Higher Wages or Cheaper Prices? - Tilted Forum Project Discussion Community

Cynthetiq · 05-28-2005, 01:48 PM

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Is shopping at Wal-Mart immoral?
Big discounters help the poor make ends meet, but they create more poverty when they pay low wages and force local stores to close. It's a conundrum facing investors and shoppers alike.
LINK
By Christian Science Monitor

In the early 1990s, business owners on the island of Kodiak, Alaska, hired a consultant to analyze how much they'd be hurt by a proposed Wal-Mart. But in gathering data at their request, Kenneth Stone also discovered how the store was apt to help another local group: the poor.

"A lot of low-income people were practically begging the city to let Wal-Mart in," says Stone, an Iowa State University emeritus economist and 20-year researcher on Wal-Mart's national impact. "They were saying, 'We have to do something to lower our cost of living. ...' I believe that the lower prices do allow for a higher standard of living for low-income people."

Stone is far from a Wal-Mart (WMT, news, msgs) cheerleader. His research documents at length how the world's biggest retailer has put countless shopkeepers out of business and thereby eliminated as many jobs as it has created. But he has found what other economic researchers have seen as well: Discount retail is a complex business with more winners, losers and tough ethical tradeoffs than public debate routinely acknowledges.Start investing with $100.

Chains need social skills
Ethically minded investors are already familiar with discounters, the high-volume, low-price chains such as Target (TGT, news, msgs) and Costco (COST, news, msgs), which rank among the 10 largest retailers in America. But it is Wal-Mart, which tops the list with $258 billion in sales in 2003, that sets off the sharpest disputes. Shunned by some investors concerned about its antiunion attitudes and environmental impact, the chain nevertheless appeared in the portfolios of 33 socially responsible investment (SRI) funds in that same year, according to a study by the Natural Capital Institute.

For some, the discount domain is a place to make a statement as well as a profit. Christian Brothers Investment Services, for instance, includes Wal-Mart, Target and Costco among holdings that pass its screening criteria for the firms' 1,100 Roman Catholic institutional clients. On behalf of shareholders, Christian Brothers urges discounters to select sites with sensitivity to local concerns, to promote women to top positions and to monitor working conditions of overseas suppliers.

"We try to raise another perspective and get them to think about some of the things that they aren't necessarily attuned to because the market isn't attuned to it," says John Wilson, director of SRI at Christian Brothers.

Others see discounters forcing investors to ask tough questions of themselves. For instance, what is the social value of keeping prices low for essential items as food and clothing? Should employees get better compensation, even if it means higher costs for those who can't afford to shop elsewhere? When one group has to make a sacrifice, should it be employees, customers, shareholders or local communities? Shareholders have a say on such issues, but reading the moral compass takes time and thought.

"The real question is, 'What kind of world do we really want to create?'" says Ruth Rosenbaum, executive director of the Center for Reflection, Education and Action, an advocacy center in Hartford, Conn., with a focus on low-income issues. "Are we designing a world that is economically beneficial for those who are able to hold shares in companies (by keeping labor costs low and stock prices high)? Or are we designing a world that is economically beneficial and therefore sustainable for most people?"

As Rosenbaum suggests, the moral task at hand might be to seek prosperity for all involved. But whether better pay and benefits for discount employees is a rising tide to lift all boats is a matter of debate, even among economists committed to reducing poverty.

'Race to the bottom'
Some recent research suggests the low prices and job opportunities offered at a new Wal-Mart store don't alleviate a community's struggles with poverty over the long term. Wal-Mart workers in California, for example, annually seek $86 million worth of public assistance, according to a 2004 study by the Labor Center at the University of California at Berkeley. If other big retailers in the state follow suit, the study projected, California taxpayers would have to foot another $410 million in healthcare services, food stamps and other public costs.

This "race to the bottom" in labor costs also seems to rub off on a surrounding area, according to research from economists Stephan Goetz and Hema Swaminathan at the Northeast Regional Center for Rural Development at Penn State University. While the national poverty rate dropped 2.4% between 1990 and 2000, the rate fell by just 0.2% on average in counties that added a Wal-Mart. One theory: Although Wal-Mart creates jobs, the company also eliminates jobs by putting others out of business.

"We didn't expect Wal-Mart would be able to affect poverty on a countywide basis, but lo and behold it did," says Goetz. Even so, he adds, discounting poses dilemmas. "It's hard to quibble with saving money, unless you're creating costs to society that you are not bearing."

Such findings seem to demand that ethical investors use their clout to insist that discounters compensate their workers better and perhaps set off a positive ripple effect in a geographic area or industry. But Wall Street notoriously punishes firms that raise labor costs, an outcome no investor would appreciate. Even if short-term returns weren't a concern, some wonder if higher prices at the cash register would truly serve the common good.

