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Wal-Mart - The High Cost of Low Prices

Posted on May 18, 2006

I finally had a chance to sit down and watch Robert Greenwald’s documentary “Wal-Mart: The High Cost of Low Price” last night. I went into the film with an open mind and expected the film to be good but probably not fair and balanced since Greenwald obviously had a point he wanted to get across (otherwise, why would he make the film?). However, at the end of the film I just sat in silence for a little while. Both my girlfriend and I were stunned by the claims the film made. The major things that hit me were:

When the whole issue with Wal-Mart first arose I was upset that the local mom & pops were going out of business due to lost sales. However, I thought that was just capitalism, survival of the fittest, and to meddle with it wasn’t the right answer. I was also under the impression that Wal-Mart took care of their employees really well so what was the big deal anyway. They can just go work at Wal-Mart. It’s not so bad. Well, the documentary claims this may not be the case.

In fact, one example in the documentary shows an independent grocery store owner who had to close his store because a Wal-Mart opened near by. The store owner talks about how he paid his employees well, took care of 100% of their healthcare insurance costs, and provided them with a 401(k) plan. Wal-Mart, on the other hand, has supposedly driven down the retail wage to a point where workers will make less at Wal-Mart then they would at their previous jobs (and the average employee lives below the poverty line even when working full-time - oh, and full-time may mean a lot less than 40 hours for most employees).

Wal-Mart also asks its employees to work off the clock so they don’t have to pay overtime which further drives down the wage people should be earning. I have seen this first hand - a couple friends from high school worked at Wal-mart for a while and their managers asked them to do this quite frequently. Management would also move any clocked overtime to the following week so it would only be paid as regular time. At the time I didn’t know any better. I just thought management was picking on the high school kids and that it was probably an isolated incident.

One thing I found very intriguing was the claim that Wal-Mart encourages its employees to seek out government assistance in the form of welfare, medicaid, etc. rather than just providing better plans for their employees. If this is true, in the end, we pay for the lower prices at Wal-Mart through our tax dollars and, even more interesting, if you don’t already shop at Wal-Mart you are still subsidizing the cost of their products!

Something that hit close to home (microfinancially speaking) was the treatment of workers in Wal-Mart factories outside the US. I am sure the documentary was a bit dramatized but it claimed that most of the workers in Wal-Mart’s overseas factories make less that $1 per day. That is the same number that microfinance is trying to help people rise above. I used to think of microfinance clients as people who did not work for a large wealthy corporation and were “on their own” so-to-speak. A pretty naive view, I suppose.

In conclusion, I want to mention that I have not done any in-depth research into these claims. I know that statistics can be manipulated to tell whatever story one needs to which is why I am cautious about claiming the movie is all truth. I encourage all of you to check out the facts for yourself, do some research, and make up your own mind. In fact, I would love to hear some feedback on this in the comments. It is an interesting issue and, if this is all true, I will be very upset that something like this is happening in America. This is not what capitalism was intended to foster.

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5 Comments so far
  1. Ben Casnocha May 18, 2006 5:34 pm

    I saw that documentary. My opinion? It’s a total joke. It doesn’t even try to be objective about anything. The Wal-Mart issue is tough, but these knee-jerk leftist documentaries reduce it to pure Evil, while in reality it’s much more complex. So, I pretty much hated it.

  2. eric May 18, 2006 8:58 pm

    Thanks for the comment Ben. I agree that the documentary is not at all objective. There is not much time, if any, spent on the other side. I would have been happier with the film if it was a bit more fair and balanced. The issue with being balanced seems to hamper a lot of documentaries. I am sure it is because the filmmakers have an axe to grind which is what drove them to make the film in the first place.

    As I mentioned in my piece, I was surprised by the claims the film made. That’s why I put this piece together and asked for people to comment. I really want to learn more about the issue before I take sides. I think that is what needs to be done after viewing any piece of media, especially one that is one-sided. I fear that too many people will take this film, and others, purely at face value (i.e. drink the kool-aid) and not question it.

  3. rjv May 25, 2006 3:39 pm

    Eric,

    I have not seen the movie (why see something I agree with anyway?) but have read enough to conclude that Wal-mart is probably not the best of employers - especially for those not in management. The reliance on tax subsidies and health benefits is clearly evident from several state initiated studies including:

    Georgia:
    “The Georgia study found that for every four Wal-Mart workers, one dependent child was enrolled in 2002 in the state health care program, PeachCare, or 10,261 of the 166,000 children covered. Employees of rival Publix Supermarket enrolled just one dependent child for every 22 workers, according to the study.”
    http://www.magicvalley.com/articles/2005/07/25/news_localstate/news_local_state.6.txt

    Florida:
    “The giant retailer, which has 91,000 full-time and part-time employees in Florida, has about 12,300 workers or dependents eligible for Medicaid, the growing health care program for the poor and the elderly.

    According to figures released Thursday by Florida’s Department of Children and Families, Wal-Mart and four other large companies that receive state incentives have an estimated 29,900 employees or their family members enrolled in Medicaid.

    The figures suggest taxpayers may be double-subsidizing low-wage employment by paying companies to create jobs and by paying for the health care of some of those companies’ employees.”
    http://www.sptimes.com/2005/03/25/State/Lured_employers_now_t.shtml

    and California (in a study done by UC-Berkeley):
    “According to a study by the Institute for Labor and Employment at the University of California, Berkeley, in 2003 California taxpayers subsidized $20.5 million worth of medical care for Wal-Mart employees.”

    Its easy to dismiss such as evidence as “leftist” propoganda but the truth suggests that even with the leftist twist much of Wal-mart employment policies are not beneficial to the US work-force or the local economy. Finally, Greenwald’s documentary might not be objective but its probably the best and only counter to the amount of ink, plugs, and platitudes Wal-mart gets in the pages of Wall Street Journal, CNBC, and other mainstream outlets. Wal-mart’s side of the story is more widely available than Greenwald’s so much so that you have to seek these out these “leftist” opinions to get the alternate view.

  4. eric May 25, 2006 4:23 pm

    Very good point. Wal-Mart definitely has a ton of clout behind them both in dollar terms and people terms. The employees side is rarely seen since Wal-mart can easily quell it. I think you have the right midset in that you look at the documentary and realize it may be a little too leftist but you still use it to inform your overall opinion. Every piece of media will have a bias but that doesn’t mean we shouldn’t use it to inform our opinions in some way. We just need to take those inherent biases into account while digesting the media.

  5. rjv May 25, 2006 9:17 pm

    Just one more thing … of all the concerns that surround Wal-mart the single issue that really irks me is the low-price aspect. I know its a low margin business blah blah but I fail to see how raising their price of flip-flops made in China (at $0.25/pair ) from $3.29 to, say, $3.33 will change consumer purchase intent. Especially when that trivial $0.04 can support a wage raise or health insurance coverage (hypothetically 50,000 skus with an average increase of $0.04 per day). Are Wal-mart consumers really that price sensitive?