a certain pride of ownership that goes into owning company stock, for a company you work for... You can look at the store, and say "*I* helped create this." and mean it.

 
At 2/09/2009 2:02 PM, Blogger OBloodyHell said...

.

> Microsoft,

.

Q.T., as someone who has worked with computers since before they fit into a cube 1 foot on a side or less, much of the ire directed at M$ comes from shoddy anti-competitive business practices which utilize its resources to bludgeon the competition out of existence rather than competing on quality, performance, features, or price.

IE chased Netscape out of existence (when IE was first introduced, NS had 80% of the browser market), despite the fact that IE3 was lacking in some key features which *NS2* had.

And *NS3* was the main competing browser when IE was first introduced -- so despite missing key features, IE stole market share from NS -- by the time NS was bought by AOL, the market shares had reversed, with NS only 20% and IE 75%.

How? Because M$ offered discounts on the OPERATING SYSTEM and OFFICE packages to computer retailers to NOT include NS on machines.

Right. They used the lethargy and lack of knowledge of computer purchasers to build its market share. No one who knew anything of computer browsers would not have installed NS onto their machine... but that was not the typical computer user buying a fair percentage of these machines.

IE7, about 2 years ago, finally introduced "tabbed browsing", which was a feature in NS5 some 7 years ago, and a part of every alternate browser ever since.

In general, M$ has NOT competed on price OR performance/features. And I need only say "Vista" to point out that they aren't doing it on quality.

It's used business trickery to screw the competition in many cases, depending on its deep pockets and plentiful cash reserves to allow them to gain market share with shoddier products while accruing losses few businesses could tolerate... but since any company which ships any computers with Windows loaded on them, pays Microsoft as though EVERY computer they shipped had Windows loaded on it (yes, if you buy a Linux box from Dell, they pay the Windows OEM price to M$ for it), they can suffer losses few other companies can tolerate and stay in business.

Yes, there are certainly those, particularly libtards, who would hate M$ simply for being successful.

Regardless of that, there is, in fact, a very real, legitimate, and rational basis for anti-M$ sentiment.

;-)

.

 
At 2/09/2009 11:05 PM, Blogger QT said...

OBH,

No argument. Microsoft has definitely played hardball with its competitors. We've got Vista on one of our laptops and it sucks ; definitely agree that quality is also not stratospheric.

Microsoft aside, there does seem to be a tendency to resent success.

 
At 2/10/2009 12:31 PM, Anonymous poor boomer said...

I have never been to a Wal-Mart with freezer units.

 
At 2/11/2009 12:11 PM, Blogger Justin said...

I will never shop at a wal-mart, both for worker's rights issues and for their adverse affect on our economy.

Why? Because the same rationale that leads WM execs and planners to install motion-sensor LEDs in their produce cases (which is commendable) leads them to cut many FT hours to PT in order to save TONS of money on employee benefits. Further, WM spends an unbelievable of amount of money on anti-union expenses, such as hiring anti-union lawyers, consultants and by waging anti-union campaigns. Why would a company eager to save money on light bills spend so much to prevent their employees from gaining a binding contract that outlines their wages, pay raises, benefits and expected tasks? Because it would affect their bottom line in the long run.

Regarding WM's adverse affect on our economy: WM is the industry-setting standard in the discount retailer market. Therefore they have an ethical responsibility to make sure the American economy is as strong and vibrant as possible. In the long run, the wealthier the population, the more they'll consume. This isn't the case with WM though. WM is powerful enough to CONTROL THE MEANS OF PRODUCTION for many of it's products. Every year tens of thousands of companies come to Bentonville, Arkansas to pitch their product. Manufacturers come with an MSRP to WM. WM insists that everything be ultra-low cost and therefore demand that MSRPs be as low as possible. The only way this can occur is to cut production costs. That means taking a product made in the US or even Mexico and shipping production jobs to cheaper labor markets, such as China or Korea.

How is this damaging to our economy? After all, the cost of goods at WM is less, so workers can afford more, right? Well, If producers are constantly cutting costs at the expense of American jobs, than we are losing a very serious battle. Think back to when our economy has been the strongest. It was when the US was producing high quality goods. The prices may have been higher, but the overall wealth of all Americans was far greater. We have seen a shift to a SERVICE economy, which is detrimental to our economic health. WM is a huge reason why our economy has shifted in such a way.

It is troubling for me to see a retailer controlling the means of production in such a way. Truly, we have to analyze what the cost of low prices is.

 

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