Operation Rollback: Wal-Mart's World of Business (Page 3)

Wal-Mart associates suffer not only from low pay but also irregular work hours. The company frequently readjusts shifts, sometimes on a weekly basis, to accommodate store needs and employee availability. This tends to favor those employees who have the fewest demands on their time, while making it extremely difficult for anyone with children or other dependents to accumulate enough hours to earn a decent living. Staff turnover is frequent, reaching a rate of 70 percent in 1999; among entry-level employees, 67 percent quit within their first ninety days. Store managers and their assistants do not have it much easier. Though better paid, they are expected to work long hours and cover any staffing gaps themselves. The company frequently reassigns young managers from store to store and region to region--an itinerant schedule that can wreak havoc on marriages. Because Wal-Mart has expanded so extensively, many managers find themselves in ruthless competition with other Wal-Marts within the same driving radius--with bonus money and future employment prospects riding on intramural cost competition. Many ambitious store managers seize the challenge, but others end up burned out.

Over the years, the chain has faced its share of lawsuits and investigations challenging its labor practices. Employees have sued Wal-Mart, charging that it has practiced pervasive sex discrimination in promoting staff to management positions, either because of traditionalist ideas about who makes a good manager or because of an economic calculation that young, unattached men would best handle the long hours and reassignments. Store managers have been accused of forcing employees to work off the clock in order to finish a job without earning overtime. One assistant store manager admitted in a deposition that he doctored employees' timecards in order to cut their weekly pay. In 2003 federal immigration officials launched an investigation of the company, code-named Operation Rollback in honor of Wal-Mart's pricing slogan. They discovered that sixty-one Wal-Mart stores in twenty-one states had subcontracted nighttime cleaning work to crews of undocumented Eastern European immigrants with ties to the Russian underworld. Lichtenstein argues that the most egregious violations are committed by harried store managers who face an ultracompetitive business environment. With reordering, stocking and pricing decisions semi-automated and controlled by the home office--Bentonville even controls the thermostat settings at most of its stores--store managers can earn a bonus only by trimming labor costs. But Lichtenstein believes that the vocal opposition at the home office to government regulation of the workplace probably contributes to some of the corner-cutting.

Lichtenstein has a lucid, plain-speaking prose style, and his book manages to be comprehensive without being repetitive or overlong. The narrative is sometimes hampered by his irritating tendency to pause and note historical parallels that do not enrich the analysis of Wal-Mart. It is unclear why a fatal fire in a Chinese factory needs a side note about the Triangle Shirtwaist tragedy, or how Wal-Mart's system of moving goods around the world is supposed to have "evoked the iron shackles subordinating slave to master," unless it is simply because Lichtenstein calls this a "supply chain." Nonetheless, he does an excellent job of covering a wide range of information from several different fields. The Retail Revolution is simultaneously about industrial organization, corporate strategy, labor history, political science and the sociology of mass consumption, and it weaves these subjects together seamlessly. And though on most matters Lichtenstein would side with Wal-Mart's critics, he gives the management its due. In light of what it set out to accomplish, the company has been extremely effective at making its business model work, and he is critical of those who express a hatred of Wal-Mart while giving low-wage copycats such as Target a free pass.

The drawback of this evenhanded approach is that pro-Wal-Mart and anti-Wal-Mart arguments appear side-by-side or in alternate chapters, without the sort of analytical framework that would help one make sense of both. Lichtenstein notes how competition from Wal-Mart and other big-box stores has decimated the main streets of small-town and rural America. According to one study, during the first decade after Wal-Mart's arrival in Iowa in the early 1980s, the state lost 555 groceries, 298 hardware stores, 293 building supply stores, 158 women's apparel shops, 116 drugstores and 153 shoe stores. But he does not explain how, exactly, this impacted the median wage or the price of household essentials, or whether Iowa shoppers were worse off without all those stores. Lichtenstein points out that in many rural settings Wal-Mart stores seem to have replaced Main Street not only as a retail center and major employer but as a community meeting place. "We cry together, laugh together, and share our lives together," explains a testimonial on the company's website. Billie Letts captured this quality of Wal-Mart as what Lichtenstein calls a "de facto town square" in her bestselling novel Where the Heart Is, the story of a pregnant teen who finds an extended family and redemption after being abandoned in an Oklahoma store. Indeed, shoppers from the South and West often say they shop at Wal-Mart because it seems "concerned about and actively involved in the community at large."

