September/October 2005 Issue
The Real Cost of Low PricesFROM THE AFSCME SECRETARY-TREASURER: William Lucy
Wal-Mart's claim to fame is its "everyday low prices." Those smiley faces keep customers coming back to load their carts with everything from paper towels to prom dresses. But the bargain prices actually come at a tremendously high cost to all of us. Can we Americans really afford Wal-Mart? The answer is no. Take a look at the mega-company's effect on our trade imbalance and its practices as a corporate citizen (Public Employee, January/February 2005, Page 18).
Wal-Mart, the world's biggest retailer, is now our nation's single largest importer of foreign-produced goods. Most of its private-label clothing is manufactured outside the United States. Nearly 50 countries are involved, but China is by far the biggest supplier. In fact, of Wal-Mart's 6,000 suppliers, 5,000 of them — 80 percent — are located there, according to a Newsweek special report.
THE COST OF CHEAP IMPORTS. So tremendous a force in low-cost manufacturing is China, the report says, that Wal-Mart in 2004 imported $18 billion in goods from that country. That amount is equivalent to more than 11 percent of the $162 billion trade deficit we had run up with China by the end of 2004!
Some economists argue that our trade deficit is a sign of a healthy economy and an indication that American consumers have more money to spend and more choices. That theory ignores the fact that our trade imbalance with China cost us 1.5 million jobs between 1989 and 2003, as American companies laid off workers and closed down manufacturing plants due to lost business. You can't take advantage of Wal-Mart's bargains if you don't have a job.
Beyond matters of dollars and cents, Wal-Mart's business model raises important moral questions.
HOW LOW CAN YOU GO? Wherever Wal-Mart goes, the company claims to provide low-cost goods and jobs aplenty. But Wal-Mart also threatens the economic foundation of the communities in which it locates, often forcing smaller retailers to shut their doors.
Worst of all, at the heart of Wal-Mart's business model are low wages and stingy benefits. It's no surprise that Wal-Mart employees are increasingly turning to health care programs for the working poor, paid for by states and the federal government. In Wisconsin, for instance, Wal-Mart employees top the list of enrollees in the state's health care program for low-income residents.
And Wisconsin is not alone. Wal-Mart's low, low prices ultimately mean that you and I are subsidizing health care for Wal-Mart employees. That's why states across the country are considering bills that would publicize employers that have large numbers of workers enrolled in public health programs. Some states would force such employers to pay more for health care insurance or reimburse taxpayers for covering these costs.
BITTER IRONIES. We have footed the health care insurance bill for Wal-Mart's underpaid, undervalued workers while the company itself has been shortchanging its customers on prescription drugs. Between 1990 and 2000, Wal-Mart allegedly billed government health insurance programs for the full quantities of prescription drugs, yet dispensed only partial prescriptions. Last June, it agreed to a $2.8 million settlement divided among several states.
Yet another feature of the Wal-Mart way is sex discrimination. More than 1 million women, both former and current employees, have accused the company of denying them equal pay and promotions. Wal-Mart discriminates against its female workers, who comprise an estimated 70 percent of its employees, while cultivating women as customers.
Because of the cost to our nation and to the global community, Wal-Mart's low prices are a bargain we simply cannot afford. The retailer's heavy reliance on suppliers from other countries costs Americans their jobs. Wal-Mart's ability to depress pay and benefits and its negative effect on employment conditions costs workers everywhere their dignity.
