(The following story by Steven Pearlstein appeared on the Washington Post?s website on October 29.)
WASHINGTON, D.C. — According to supermarket giants Safeway, Albertson’s and Kroger, the competitive threat from Wal-Mart makes it impossible for them to survive without cutting the pay and benefits of unionized employees.
But to hear it from the 70,000 striking or locked-out members of the United Food and Commercial Workers union, accepting anything less than they get now would set up an unwinnable race to the bottom with Wal-Mart’s nonunion “associates” who make as little as half of what they do.
Both sides are right, of course, which only confirms what a dominant factor Wal-Mart has become in how American business is conducted, and how wages and prices are set. Wal-Mart is now the symbol for all that is good and bad in the hypercompetitive global marketplace, its impact rippling to every corner of the U.S. economy.
Wal-Mart’s relentless drive to deliver low prices now directly saves American consumers $20 billion a year by one estimate — and probably several times that sum once the indirect effect on competitors is factored in.
To win Wal-Mart’s business, suppliers have been forced to close U.S. factories and source overseas, with millions of American jobs lost in the process. Wal-Mart alone accounts for 10 percent of all imports from China, and its shelves bear little trace of the “Buy America” philosophy of its founder.
The ruthless efficiency of Wal-Mart’s supply chain accounts for as much as a quarter of the economy’s recent productivity gains, according to a study by McKinsey & Co.
Surely no sector has felt the “Wal-Mart effect” more than retailing. The retail giant now accounts for 35 percent of food sales, 30 percent of consumer staples, 25 percent of drug store products and 15 percent of magazines, books and apparel. Entire chambers of commerce have been wiped out with the arrival of a new “superstore,” while “greeting customers at Wal-Mart” has replaced “hamburger flipping” in the national debate over wages and trade.
The credibility of Wal-Mart’s claim that it balances the interests of the workers and consumers took a direct hit last week when federal agents arrested several hundred illegal aliens cleaning floors and emptying trash baskets at Wal-Mart stores. Conversations secretly recorded at corporate headquarters supposedly put the lie to executive assertions that they were shocked to learn their cleaning contractors had hired undocumented workers.
In a rather neat way, Wal-Mart presents the essential dilemma of modern global capitalism: how to capture most of its benefits while minimizing the unpleasant side effects.
Too much innovation and consumer saving would be lost if government were to step in to prevent Wal-Mart from opening new stores or purchasing goods from overseas — which, in effect, is what its opponents would like.
At the same time, we know that, in the face of the market’s ruthless search for efficiency and growth, there are other ways for a wealthy society to assure all workers a minimal standard of living.
I’m talking about a minimum wage that would put a family with two full-time workers above the poverty line in high-cost metropolitan areas — and no doubt put upward pressure on wages at places like Wal-Mart.
Or how about requiring employers like Wal-Mart to provide all workers with affordable health insurance, including part-timers and recent hires.
And what about labor laws effective enough to prevent companies such as Wal-Mart that instruct managers never to hire anyone who once belonged to a union, that routinely fire any employee seen talking to a union organizer and that fly in special teams whenever a store’s employees score too high on a “union probability index.”
Yes, such measures would likely force Wal-Mart to raise the price of jeans and chicken wings by a nickel or two, slow its growth, and maybe even shave a fraction of a point off real GDP.
But that’s not the issue. The issue we ought to be debating is what is an acceptable price to pay to restore a measure of fairness, equality and economic security to Wal-Mart nation. That is fundamentally a political issue, not an economic one.