News and Document archive source
copyrighted material disclaimer at bottom of page

NewsMinecabal-elitecorporatewalmart — Viewing Item


Wal mart screws labor force { November 6 2003 }

Original Source Link: (May no longer be active)
   http://www.washingtonpost.com/wp-dyn/articles/A6513-2003Nov5.html

http://www.washingtonpost.com/wp-dyn/articles/A6513-2003Nov5.html

Stores Follow Wal-Mart's Lead in Labor
Competitors Struggle to Match Savings From Non-Union Workforce

By Greg Schneider and Dina ElBoghdady
Washington Post Staff Writers
Thursday, November 6, 2003; Page A01


MORGANTOWN, W.Va. -- As a young man, Roy Bukrim found a job that seemed better than working in dangerous coal mines like his relatives: He hired on at the Kroger supermarket, where 27 years later he's head night stocker and supports a wife, two kids and a mortgage.

But Bukrim, 48, figures he wouldn't have that career option today. Young people who take a job there now get minimum wage and no health benefits, then leave after a few months. Bukrim said the future that he saw in grocery work no longer exists. "We've been the generation where that's all changed."

To Bukrim and other workers -- as well as Kroger Co. executives -- the juggernaut driving that change is the store's most-feared competitor, Wal-Mart Stores Inc.

"All we've heard is Wal-Mart this and Wal-Mart that," said Kroger cashier Victoria Marano. "They want to be like Wal-Mart so they can compete."

Wal-Mart, the world's biggest retailer and the nation's biggest private employer, has become so powerful that its practices reverberate throughout the U.S. economy. About as many people work for Wal-Mart -- 1.3 million -- as are on active duty in the U.S. military. Its most recent annual sales -- $245 billion -- are greater than the gross domestic product of Switzerland. It's no wonder the company has more than 3,000 stores in the United States; on Oct. 29 alone Wal-Mart opened 39 stores, and it once opened 47 in a day.

Because it wields enormous buying power, Wal-Mart influences the makers of virtually all household products, dictating everything from pricing to packaging. What's more, Wal-Mart's mania for selling goods at rock-bottom prices has trained consumers to expect deep discounts everywhere they shop, forcing competing retailers to follow suit or fall behind.

The Oct. 23 arrest of 250 illegal aliens working for outside cleaning crews at 61 Wal-Mart stores nationwide underscores another aspect of Wal-Mart's low-price formula: a fervent effort to hold down labor costs. This week the retailer said it has received a "target letter" from a federal grand jury in Pennsylvania, signifying that Wal-Mart itself is under investigation for its role in using illegal workers.

Part of the reason the chain is able to offer a microwave oven for under $30 or a 24-can package of Sam's Choice cola for $3.64 or a gas-powered lawn mower for under $150, for instance, is because it contracts with outside janitorial services -- some of which have questionable hiring practices -- and relies heavily on lower-paid part-time workers, say unions and competitors.

Wal-Mart's vast, non-unionized work force earns a typical wage of about $7 to $8 an hour. Unionized workers at Kroger, by contrast, said they were making between $11 and $13 an hour, with full health benefits. About 62 percent of Wal-Mart workers are eligible for benefits, but less than half of the workforce participates. Critics say the low participation is because Wal-Mart requires steep employee contributions.

As other retailers follow Wal-Mart's lead, workers without technical training are feeling a tightening squeeze. Low-skilled manufacturing jobs are vanishing at historic rates -- West Virginia's coalfield employment, for instance, plummeted from 59,700 jobs in 1980 to 15,700 in 2000. Untrained people entering today's workforce the way Bukrim did three decades ago have dwindling odds of reaching the middle class.

"These are jobs that have historically yielded a middle-class lifestyle. But with a much more lean and mean approach to services, many of those jobs are going by the wayside," said Jared Bernstein, an economist with the Economic Policy Institute.

Nowhere is that shift more evident than at supermarkets, such as Kroger, which have seen Wal-Mart rocket to the top of their industry in only 10 years. Bukrim and 70,000 other unionized workers at the Kroger, Safeway and Albertsons chains in several states -- including West Virginia, California and Kentucky -- are now on strike or locked out in a conflict over wage and benefits changes their employers say are necessary to compete with Wal-Mart.

