On September 11, Chicago Mayor Richard Daley used his veto power for the first time in seventeen years to block a measure that would have given Wal-Mart employees and workers at other “big box” stores at least $10 per hour plus benefits worth at least $3 per hour. The City Council had passed the bill by a 35-to-14 vote margin. Daley’s brash act was a temporary victory for the chorus of conservative pundits and corporate flacks who have been singing Wal-Mart’s virtues for the past year. Here’s what they claim and why they are wrong:
1. Wal-Mart’s low prices save American consumers $263 billion a year
(cited by syndicated columnists Robert Samuelson, Sebastian Mallaby, John Tierney and George Will):
The Economic Policy Institute has ripped apart the methodology Wal-Mart’s consultants used to come up with this most popular claim of the Wal-Mart pundits. The consultants based their finding on an analysis of the effect of Wal-Mart expansion in a locality on overall consumer prices in that area. The problem, as EPI points out, is that 60 percent of the consumer price index is made up of services like transportation and housing that Wal-Mart doesn’t provide. Therefore, the $263 billion figure is wildly exaggerated.
Even Wal-Mart’s recent announcement that it will sell generic drugs for $4 is mostly hype. According to the New York Times, the plan will only cover about 124 medicines (out of 11,000 generics on the market), and Wal-Mart was careful not to include relatively expensive but widely used drugs like the high-cholesterol treatment Zocor. In her forthcoming book Big-Box Swindle, Stacy Mitchell cites surveys in several states that have found it was independent pharmacies–not Wal-Mart–that had the lowest average prices on drugs.
While Wal-Mart’s consumer benefits are clearly overrated, it’s hard to dispute that the company sells a lot of cheap stuff. The question, then, is at what price? Slavery kept cotton prices low in the United States for centuries and saved consumers countless dollars. But it was wrong. Likewise, Wal-Mart’s strategy of keeping costs down by exploiting sweatshop suppliers abroad while undermining unions and paying less than living wages in this country should be deemed unacceptable in the twenty-first century.
2. If Wal-Mart increases wages, it will have to increase prices
Wal-Mart knows, despite all the bluster to the contrary, that there is ample space in its profits ($11.2 billion in 2005) to increase wages without raising prices. According to the Economic Policy Institute, Wal-Mart could have raised the wages and benefits of each worker by more than $2,000 last year without raising prices–while still maintaining a profit margin substantially higher than Costco’s. A key competitor, Costco pays its workers an average of $17 an hour. Wal-Mart claims it pays its full-time employees $10.11 per hour but refuses to reveal average pay for its part-time workers.