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Tough Times Boost Wal-Mart’s Allure

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Wall Street Journal: Tough Times Boost Wal-Mart's Allure

CHICAGO—Wal-Mart Stores Inc. has won the support of dozens of church ministers in its long-running battle to expand in Chicago, a sign of how the recession has softened skepticism of the retailer in a community desperate for jobs.

The ministers, most of them African-Americans together representing thousands of congregants, are pressuring the city council to grant approval for a Wal-Mart "supercenter"—a store with a full grocery that also sells general merchandise—on the city's South Side.

Some of the same ministers as recently as last year opposed bringing the discount giant to the South Side, concerned that the company's pay was inadequate and that the store would hurt nearby businesses. But the need for jobs and tax dollars in the recession—along with a big push by Wal-Mart—has changed their minds.

The shift sets up a showdown between the ministers and another community group, largely financed by unions, that opposes the proposal, which remains stalled in the city council.

The proposed store would employ about 400 in a middle-class, largely African-American neighborhood at a development called Chatham Market. The 50-acre site is home to a Lowe's home-improvement store, a sandwich shop, two vacant multi-tenant buildings and clumps of chest-high weeds.

"The reality of the day…is that there's no other retailer willing to come to the community," said Alderman Howard Brookins, a Democrat whose ward includes the development. "The [Chatham] Market is dying. We've got to do something." …

Related: Progressives Declare -No Jobs- are Good Enough For South-Side Residents

Comments

4 responses to “Tough Times Boost Wal-Mart’s Allure”

  1. PamBG Avatar
    PamBG

    A very complex situation.
    Chicago may be better off than Northeast Ohio, but I know from personal experience that most of the available jobs around here pay just above minimum wage, offer no benefits, and the employers want to limit workers’ hours to below 30/week for reasons that I don’t understand. (Are there laws in the US about having to offer full-time employees better terms and conditions than part-time employees?) Nonetheless your employer wants your full-time availability and you must be totally flexible and available 7 days a week, often on a schedule they determine at the last minute, so there is no way of supplementing your income with another part-time job. (My husband’s employer tells him two days before his working week starts what his hours will be for the following week.)
    As I also know from personal experience, on the one hand, you get so desperate for a job, any job, that you will take that 25-hour a week minimum wage job because you have to get by somehow. You also get so desperate trying to live on that wage that you shop at Walmart because their food prices are significantly lower than the local Supermarket. (You will also become an expert on the price of everything in an attempt to stretch your dollar as far as possible.)
    On the other hand, Walmart drives down the prices that it pays to its suppliers in the pursuit of its own profits. And it has the power to drive smaller suppliers into financial ruin.
    I suspect, although I’m not certain, that it also perpetuates this culture of paying people minimum wage and limiting the number of hours they can work. And, in smaller towns in remote areas, Walmart’s presence often results in local businesses closing because they can’t compete with Walmart’s buying power.
    I’m not sure what “the answer” is. But it’s a good example of the economic and moral complexities involved in a lot of economic decisions.

    Reply
  2. Michael W. Kruse Avatar
    Michael W. Kruse

    Precisely!
    Back in 2006 I published a post that featured the analysis of Jason Furman (now on Obama’s board of economic advisors) Is Wal-Mart a Good Thing?
    Furman estimates that Wal-Mart has by far been the most significant factor in keeping prices down on food staples, clothing, and basic household goods … items which have a disproportionate impact on low-income folks. Not just through their own stores but also through making their competition compete on price. Wealthier households spend about 3% of their income spent on eat at home food while for low-income households spend 26%. That is very significant impact.
    Yet you are going to make a lot of money working at Wal-Mart. Wal-Mart does tend to crimp some local businesses but the lower the income of the community resident they more likely they are to favorable to Wal-Mart because of the low prices. When we have money it is easier to become particular about where to shop even if it means paying more but not so if you are just getting by. And even despite the low wages, prior to the recession, new Wal-Mart stores always have had far more applicants than positions.
    As with most economic issues we aren’t talking about clear cut “right and wrong” so much as trade-offs. Do we want higher wages, home-grown stores, limited variety, and higher prices or lower wages, box stores, wide variety, lower prices.
    There is a part of me that wants to not like Wal-Mart … but I still shop there. 🙂