Goetz, for instance, acknowledges that low prices on goods from food to hardware bring a valuable social benefit: "The standard of living is up for poverty-stricken people. Critics of Wal-Mart haven't looked at that." For Bruce Weber, co-director of the Rural Poverty Research Center at Oregon State University, research on discounters' social impact is still too scant to warrant firm conclusions. Still, he believes the issues are broader than they have been framed in public debate thus far.

"A whole bunch of consumers are better off from the low prices, but a few workers are worse off. That's the way economists soothe themselves about all of this," Professor Weber says. "I think it's an empirical argument. How many people benefit and how many people pay? Most economists believe keeping prices down offers a benefit. ... For an individual consumer who doesn't depend on (a discounter's) wages, how could it not be better to have a Wal-Mart?"

A shopping-cart challenge, too
Where ethical investors might test their mettle, however, is in weighing the immediate benefits for individual consumers -- even the poorest ones -- against other long-term goals. If saving American jobs in textiles and other labor-intensive industries is a top priority, discounters who rely on outsourcing to overseas manufacturers might not offer the best investment option. Similarly, those who care deeply about preserving American communities that reinvest locally might not favor the Wal-Mart model, in which Goetz says "all the profits are siphoned off to (corporate headquarters in) Bentonville, Ark."

In the view of the United Food and Commercial Workers Union (UFCW), which represents 1.4 million workers, discounters present a moral challenge to every investor.

"It comes to what kind of human being you are," says Jim Papian, a spokesman for the union, which has found Wal-Mart nearly impossible to organize. "If you're someone with enough money to invest, that means that you've probably been able to take advantage of some opportunities you've had, you have extra cash or whatever. And it means you've probably had good employment opportunities, good working conditions. Why shouldn't the businesses you invest in provide those same conditions for their employees?"

For better or worse, discounting seems poised for a long run in the American economy. That means that diversified investors with an interest in ethics will have no choice but to grapple with the complexities posed by this sector. Doing so means probing lots of gray areas, since researchers readily admit they're just beginning to learn how discounting is affecting society at home and abroad.

By G. Jeffrey MacDonald

I read this article and was going to post yet another Walmart article, but quite frankly those that dislike Walmart have said their piece and those that love it have said theirs also.

This one was different since it asked very simple questions. Please answer the following questions:

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Others see discounters forcing investors to ask tough questions of themselves. For instance, what is the social value of keeping prices low for essential items as food and clothing? Should employees get better compensation, even if it means higher costs for those who can't afford to shop elsewhere? When one group has to make a sacrifice, should it be employees, customers, shareholders or local communities? Shareholders have a say on such issues, but reading the moral compass takes time and thought.

For instance, what is the social value of keeping prices low for essential items as food and clothing?

Basic services should be kept at a minimum cost and simple profit margin.

Should employees get better compensation, even if it means higher costs for those who can't afford to shop elsewhere?

Employees try to get the most dollar for the least amount of work. Employers try to get the most work for the least dollar. Seems to be the same capitalistic forces in play as those that determine where people shop and buy good. Capitalism forces those businesses into creation, we have $1 stores all over the place that sell lots of the same housewares that WalMart sells, they may not be stylish but they are functional.

When one group has to make a sacrifice, should it be employees, customers, shareholders or local communities?

unfortunatelty it's the employees who end up making the sacrifice. Local commuinities have more say, shareholders have more say, customers have more say than the employee. Give the employee a voice via union? that drives up the costs... so in the end the business chooses the loser to be the employee.

Elphaba · 05-28-2005, 03:47 PM

For the sake of argument, I think it possible that the employee is not always the loser. I can only justify this comment by using WalMart as an example, but it is not my intent to make this about WalMart.

It appears that one of their business strategies is to open stores in rural communities. My experience of them (living in BFE) is that the small towns have high unemployment due to the lack of jobs and residents need to travel long distances to get a job. Wouldn't bringing say 200 jobs requiring limited skills be good for the unemployed?

Seeker · 05-28-2005, 08:13 PM

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For instance, what is the social value of keeping prices low for essential items as food and clothing?

I think there is a social value in keeping items that are, or can be seen as, a necessity at an affordable/low price. If the store can't make a huge profit on these items, I think they would at least realise the high turnover value. I'm not sure about your welfare system due to my lack of experience or understanding, but in Australia I think it would not benefit the welfare system here.. if prices were to go up to satisfy capitalist hunger, the welfare system would have to find more tax dollars to compensate... does it make sense that the tax dollars actually feed the captialist society?
I also have some problem when it comes to the price of underwear as an example.. how the hell can a pair of underwear cost the same as, if not more than the price of a t-shirt? Little examples of 'needs against wants' in the pricing structures like this can drive me crazy.

