[Marxism] Walmart and Costco

Marvin Gandall marvgandall at rogers.com
Wed May 4 06:11:52 MDT 2005

An interesting article in today's NYT on Walmart's peonage pay system, and
the union-led public campaign against it. Walmart pays an average
$9.68 an hour, compared to an average $12.28 for the retail sector as a
whole. The average hourly wage in the US is close to $16, which is what
workers at Costco make on average. A large percentage of Costco workers
(82%) also have a company health plan, compared to only 48% at Walmart. The
comparison is buried in the article, which doesn't inquire into the

Is Costco unionized? If it isn't, you wouldn't expect pay/benefits to
(voluntarily) be so much higher than at its chief rival. It competes in the
same markets, doesn't it? What about the relative earnings and market share
of the two companies? How does Costco withstand the inevitable pressure from
its investors - I assume it's publicly traded - to bring its labour costs
more into line with Walmart? Does anyone know?

May 4, 2005
Can't Wal-Mart, a Retail Behemoth, Pay More?
New York Times

BENTONVILLE, Ark. - With most of Wal-Mart's workers earning less than
$19,000 a year, a number of community groups and lawmakers have recently
teamed up with labor unions in mounting an intensive campaign aimed at
prodding Wal-Mart into paying its 1.3 million employees higher wages.

A new group of Wal-Mart critics ran a full-page advertisement on April 20
contending that the company's low pay had forced tens of thousands of its
workers to resort to food stamps and Medicaid, costing taxpayers billions of
dollars. On April 26, as part of a campaign called "Love Mom, Not Wal-Mart,"
five members of Congress joined women's advocates and labor leaders to
assail the company for not paying its female employees more.

And in a book to be published this fall, a group of scholars will argue that
Wal-Mart Stores, having replaced General Motors as the nation's largest
company, has an obligation to treat its employees better.

Among workers at Wal-Mart's 3,700 stores across the United States, the
debate is also heating up.


Labor groups and their allies are focusing on Wal-Mart because they say that
the campaign will not just benefit its workers but also reduce the existing
pressure on unionized competitors to reduce their own wages and benefits.

"Wal-Mart should pay people at a minimum enough to go above the U.S. poverty
line," said Andrew Grossman, executive director of Wal-Mart Watch, the
coalition of community, environmental and labor groups running the series of
ads criticizing Wal-Mart. "A company this big and this wealthy has the
ability to pay higher wages."

H. Lee Scott Jr., Wal-Mart's chief executive, vigorously defends his
company, arguing that wages are primarily determined by market forces and
that Wal-Mart pays more than most retailers and provides better
opportunities for advancement.

"If people tell you that Wal-Mart is leading the so-called 'race to the
bottom' in terms of job quality or pay, they're not only wrong, they're dead
wrong," he said to journalists at a company-sponsored conference here in
April, the first time Wal-Mart has gone out of its way to invite a number of
reporters to its headquarters to hear its views. "We are instead creating a
better workplace with more opportunity and more benefits than have been
available in retail."

Mr. Scott contends that the critics, including competitors, are defenders of
an outdated status quo, intent on upholding a retailing system full of
inefficiency and inflated prices.


Wal-Mart says its full-time workers average $9.68 an hour, and with many of
them working 35 hours a week, their annual pay comes to around $17,600. That
is below the $19,157 poverty line for a family of four, but above the
$15,219 line for a family of three.

Wal-Mart critics often note that corporations like Ford and G.M. led a race
to the top, providing high wages and generous benefits that other companies
emulated. They ask why Wal-Mart, with some $10 billion in profit on about
$288 billion in revenue last year, cannot act similarly.

"Henry Ford made sure he paid his workers enough so that they could afford
to buy his cars," said William McDonough, executive vice president of the
United Food and Commercial Workers union. "Wal-Mart is doing the polar
opposite of Henry Ford. Wal-Mart brags about how its low prices help poor
Americans, but its low wages are helping increase the number of Americans in

Mr. Scott argues that retailers, with narrow profit margins, face a
different competitive situation and cannot afford to be as generous to their
workers as automakers and other capital-intensive companies.

"Some well-meaning critics," he said, "believe that Wal-Mart, because of our
size, should play the role that General Motors played after World War II,
and that is to establish the post-world-war middle class that the country is
so proud of. The facts are that retailing doesn't perform that role in the
economy as G.M. does or did. Retailing doesn't perform that role in any
country in the world."

Many of those assailing Wal-Mart argue that the company can, and should, pay
its workers at least $2 more an hour and add $1 or $2 an hour beyond that to
improve its health benefits. A Harvard Business School study found that
Wal-Mart paid $3,500 a year for each employee for health care, while the
typical American corporation paid $5,600.

If Wal-Mart spent $3.50 an hour more for wages and benefits of its full-time
employees, that would cost the company about $6.5 billion a year. At less
than 3 percent of its sales in the United States, critics say, Wal-Mart
could absorb these costs by slightly raising its prices or accepting
somewhat lower profits.

But company executives dismiss such proposals, saying they would largely
wipe out Wal-Mart's profit or its price advantage over competitors. Wal-Mart
had a profit margin on sales last year around 3.5 percent. If "we raised
prices substantially to fund above-market wages, as some critics urge," the
company argued in a recent two-page ad in The New York Review of Books,
"we'd betray our commitment to tens of millions of customers, many of whom
struggle to make ends meet."

Full: http://www.nytimes.com/2005/05/04/business/04wages.html?th&emc=th

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