The analysis is sharper when Lichtenstein moves from home economics to political economy. He describes how Wal-Mart donates money to nonprofit groups and educational institutions that promote free-market public policies, and sponsors a "Students in Free Enterprise" program for students of Southern evangelical colleges. But he also shows how the company lobbies governments to rezone potential store sites and extracts millions of dollars in subsidies in the process. And he details how Wal-Mart employees make considerable use of federal and state welfare provisions. To help them make ends meet, store managers have been known to give their employees directions about how to apply for food stamps, the Children's Health Insurance Program or the Earned Income Tax Credit. Frustrated by the costs that Wal-Mart seemed to be transferring to taxpayers, Maryland passed a bill in 2006 requiring large companies to spend more on healthcare. (The so-called Wal-Mart bill was struck down by a federal court, which argued that it would "preempt" an existing federal law.) Of course, it is hardly unusual for a corporation or its executives to defend free enterprise in theory while taking advantage of whatever opportunities government offers. For his part, former Wal-Mart CEO H. Lee Scott blames the lavishness of welfare benefits themselves for his employees' interest in them: "There are government assistance programs out there that are so lucrative, it's hard to be competitive, and it's expensive to be competitive."

Lichtenstein concludes that the chain may be facing the limits of its expansion and the internal contradictions of its business model. Its move into the Northeast and Pacific Coast has faced significant resistance. Opponents of big-box stores worry that Wal-Mart's huge operations will drive small-town merchants out of business, snarl traffic and despoil the environment. Others consider the store to be the flagship of red-state cultural imperialism. At the same time, the "relentless growth and Darwinian competitiveness" of the big stores "created a world that is increasingly inhospitable to their own success." As other corporations follow the Wal-Mart way, its own customers are increasingly squeezed by the low-wage, part-time economy that Wal-Mart helped to create. The main stress on American family budgets now comes from transportation, healthcare and education--none of which can be reliably purchased at a Supercenter. The squeeze on discretionary consumables was substantial enough that in 2005, CEO Scott hinted that he might even support a higher federally mandated minimum wage so that his customers could afford to buy more stuff. (Though when Congress debated a raise the following year, the company lobbied to kill it.)

We shall see. The expansion of international "supply chains" from Asian factories to American consumers has certainly created global trade imbalances and international currency flows that are not necessarily sustainable over the long run. A readjustment of the world economy, not a slackening demand for inexpensive consumer products, strikes me as the greatest threat to the Wal-Mart business model. And, for its part, the chain is already adapting to new circumstances. In recent years, Wal-Mart has expanded well beyond the borders of North America into Europe, Mexico and Asia. It imports factory goods from China and also operates its own retail stores there. But the stores look very different from their American counterparts. In Kunming, near the border with Myanmar, Wal-Mart rents space inside its store to independent vendors, who pay $1.20 per day to hawk Yunnan coffee, tobacco bongs filled with local rice wine and condiments made from eggplant, soybeans and ginger. The atmosphere is "festival-like, even chaotic," as vendors shout out their wares, sometimes through loudspeakers or while pounding on drums, and customers crowd a stall to fish pears out of a solution of sugar, salt and licorice root--"a Wal-Mart store sans Wal-Martism," according to sociologist Eileen Otis. Another Chinese employee explains his loyalty to the company by suggesting that Sam Walton was, in fact, a student of Chairman Mao who "adopted the revolutionary strategy of 'the countryside encircling the city.'&nthinsp;" And so the revolution continues.

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