Originally Published: March 22, 2004 7 a.m.
Have you ever wondered how things at Wal-Mart can be so cheap? (The store that "Dares to Save Us Even More".)
How do they do it? Could it be that the owners are forgoing profits and passing the savings on to the consumers? Unlikely.
According to Forbes, five of the world's top 10 billionaires are members of the Walton family that owns Wal-Mart. In 2002 alone, the company made more than $7 billion in profits.
Maybe Wal-Mart is particularly good at making deals to buy the products it sells. Indeed, people have singled out Wal-Mart repeatedly for abusing its dominant market position through unfair and lopsided bargaining practices. Wal-Mart buys at the lowest possible negotiated price, which translates into the lowest possible wages for workers in China and other developing countries that make the products. So clearly, Wal-Mart is able to sell so cheaply partly because it buys so cheaply.
However, foreign workers are not the only ones struggling to make a living so we can pay less for more – our friends and neighbors who work at Wal-Mart also feel the squeeze.
In 2003, Stan Cox of Salina Kans., wrote in the local paper on whether a single parent with two children could provide for his or her family while working full-time at Wal-Mart and shopping for all purchased goods at Wal-Mart. His conclusion? In spite of a 10 percent in-store discount (not applicable to food), and employer-assisted health care coverage, the worker could simply not make ends meet (for more details, see http://members.cox.net/t.s/Wal-Mart.html).
Interestingly, Cox goes on to point out that because of the low wages, this parent would quality for an Earned Income Tax Credit (EITC) of $4,140 in 2002. In other words, taxpayers fill the gap between minimum wages that Wal-Mart pays and the minimum earnings the employees need to survive.
Interestingly, low-paying jobs with minimal benefits affect the entire economic playing field of a community. A vivid example of this is playing out in the grocery workers' strike in Southern California.
Safeway, Albertsons and Krogers – the "big three" grocery stores – refuse to provide workers with the health care coverage that has existed in the past. The companies say discount stores that are moving into food sales (the largest in our area being Super Wal-Marts), are not providing their employees with anything close to the benefits the striking workers of the big three grocery stores are requesting.
The grocery stores therefore worry that they will lose out to Wal-Mart – and if history is any indication, they probably will.
Another reason you might get a great deal at Wal-Mart is because the store is voluntarily losing money on the item to drive competitors out of business. Only corporations able to support temporary losses can sustain this predatory competition. I don't need to explain what happens to prices when competitors go out of business.
Certainly Eddie Basha, the CEO of the largest Arizona-based grocery store, is worried. He recently said that Wal-Mart's tactics are the economic equivalent of the Nazis' "blitzkrieg" or military tactics in World War II. While the Jewish community criticized Basha for trivializing the holocaust, the statement clearly reflects his anger over the lack of citizenship displayed by the world's largest corporation.
So back to the original question … why is stuff at Wal-Mart so cheap? To put it bluntly, Wal-Mart is able to drive its prices down by driving down wages – both here and overseas. And yet, an alarming percentage of the "job creation" taking place in our increasingly globalized economy are Wal-Mart jobs or the equivalent.
Indeed, Wal-Mart has become the biggest employer in our United States.
This brings me to a question that we might be able to do something about. Do we really want a second Super Wal-Mart in Prescott?
Is the developer overseeing the reincarnation of Ponderosa Plaza acting on behalf of our community's long-term social and economic interests?
Call or e-mail Prescott's mayor and council members to express your opinion. Wal-Mart's good deals come with substantial hidden costs – paid for by Prescott.
Tim Crews is a professor of environmental studies at Prescott College and director of the college's Wolfberry Farm in Chino Valley. His views do not necessarily reflect those of Prescott College.