Some economists argue that the Wal-Martization of the American workforce is simply the free-market system functioning as it should. Gary Stibel, founder and principal of the New England Consulting Group, said Wal-Mart has saved consumers more than $20 billion through its discount pricing. Figuring in Wal-Mart's pressure on other retailers to lower prices, savings top $100 billion, he said.

"In this day and age, the United States needs more companies like Wal-Mart to create jobs, even if not at the highest pay," Stibel said. "The company that makes its mark by taking the cost of manufacturing products and services up will lose, and the country that promotes that will lose."

Wal-Mart morphed from a single store in Rogers, Ark., in 1962 into a retail powerhouse by mastering the art of low pricing in a way that has transformed its competitors, its suppliers and the industries it now dominates -- including groceries, toys and apparel.

Founder Sam Walton pioneered the "supercenter" retail phenomenon. His use of technology such as bar code price scanners and his reinvention of the supply chain, with stores reordering stock only as needed instead of keeping mountains of goods in warehouses, changed the way businesses interact with one another and their customers.

Walton's method of expanding his chain was unique, too. The company emerged from what one analyst called "one of the most backward areas of America" and spread through the rural South by hiring people who were accustomed to farm work. Wal-Mart inspired fervent loyalty from customers by putting its stores in regions other retailers had ignored.

But it also drew condemnation for squashing smaller businesses in its path. Small-town business districts tended to empty out when Wal-Mart hit. Some areas responded by drafting anti-Wal-Mart zoning ordinances that keep out retailers of a certain size.

Today, "Wal-Mart creates its own weather," said John A. Challenger, chief executive of Challenger, Gray & Christmas Inc., a Chicago outplacement firm that tracks retail jobs. "It sets the standards in many ways for retailers throughout the country, which benchmark against them."

Kmart Corp., which dwarfed Wal-Mart only 15 years ago, filed for bankruptcy protection in 2002 and eliminated 57,000 positions in part because it tried to compete with Wal-Mart on prices and failed. FAO Inc., the iconic toy seller, filed for protection from its creditors in part because it did not try to compete with Wal-Mart on prices. Both retailers have since emerged from bankruptcy proceedings. And since Wal-Mart began aggressively expanding into groceries in the past decade, some national supermarket chains have gone bankrupt.

Wal-Mart's pressure to hold down labor costs also helps fuel the national market for undocumented workers, immigrant advocates say, as employers take advantage of laborers who are too fearful of being deported to object to substandard wages and conditions. Rather than hire illegal immigrants themselves, big chains typically turn a task such as janitorial services over to a low-bidding national contractor, which in turn farms the work out to smaller subcontractors. The subcontractors range from established firms that rigorously check workers' immigration status to one-man, fly-by-night operations that knowingly employ illegal workers, labor experts say.

Undocumented workers learn of the companies through word of mouth, foreign-language newspaper advertisements and Web sites. It was a Russian hostel owner in Brooklyn, for example, who directed 24-year-old Russian immigrant Misha Firer to a small company that cleaned a Wal-Mart in Pennsylvania. For two months, the undocumented worker lived in a trailer park and buffed the store's floors from midnight to 8 a.m. for $6 an hour -- $1 of which was seized by his boss, Firer said.

Even though Wal-Mart's roots are outside of food retailing, it's within the food sector that the non-unionized retailer is most affecting labor relations in this country, said Ira Kalish, a global director at Deloitte Research.

"The impact in terms of wage pressures is really in the supermarket industry because that's the one part of retailing that's heavily unionized," Kalish said. "Most others are not. For [a fashion retailer such as] the Gap, for instance, the issue is not so much labor costs as supply-chain efficiency, sourcing and rent."

But for supermarkets, which operate on razor-thin profit margins, labor is perhaps the highest cost of doing business, said Michael J. Silverstein, a senior vice president at Boston Consulting Group.

"The less you pay [for labor], the lower your prices can be," Silverstein said. "The grocery store is a war zone, and the weak are going down fast -- and with them go a lot of jobs."

