> >From Dollars and Sense, Sept./Oct. 2000
> http://www.DollarsandSense.org
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> Dollars and Sense
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>
> THE WAL-MART TRAP
>
> By Annette Bernhardt
>
>
> For every woman shattering the glass ceiling, there are many more trapped
> in lowwage jobs and working conditions that don't look very different from
> those at the start of the women's movement. Since 1973, the gender gap in
> wages has almost been cut in half, but women still earn significantly less
> than men, are still segregated in traditionally female occupations, and are
> less likely to have health and pension coverage - despite total parity in
> education. The problem is especially severe at the bottom of the wage
> hierarchy. In 1997, 18% of white men earned poverty-level wages, compared
> to 32% of white women, 43% of black women, and 53% of Hispanic women.
>
> So where are all the low-wage jobs coming from? And why haven't they gone
> away in the "postindustrial" economy? Most of them are service jobs, and
> most continue ro be the territory of women and people of color: hotel room
> cleaners, nursing assistants, data-entry clerks, hamburger flippers,
> secretaries, childcare workers, cashiers, tellers, callcenter operators.
> These jobs are not coming from dinosaur firms that somehow haven't yet
> caught on to the new "hightech" credo. More and more, low-wage jobs are
> being created by efficient, technologically sophisticated firms. The new
> "high-tech, low-skill" business strategy is typified by the retail
> industry, and particularly by the business model of retail giant Wal-Mart.
> And because this model is so profitable, it will continue to dominate the
> working lives of many Americans, especially women.
>
> SEGMENTATION IN THE RETAIL INDUSTRY
>
> In the private sector, one in five Americans (21%) currently holds a retail
> job. Among the occupations with the largest projected job growth to 2006,
> cashiers and salespeople rank first and fifth, respectively. Yet retail
> wages for non-managerial workers averaged only $9.08 an hour in 1999. In
> 1997, nearly a third (31.7%) of the workers living in poverty worked in
> retail, compared to 15.8% of the overall population.
>
> While jobs in this industry have never been good, retail wages have
> actually fallen as a percent of the national average, from 74% in 1973 to
> 68% in 1999. This deterioration in job quality has been driven by a
> splitting of the consumer market over the past two decades. On the one
> hand, there are now specialized department stores, upscale grocers, and
> home improvement and auto repair centers offering personalized, in-depth
> service. On the other hand are the mass discounters, outlet stores, and
> uncountable fastfood franchises offering no-frills service and cheap
> products. Here, wages and job quality rank at the bottom.
>
> Bloomingdale's and Stern's department stores, both owned by Federated
> holding company, illustrate this split. Bloomingdale's serves high-income
> customers. Only 20% of its workers are part-time, turnover is low, wages
> are above average for Federated stores, and a significant amount of money
> is spent on recruiting polished workers with good "people skills" - mostly
> young white women attending college. By contrast, Stern's is a mass-market
> operation. It focuses not on service but rather on centralizing and
> streamlining operations with new technology and fewer people. Wages are
> significantly lower, about 60% of the jobs are part-time, and turnover is
> high. Employees tend to come from working-class backgrounds.
>
> This market and job segmentation has emerged in such industries as
> healthcare, banking, telecommunications, insurance, and airlines. But
> retail is unique, because it is dominated by the low-wage strategy. And
> this strategy has been defined, almost single-handedly, by one company.
>
> THE ASCENT OF WAL-MART
>
> The "Wal-Mart model" is the leading retail strategy (perhaps the leading
> business strategy in any sector) to emerge since the 1970s. This model
> features a super efficient production process in which each operation -
> buying products from manufacturers, distributing them to the retail stores,
> and selling them to customers - is linked to the next in a continuous
> "justin-time" chain. Starting with the premise that its stores would
> compete with "everyday low prices," Wal-Mart has attacked this coordination
> problem on several fronts.
>
> At the core of its strategy lies technology. Wal-Mart pioneered the use of
> inventory-managing technology, and in recent years has invested some $600
> million in its information system. When scanning barcodes, cash registers
> instantaneously record and track every item sold, producing an up-to-the
> minute computerized inventory record. This information is then linked
> directly to both the warehouse distribution centers and the manufacturers
> that supply them, automating the whole restocking process.
>
> Wal-Mart's integration of the entire supplierdistribution chain may seem
> straightforward, but it is in fact extraordinarily difficult to achieve. As
> of June 2000, the company was selling thousands of products in its 2,988
> U.S. stores, staffed by 885,000 workers. These stores were supplied by 51
> distribution centers and served more than 100 million customers weekly. The
> "just-intime" flow depends on tighter relationships with suppliers, another
> Wal-Mart innovation. The company has increasingly focused on a small core
> of suppliers, pressuring them for bigger discounts, help in delivery and
> stocking, product testing and development, and even total dedication to
> supplying only Wal-Mart.
>
> Technology is only a conduit for Wal-Mart's singleminded business strategy
> of total market dominance. Until recently, the company has wisely stuck to
> non-urban areas where retail competition is weak. When it enters a new
> region, Wal-Mart places one or two initial stores according to a grid. It
> then successively adds more stores, breaking ehe grid into smaller and
> smaller pieces, until the region is saturated and mom-and-pop stores have
> been driven out of business. This strategy has not gone unnoticed: in
> America's heartland, communities are increas ingly protesting the arrival
> of new Wal-Mart stores.
>
> PEOPLE UNDER THE WAL-MART MODEL
>
> Contrary to heavy company publicity, such as television commercials
> featuring happy WalMart "sales associates," most jobs at Wal-Mart are not
> good jobs. Sales associates basically ring up sales, stock and neaten
> shelves,, and handle lay-aways. Traditional job segregation continues
> unabated at Wal-Mart: Women are disproportionately relegated to cashier
> positions, customer service, or sales positions in low-ticket departments
> such as apparel and jewelry, while men are disproportionately assigned to
> managerial positions or to lucrative departments such as appliances.
