----- Original Message ----- From: "Marvin Gandall" <marvgandall at rogers.com> To: "LBO-Talk" <lbo-talk at lbo-talk.org> Sent: Wednesday, May 04, 2005 7:10 AM Subject: [lbo-talk] Walmart and Costco
An interesting article in today's NYT on Walmart's peonage pay system, and the building 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 discrepancy.
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?
MG ------------------------------------ May 4, 2005 Can't Wal-Mart, a Retail Behemoth, Pay More? By STEVEN GREENHOUSE 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.
(snip)
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.
(snip)
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 poverty."
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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