Wednesday, December 13, 2006

Wal-Mart Deserves the Nobel Peace Prize?

With $330 billion in annual sales, Wal-Mart certainly attracts a lot of shoppers--and unflattering attention. It's often blamed for paying workers poorly, driving small merchants out of business, buying from overseas sweatshops, and killing downtowns. When you read about them in the news, it's usually about how their latest proposed store is being opposed by local civic groups, right?

Well, in an article in the January 2007 edition of Kiplinger's, Jeremy Siegel writes about the flip side of Wal-Mart's impact. He notes that "for millions of people, Wal-Mart is a lifesaver that provides what they want at prices they can afford." He also pointed out that Wal-Mart pays more than $10 an hour, on average, and that when they opened a new store in Chicago, they had 25,000 applications for 325 jobs. Despite that, Chicago City Council had voted to hold have higher minimum wages requirements for Wal-Mart and other big box retailers. Though the bill was vetoed, Siegel noted that it sends the message to prospective employers, that "We will penalize you for being a large, efficiently run company that offers consumers the lowest prices. Would Chicago prefer less-efficient companies with higher prices and fewer jobs?"

Wal-Mart's huge size means that other competitors, such as grocery stores and other merchants, need to be more competitive in price. Siegel cites a study that found that Wal-Mart's growth from 1985-2004 resulted in food-at-home prices that were 9.1% lower and overall prices that were 3.1% lower than they would have otherwise have been. Don't ask me how they figured that out, but that means that if it hadn't been for Wal-Mart, we'd be paying higher prices on most things we buy.

Siegel also addressed the criticism that Wal-Mart encourages sweatshops in the developing world. Here, he cites an editorial by Brian Tierney of the New York Times. Tierney makes the argument that Wal-Mart is as deserving of the Nobel Peace Prize as is Muhammad Yunus, the 2006 prize winner, who founded Grameen Bank. Grameen Bank helped people in poor villages in developing countries through microloans. Tierney makes the point that Wal-Mart is actually responsible for the creation of far more jobs in the developing world than Grameen.

Well, nominating Wal-Mart for the Nobel Peace Prize may be a bit much to swallow, but Siegel's article does point out the positive side of Wal-Mart that is rarely mentioned in the press and gives some food for thought.  I'd be interested in what readers have to say.


Daro said...

As an employee of Wal-Mart for the last 16yrs I have to take to task its critics about low pay and poor benefits. Yes, when I first started with the company my wages were not the best, but as a recent college graduate I actually pursued a career at Wal-Mart because of all the great things I'd read and heard about it my college classes and the benefits provided I would say are second to none. The critics contend that were are provided poor health care coverage ,however, when my son was born with bilateral hydronephrosis (blocked kidneys and bladder) and pulmonary hypoplasia (underdeveloped lungs, which were burst while trying to stabilize his breathing) it quickly became apparent how good Wal-Mart health insurance actually was. With his bills over $800,000 I'll never forget the day we received a statement for one of his bills the amount $600,000 at the bottom it stated paid in full. He will eventually need a kidney transplant and low and behold Wal-Mart has a transplant network set up. I think its a great place to work and with a family of five a great place to shop. Thank you Mr. Sam. Daro Crandall

Sally Parrott Ashbrook said...

I don't have time to respond to all of this post. However, I would suggest you go read the Fast Company article (came out about a year ago) about why Snapper refused to do business with Wal-Mart anymore. Wal-Mart pushes prices down in part by requiring companies to decrease their expenses by decreasing their quality.

Also, you should check out the documentary: Wal-Mart: The High Cost of Low Prices.

gte said...

Sally, thanks for the heads up on the Fast Company article. I just looked it up and read it. To me, it doesn't really say anything negative about Wal-Mart. Actually, it reinforces some of Siegel's points that they make products more affordable. In the Fast Company article, it talks about how they had lowered the price and increased the content of the mowers each year.

That said, I'm not necessarily a Wal-Mart proponent. I shop there occasionally, but don't like their long, slow lines and the way that they're often out of stock of what I'm looking for. They also don't have some of the nicer brands/quality products that I'm looking for. Just thought Siegel's take was an interesting one.

Duane Gran said...

Walmart should be praised for its efficiency and advanced logistics. These are all gains for the economy and consumers in general, however they deserve every bit of scrutiny they get for two areas of deficiency:

1) They focus so much attention on narrowing the gap between shelf price and market cost that it forces them to compromise in paying for labor. For example, Costco manages to pay its employees an average of $17 per hour (versus wal-mart's $9.38). They recoup this cost through higher retention and employee loyalty and everyone is the richer for the experience.

2) As the Fast Company article points out, Walmart has a reputation for brutal negotiations with its suppliers. When Walmart demands the financial statements of its business partners you can't call it a collegial business relationship. In many cases Walmart can be described as "firm, but fair" but they have literally bled some suppliers to death only to acquire their product logistics when the supplier is in distress.

Carnival of Personal Finance #79 said...

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