>
> Work schedules change constantly, and if demand is slack, associates are
> asked and even required to leave their shifts early. Conversely,
> part-timers often work full-time hours without getting the corresponding
> benefits. Stores are often understaffed, something Wal-Mart workers blame
> for the stressful work environment. When the company opens a store, it
> hires more workers than it will eventually need, partly to help with
> set-up, but also to screen its new employees. After several months,
> Wal-Mart lets go those it does not need. Clearly, workers are bearing the
> brunt of the "just-in-time" system.
>
> Not surprisingly, the company keeps a tight fist on its payroll. Starting
> wages are either at or close to the minimum wage. Raises are not guaranteed
> and top out at 30=A2 a year. Even department heads start at only $8 an hour=
> .
> Genuine full-time work (40 hours a week) is hard to get at Wal-Mart,
> because the company defines "full-time" as 28 hours a week. This odd
> definition allows the company to increase staffing as needed, without
> exceeding the limit of 40 hours a week (thereby avoiding the
> time-and-a-halfpay mandated by federal law). Health benefits are available
> for full-timers, but the workers must contribute 40% from their own
> paychecks (a significant deduction at $5 or $6 an hour). There is no
> pension plan, though the employee stock ownership plan is touted as a
> substitute. The problem is that most workers never benefit from this
> system. Between high turnover and low pay, less than 2% have accumulated
> $50,000 or more in stock.
>
> PROSPECTS FOR CAREER MOBILITY
>
> Wal-Mart registered sales of $165 billion last year. The company
> consistently outperforms other retailers on most measures of productivity
> and performance. Its business model has put enormous pressure on the
> industry to follow suit, and will continue to prevail in the foreseeable
> future.
>
> Is this really cause for concern? One common argument is that the retail
> sector and other low-wage service industries serve as a temporary
> way-station for workers - mothers wanting to get out of the house, retirees
> looking for something to occupy their time, and especially teenagers
> earning spending money. But this is a misleading or, at the very least,
> outdated picture. In 1996, only 16% of the workers in this industry were
> between the ages of 16 and 19. Fully 44% were age 35 or older. More and
> more, retail workers depend on their jobs for their long-term livelihood.
> In working-class and inner-city communities across the country, retail is
> in fact the main employer.
>
> And in this dependence lies the heart of the problem, because low-wage jobs
> are "sticky" - once you're in, you're trapped. Moving up is tough, since
> many service industries have extremely flat job hierarchies. Sales and
> service occupations make up more than two-thirds of retail jobs, and the
> average ratio of managerial to front-line workers is 1:15. A typical
> Wal-Mart store has one store manager, four assistant managers, and 235
> non-salaried workers. Moving out is equally tough, because training is
> almost nonexistent. Retail workers get, on average, seven hours of training
> (last among 14 business sectors), giving them few skills with which to get
> better jobs.
>
> POLICY OPTIONS
>
> So what are the options for boosting job quality at the bottom of the
> service sector? The answer will probably not be found in the market.
> Wal-Mart has perfected a business strategy that does not build on "human
> capital" but that is nevertheless high-tech, efficient, and profitable.
> This means that the "high-road" carrot is unlikely to work here. Wal-Mart
> and its ilk are already taking the "high road" technologically - only with
> a low-wage crew. These businesses have nothing to gain by upskilling jobs.
> If Wal-Mart trained and paid workers to spend more qualit,v time with
> customers, profits would suffer. Similarly, what would convince McDonald's
> to shift its Taylorized system to one based on skilled workers, given the
> enormous startup costs and the amount of capital it has already sunk into
> designing its kitchen around low-skill labor?
>
> High-skill strategies are a hard sell at the bottom of the service sector.
> Ultimately, the only realistic solution to bad jobs in these industries is
> non-market intervention. The minimum wage and Earned Income Tax Credit are
> obvious candidates, though they will likely not suffice, especially since
> the latter ends up subsidizing low-wage employers. In the long run, what is
> needed is an all-out unionization assault on Wal-Mart and other firms like
> it. The United Food and Commercial Workers International Union (UFCW) is
> starting to do just that, responding to Wal-Mart's entry into the
> supermarket industry by mounting a national community-based organizing
> campaign. This spring, for example, meat cutters at a Wal-Mart store in
> Jacksonville, Texas, won union recognition, a first in the history of the
> retailer. But Wal-Mart responded by closing its meat-cutting operations in
> 180 stores in six states, including the one where workers had organized.
>
> The obstacles to organizing a high-turnover service workforce are enormous.
> A new type of unionism will likely be needed, one that is multi-employer
> and occupationally based. Pursuing such a strategy will take significant
> reform on many fronts - not only in labor's willingness to adopt a new
> constituency and new organizing tactics, but more importantly, in labor law
> itself.
>
> Resources: Annette Bernhardt, "Performance Without the High-: Firms and
> Technology in Low-End Services," presented at the 2000 Annual Meetings of
> the Industrial Relations Research Association, Boston, MA; Lawrence Mishel,
> Jared Bernstein, and John Schmitt, The State of Working America 1998-99,
> Washington D.C.: Economic Policy Institute, 1999.
>
> Annette Bernhardt is a senior associate at the Center on Wisconsin Strategy
> University of Wisconsin-Madison. Her research focuses on low-wage labor
> markets and developing viable policy solutions in the service sector.
>
> ----------------
>
>
> Now I'm finding out there's just one kind of war
> It's the one going on 'tween the rich and poor
> I don't know a lot about what you'd call class
> But the upper and middle can all kiss my ass
> --Utah Phillips, "Larimer Street"