Wal-Mart's supercenters have labor costs roughly 20 to 30 percent lower than those of unionized supermarkets, according to a study from consulting firm Retail Forward. As a result, groceries at Wal-Mart cost about 15 percent less than the competition, the study said.

Retail Forward concluded that for every Wal-Mart Supercenter that opens in the next five years, two supermarkets will close their doors. That means the supermarket industry could lose 2,000 more stores over the next five years, or 400 a year.

"It's unlikely that any other U.S. food retailer will catch up to Wal-Mart, even through a mega-merger," the report said. By 2007, the chain should capture 35 percent of supermarket industry sales and double the number of its supercenters to 2,250.

Wal-Mart is applying the same heavy pressure on grocery suppliers that it exerts on makers of other consumer goods, leaving them beholden to the retailing giant for a significant part of their revenue. Wal-Mart made up 30 percent or more of U.S. sales for Clorox Co., Gillette Co., Mattel Inc., and Procter & Gamble Co. in fiscal 2002, according to Fitch Ratings.

For retailers, competing with Wal-Mart means not just holding down wages, but curbing health care costs, which are becoming an increasing burden on employers nationwide.

A report by the AFL-CIO, which has tried and failed to organize Wal-Mart workers, said the retailer insures only about 45 percent of its workforce. Wal-Mart workers must pay about one-third of the cost of their health care premiums, while employees at other large companies typically pay 16 to 25 percent, the report said.

The result is that many Wal-Mart workers transfer the health care burden either to their spouse's employer or to government agencies, the report said.

Some employees at Minneapolis-based Target Corp., a non-union company once known for its generous employee benefits, say they believe price competition with Wal-Mart caused their employer to cut benefits as well.

In April, Target rolled out a new health care plan for 2004 that offered generous benefits, but only for employees who averaged more than 32 hours of work each week. Some Target employees say the company then hired more workers and reduced existing workers' schedules so they no longer qualified for the plan.

Wal-Mart workers have complained of similar strategies designed to keep them from qualifying for health coverage.

Lawsuits representing thousands of current or former Wal-Mart employees and focusing on wage and overtime pay as well as sex discrimination are on file around the country, along with dozens of complaints to federal labor regulators.

Wal-Mart defends its practices, arguing that its employees have generous access to insurance and that worker contributions to health care -- $57 per two-week pay period for a family plan -- are in line with the rest of the industry. The company does not quibble with AFL-CIO's wage numbers or health coverage statistics, "but they're only telling half the story," said Mona Williams, Wal-Mart's chief spokeswoman.

Forty percent of the employees who Wal-Mart insures had no medical benefits prior to joining the company, she said. "These are people who would have fallen through the cracks or been on public health rolls," she said, adding that some 62 percent of Wal-Mart's workers are eligible for benefits.

As for wages, Wal-Mart's entry-level jobs "are not designed for someone who is the sole support for a family" but for those looking to advance, she said. About two-thirds of Wal-Mart's managers were once hourly workers for the chain. Employee turnover is 50 percent, better than the 70 percent industry average, Williams said.

Maybe that's why union attempts to organize Wal-Mart employees have failed, Williams said.

"What we need to ask our competitors is: Can they be more efficient? Can they live more frugally?" she said. "Is paying people $15 to $17 [to stock shelves] realistic?"

Some analysts agree, saying Wal-Mart's strategies and success would not be possible without willing workers and the backing of penny-pinching consumers.

"You can't stay non-union unless you're giving people something. On balance it has to work out for employees," said Bernard Sosnick, an analyst at Oppenheimer & Co.

Kroger employees on a picket line this week in Morgantown, many of whom said they were making between $11 and $13 an hour, said they would never work at Wal-Mart. But most said they shop there. In the parking lot of the nearest Wal-Mart Supercenter, on a hilly cow pasture 19 miles south of Morgantown, Vivian Mullins and her daughter, Jennifer, wheeled out a cartload of groceries and said they have sympathy for Kroger workers. But they love their Wal-Mart.

"I applied to work there just the other day," said Jennifer Mullins, 18, currently working in a restaurant. "A lot of my friends I went to school with work there. They think it's great."

Staff writers Kirstin Downey and Michael Barbaro contributed to this report.