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Should employees get better compensation, even if it means higher costs for those who can't afford to shop elsewhere?

I don't mind the perceived lack of compensation for employees in this context. The employees that usually work in 'cheap shops' here are usually young, or just people who need some income support. I think it's a choice to work for that particular employer and if it's not an 'inbetween' or 'springboard' job, the employee is usually aware of what they are prepared to put in and what they get from it. If they want more money then they have the means to get qualifications or to at least seek a different job if the wage is not doing it for them.

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When one group has to make a sacrifice, should it be employees, customers, shareholders or local communities?

I too see it as the employee that makes the sacrifice. But again, it is up to the employee as to what they want to make of the position.

I don't really understand how we could make everything fairer for everyone in the current systems of society? Should I be even thinking that it should be fairer to everyone in society? I think I am looking at it in the same way as Ruth Rosenbaum;

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"Are we designing a world that is economically beneficial for those who are able to hold shares in companies (by keeping labor costs low and stock prices high)? Or are we designing a world that is economically beneficial and therefore sustainable for most people?"

interesting..

iccky · 05-28-2005, 09:01 PM

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Originally Posted by Elphaba

For the sake of argument, I think it possible that the employee is not always the loser. I can only justify this comment by using WalMart as an example, but it is not my intent to make this about WalMart.

It appears that one of their business strategies is to open stores in rural communities. My experience of them (living in BFE) is that the small towns have high unemployment due to the lack of jobs and residents need to travel long distances to get a job. Wouldn't bringing say 200 jobs requiring limited skills be good for the unemployed?

The problem is that Walmart doesn't only create jobs. When a walmart comes in it sucks up retail dollars from almost every existing store in the area. Many of them shut down, or at the very least must fire some workers. Further, since Walmart's business plan is based on using as little labor as possible, their are often fewer jobs created then destroyed, and the jobs created are almost always lower paying.

So no, Walmart does not creat jobs, at least in the sense of creating a net gain of jobs in a community.

Cynthetiq · 05-28-2005, 09:35 PM

Quote:

Originally Posted by Elphaba

For the sake of argument, I think it possible that the employee is not always the loser. I can only justify this comment by using WalMart as an example, but it is not my intent to make this about WalMart.

It appears that one of their business strategies is to open stores in rural communities. My experience of them (living in BFE) is that the small towns have high unemployment due to the lack of jobs and residents need to travel long distances to get a job. Wouldn't bringing say 200 jobs requiring limited skills be good for the unemployed?

then state so. My posting this thread is not to add onto Walmart praising or bashing, it's to answer the questions posed within the article.

Elphaba · 05-28-2005, 10:09 PM

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Originally Posted by Cynthetiq

then state so. My posting this thread is not to add onto Walmart praising or bashing, it's to answer the questions posed within the article.

I believe I posited an answer to *your* question, being very careful to qualify it as *not* intended to be another Walmart thread.

So what exactly did I not state clearly to you? If I can rephrase something specifically that you object to, please let me know what it is.

Marvelous Marv · 05-29-2005, 09:34 AM

Quote:

Originally Posted by Cynthetiq

Others see discounters forcing investors to ask tough questions of themselves. For instance, what is the social value of keeping prices low for essential items as food and clothing? Should employees get better compensation, even if it means higher costs for those who can't afford to shop elsewhere? When one group has to make a sacrifice, should it be employees, customers, shareholders or local communities?

This is a tough one. When I walk into Wal-Mart, I can choose from items made in China, Pakistan, and India. That can't be good for the US economy. Or maybe it is-I'm not an economist.

Costco seems to be doing fine, with much less employee turnover than Wal-Mart. There has to be another factor at work besides cost of labor, or lack of unionization.

It just occured to me that low wages would seem to benefit those politicians who favor expanded social programs. I doubt that there is a recipient of government assistance anywhere who will vote for smaller government, a la the Republican party. They, of course, would seem to favor low wages because of the effect it has on the balance sheet.

Once again, I seem to have straddled the fence.

Sorry if this belongs in the politics area.

Cynthetiq · 05-29-2005, 12:48 PM

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Originally Posted by Elphaba

I believe I posited an answer to *your* question, being very careful to qualify it as *not* intended to be another Walmart thread.

So what exactly did I not state clearly to you? If I can rephrase something specifically that you object to, please let me know what it is.

my apologies... the last part for my post was misdirected. It was directed at iccky and I forgot to state so.

Ustwo · 05-29-2005, 01:13 PM

The funny thing I've noticed about walmart is that in rural areas they are often very nice stores, clean etc, while in the more affluent areas they are dirty seem poorly run.

I'm going to guess its based on the quality of the employees. In a rural area, a big walmart will be a major employer, and there will be competition for the jobs offered.

