Croker Sack

"Democracy is the theory that the common people know what they want, and deserve to get it good and hard." — Henry Louis Mencken (1880-1956)

Monday, November 28, 2005

Wal-Mart: Jekyll and Hyde?

Is the world's biggest retail business suffering from some sort of Jekyll and Hyde syndrome, or does it just depend on one's point of view?

Here is an article from The Seattle Times that is generally critical and here is one from the Washington Post that is generally laudatory.

The facts don't seem so different, but the opinions formed based on those facts could hardly be more different.

One's prejudices really do matter sometimes. Take this part from the critical article for example:

Indeed, a Business Week analysis shows Costco's average hourly wage is $15.97, far above the Wal-Mart (Sam's Club) $11.52 figure (even excluding the 25 percent of Wal-Mart workers who are low-paid part-timers). The yearly employer contributions to health care — Costco, $5,735; Wal-Mart, $3,500. Of Costco employees, 82 percent are covered by the health plan; Wal-Mart, 47 percent. Employee turnover at Wal-Mart is three times higher than Costco's.

And then comes the clincher, suggesting the low-road approach may not be so clever after all: Costco's profit per employee is $13,647; Wal-Mart's, $11,039.

Now, if one retail business promised low prices all the time, might its profit per employee be lower because of those low prices?

And, as pointed out by the laudatory article, the people who shop at Costco are not the same as those who shop at Wal-Mart:

Wal-Mart's critics allege that the retailer is bad for poor Americans. This claim is backward: As Jason Furman of New York University puts it, Wal-Mart is "a progressive success story." Furman advised John "Benedict Arnold" Kerry in the 2004 campaign and has never received any payment from Wal-Mart; he is no corporate apologist. But he points out that Wal-Mart's discounting on food alone boosts the welfare of American shoppers by at least $50 billion a year. The savings are possibly five times that much if you count all of Wal-Mart's products.

These gains are especially important to poor and moderate-income families. The average Wal-Mart customer earns $35,000 a year, compared with $50,000 at Target and $74,000 at Costco. Moreover, Wal-Mart's "every day low prices" make the biggest difference to the poor, since they spend a higher proportion of income on food and other basics. As a force for poverty relief, Wal-Mart's $200 billion-plus assistance to consumers may rival many federal programs. Those programs are better targeted at the needy, but they are dramatically smaller. Food stamps were worth $33 billion in 2005, and the earned-income tax credit was worth $40 billion.

Wal-Mart provides jobs on the lower rungs and greater purchasing power to those on the lower rungs. Can that be bad?

Perhaps, if you were a business owner who enjoyed a greater profit from sales to the customers who went to that new Wal-Mart to enjoy those lower prices. Or, if you are someone who doesn't want to see it happen to you, as your erstwhile customers go where their earnings buy the most.

(Hat tip: RealClearPolitics)


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