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Do the Benefits of Wal-Mart Outweigh Its Drawbacks?

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.