© 2003 The Washington Post Company


Activist takes million from walmart for mlk memorial { March 24 2006 }
Americans say walmart is bad for america
Canadian store near union contract will be closed by walmart
Class action sex discrimination lawsuit against walmart
Council sellsout black chicago community to walmart { April 21 2004 }
Ehrlich urged to return walmart money { May 4 2005 }
Empire of bargains remakes working world { November 23 2003 }
Executives knew walmart employees were illegals { November 8 2005 }
Foes dig in as walmart aims for new york city { February 10 2005 }
Germanys walmart goes for world conquest { April 26 2004 }
Gocery store windixie dies out to wal mart
Grocers treat employees like walmart employees
Grocery unions battle to stop invasion of giant stores { November 25 2003 }
Hacktivists piss off walmart
Heir john walton dies in plane crash
How costco became the anti walmart
India protests western style stores like walmart
La voters suburb reject wal mart supercenter
Legislature proposes special tax on walmart
Lobbyists hired by walmart to topped benefits bill { November 18 2005 }
Los angeles council hampers walmart plans
Los angeles fights walmart to protect jobs { April 2 2004 }
Los angeles voters send wal mart packing { April 7 2004 }
Maryland forces healthcare for walmart employees
Mexicans protest walmart near ruins
New pyramid mexican walmart threatens ancient treasures { November 5 2004 }
No walmart in chicago [jpg]
Pelosi says wal mart arrests terrorizing
Protesters bash wal mart attempts in two cities { May 2 2004 }
Scouring the globe to give shoppers 8d polo shirt { November 24 2003 }
Stymied by politicians walmart turns to losangeles voters { April 5 2004 }
Teens charged with bombing walmart in maine
Two walmart stores in quebec receive bomb threat { February 11 2005 }
Virginia town joins against walmart
Wal mart economic disease
Wal mart facing rising resistance { May 4 2004 }
Wal mart interested in acquisitions in brazil { August 25 2004 }
Wal mart invates mexico and mexico gladly surrenders { December 6 2003 }
Wal mart raids 300 illegal workers
Wal mart screws labor force { November 6 2003 }
Wal mart threat fuelds new urban politics { May 20 2004 }
Wal mart violated labor laws { January 13 2004 }
Wal marts benefits come under fire
Walmart bank threatens financial system says lawmakers
Walmart bank { January 7 2003 }
Walmart buys brazil supermarket chain
Walmart CEO goes offensive on critics
Walmart china inventory hits 18b this year
Walmart costs state taxpayers for workers { August 3 2004 }
Walmart customers overcharge problems { April 3 2004 }
Walmart cuts prices ahead of holidays to boost sales { November 21 2006 }
Walmart dependent on welfare for employees { November 7 2003 }
Walmart economy was keeping down inflation
Walmart forces jobs overseas
Walmart ge morgan banking system { May 23 2003 }
Walmart gets bigger
Walmart in offensive to boost image { September 8 2004 }
Walmart in queens scrapped due to protest
Walmart involved in congressional black caucus fundraiser { May 15 2005 }
Walmart locked janitors in stores
Walmart nation race to the bottom { February 18 2004 }
Walmart on fire [jpg]
Walmart operates intelligence spying network
Walmart pays ceo more and employees less than costco
Walmart recommends king for planet of the apes
Walmart reopens after arson fires { December 24 2004 }
Walmart threatens to double china outlets by 2006
Walmart to begin phased rfid tag
Walmart to use more partimers cheaper labor
Walmart uses extreme tactics to stop unions { May 2 2007 }
Walmart violates clean water act { May 12 2004 }
Walmart violates labor laws to stop unions { May 1 2007 }
Walmart wins warnings on future investigations { February 12 2005 }
Walmart
Walmarts wants stores throughout europe { May 24 2004 }
Winndixie cuts 326 to compete with walmart
Workers from indonesia nicaragua etc sue walmart
Zoning rules block kansas walmart supercenter

Files Listed: 78



Correction/submissions

CIA FOIA Archive

National Security
Archives
Support one-state solution for Israel and Palestine Tea Party bumper stickers JFK for Dummies, The Assassination made simple