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Do the Benefits of Wal-Mart Outweigh Its Drawbacks?

The sheer size of the international retailer means good news for consumers. But what about the way employees are treated? Or the store's ruthless competitive practices?

by
Clayton E. Cramer

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June 20, 2010 - 12:00 am
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I have mixed feelings about Wal-Mart. On the one hand, I am horrified at the role it plays as China’s sales organization.  Buy stuff at Walmart today; the money that Wal-Mart pays to a Chinese manufacturer might well fund a military confrontation with China fifteen years down the road. I am concerned that Wal-Mart’s aggressive approach to competition has driven many U.S. companies out of business — or at least forced them to move manufacturing to low wage countries.

I am also less than thrilled with Wal-Mart’s approach to wages. Retail is notorious for paying its workers badly. Still, when I hear complaints about how badly Wal-Mart treats its workers concerning hours, wages, and health insurance, what comes to my mind? Wal-Mart is probably still treating its workers better than the vast majority of regional and local retailers — the ones that we are supposed to feel sorry for when Wal-Mart opens a new Supercenter in East Nowhere, Ohio.

Still, don’t you wish that Wal-Mart could take some of that much touted efficiency and profit, and use it to pay its workers better? I was watching a CNBC special, The NEW Age of Walmart, recently. It was reasonably fair to Wal-Mart, but I was struck by the CEO’s response to one question. The reporter asked him why Wal-Mart couldn’t takes some of its $13 billion a year in profits and raise the wages of its workers a dollar or two an hour. (You know: to get them up to miserably low wages.)

I was not terribly impressed with CEO Mike Duke’s response. Essentially, he said it would not work with their business model.  As I used the information that this special presented, I realized that there was a far better answer that he could have given. The special reported that Wal-Mart had $13 billion a year profit worldwide. Wal-Mart has one million U.S. employees (an absolutely astounding number). If Wal-Mart gave each of those employees a two-dollar an hour raise, and if every employee is full-time (which I know isn’t correct), that would be more than four billion dollars — almost one-third of the corporation’s worldwide profit. Duke could have pointed this out, and suddenly Wal-Mart doesn’t sound so incredibly Scrooge-like. Wal-Mart, like most retailers, is profitable, but it is based on volume and efficiency, not high profit margins.

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