    Reply
  3. PamBG Avatar
    PamBG

    Do we want higher wages, home-grown stores, limited variety, and higher prices or lower wages, box stores, wide variety, lower prices.
    I don’t honestly know how I would answer that question. At 25 hours a week there is no way we’re going to pay our expenses anyway. To misquote Janice Joplin, when “Nothing-left-to-lose is just another work for freedom” a society with a bit more social equity looks attractive.
    Not a society that takes away from the middle-class to give to the poor. But a society that thinks the person who works in the grocery store is actually working and isn’t lazy and therefore deserves to earn a living wage; and a society that doesn’t believe that CEOs are worth tens of millions of dollars annually. Which we don’t have at the moment. We like to maintain our fiction that it’s possible to live on 25 hours a week at $8 hour; obviously, most of us can’t do math.

    Reply
  4. Michael W. Kruse Avatar
    Michael W. Kruse

    CEO compensation, at least for the mega-corps, is all out of whack and tends to reward the wrong things, IMO. However, there are about 300,000 CEO’s of corporations in the U.S. If you take out the Fortune 1,000, the ratio of CEO salary to average employee salary at a CEO’s firm is 4:1. I think that is reasonable. The real insanity is with some of the mega-corps messed up incentives.
    While I know this will likely get me in trouble, I don’t support the idea that businesses must pay living wages. We don’t live in a patron/client or in a lord/peasant world. Businesses do not compel workers to work for them and workers do not make life-long obligations to business.
    Businesses should pay according to the economic value of the labor offered and workers should seek to improve their skills to command a higher wage (though I know many business owners who assist workers out of their own pocket to help workers improve their lot via more education or other means.)
    If you look at the household income of the households were minimum wage workers live, the median household income is about $45,000 a year. I believe it is about 25% of workers that live in households that make more than $80,000 a year. Many minimum wage workers are teenagers, folks looking for flexible work, and folks living in households with other wage earners. Minimum wage is usually a temporary status that changes with experience and skill development.
    Living wage would eliminate entry level jobs for teens and unskilled workers. Internships for students with businesses or government … where the student is given work experience and a small stipend …would have to cease because the student is not being given a living wage. The argument will be made that the student is getting something non-monetary (i.e. experience) in exchange and she chose not to take a living wage. It is no different for the low-skilled worker. For whatever reasons, the worker has chosen to work for the business instead of pursing options that would command a higher wage. If the worker isn’t going to bring the economic value to the business why is the business obligated to pay more than the economic value? And indeed, precisely the reason many take a minimum wage job is to get experience that will allow them to command higher wages in the future. The experience is the non-monetary compensation.
    Furthermore, discrimination laws would have to change radically. Right now, when hiring, your are not supposed to ask about age, marital status, number of children, health status, etc. What is a living wage for two people with identical skills: a 24 year old single woman with no children in perfect health vs a thirty year old married man with three children. If we are serious about businesses being totally responsible for the worker’s welfare, then, like a social worker, HR departments are going to have to do detailed workups of each employees status to determine living wages.
    I don’t think the real issue is the number minimum or low wage jobs but rather income mobility. What are the chances of a worker significantly improving their income over time. Studies of workers show that American income mobility is quite high, though typically not so much during a recession. And during recessions or major shifts in industries you can get significant mismatches between business and the labor pool.
    We could make the case the government should redistribute income to low-income people in favor of greater equity, which we do to some degree, but then you fall into the subjective area of economic efficiency vs. issues of equity.
    Okay, I’ll shut up now. 🙂

    Reply

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