In an area with many job choices, only those who can't get better jobs will be working at wal-mart.

Its just a theory, but I've seen the difference in store quality a lot here in illinois. In the north part of the state where the money and industry are, wal-marts are trash. In the centeral-southern part, they are very nice.

wwcd101 · 05-31-2005, 06:00 AM

I dislike shopping at the big discounters (i'm not much of a shopper anyway).

People must not realize the power of their simple shopping decisions. They vote for or against WalMart every day.

It's kind of like free music downloads...

Thanks for listening.

kutulu · 05-31-2005, 09:58 AM

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Originally Posted by Marvelous Marv

Costco seems to be doing fine, with much less employee turnover than Wal-Mart. There has to be another factor at work besides cost of labor, or lack of unionization.

You're right. They don't need to make a choice between low prices and high wages. Costco pays a lot more to their workers, has a higher percentage of full-time workers, gives better benefits to their workers and still keeps the same prices as their Wal-Mart run competition (Sam's Club).

Cynthetiq · 05-31-2005, 10:04 AM

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Originally Posted by kutulu

You're right. They don't need to make a choice between low prices and high wages. Costco pays a lot more to their workers, has a higher percentage of full-time workers, gives better benefits to their workers and still keeps the same prices as their Wal-Mart run competition (Sam's Club).

They don't need to make a distinction directly from the title, they do have to answer who gets the short end of the stick. So in the above the shareholders are the ones who take the hit.

snowy · 05-31-2005, 11:35 AM

A lot of people have brought up Costco in this thread--my good friend's mom works doing fraud investigation/loss protection for a Costco here in OR. I've gotten to see the other side of Costco as an employer, and I have to say I haven't heard any complaints--and this lady has worked for several large retailers in our area.

The reason WHY Costco manages to keep their costs low and their employees happy is that they don't spend all the money on their CEOs and administration that other large retailer chains do. The CEO only makes $100,000 more than a store manager. That's where they save all their money--they don't pay huge overinflated salaries to the top management. They also don't have to answer to a family demanding more money (like Wal-Mart and the Waltons).

As for me, I'd rather spend more money so that others can make a living wage. This is why I spend my money at Costco and other retailers besides Wal-Mart.

View Poll Results: What's better to/for you?
Higher Wages	21	55.26%
Cheaper Prices	10	26.32%
I don't care about either, I'll pay for convenience	7	18.42%
Voters: 38. You may not vote on this poll

05-29-2005, 01:13 PM	#9 (permalink)
Ustwo Pissing in the cornflakes	The funny thing I've noticed about walmart is that in rural areas they are often very nice stores, clean etc, while in the more affluent areas they are dirty seem poorly run. I'm going to guess its based on the quality of the employees. In a rural area, a big walmart will be a major employer, and there will be competition for the jobs offered. In an area with many job choices, only those who can't get better jobs will be working at wal-mart. Its just a theory, but I've seen the difference in store quality a lot here in illinois. In the north part of the state where the money and industry are, wal-marts are trash. In the centeral-southern part, they are very nice. __________________ Agents of the enemies who hold office in our own government, who attempt to eliminate our "freedoms" and our "right to know" are posting among us, I fear.....on this very forum. - host Obama - Know a Man by the friends he keeps.

05-31-2005, 11:35 AM	#13 (permalink)
snowy Kick Ass Kunoichi Location: Oregon	A lot of people have brought up Costco in this thread--my good friend's mom works doing fraud investigation/loss protection for a Costco here in OR. I've gotten to see the other side of Costco as an employer, and I have to say I haven't heard any complaints--and this lady has worked for several large retailers in our area. The reason WHY Costco manages to keep their costs low and their employees happy is that they don't spend all the money on their CEOs and administration that other large retailer chains do. The CEO only makes $100,000 more than a store manager. That's where they save all their money--they don't pay huge overinflated salaries to the top management. They also don't have to answer to a family demanding more money (like Wal-Mart and the Waltons). As for me, I'd rather spend more money so that others can make a living wage. This is why I spend my money at Costco and other retailers besides Wal-Mart. __________________ If I am not better, at least I am different. --Jean-Jacques Rousseau Last edited by snowy; 05-31-2005 at 11:38 AM..

05-28-2005, 03:47 PM	#2 (permalink)
Elphaba Deja Moo Location: Olympic Peninsula, WA	For the sake of argument, I think it possible that the employee is not always the loser. I can only justify this comment by using WalMart as an example, but it is not my intent to make this about WalMart. It appears that one of their business strategies is to open stores in rural communities. My experience of them (living in BFE) is that the small towns have high unemployment due to the lack of jobs and residents need to travel long distances to get a job. Wouldn't bringing say 200 jobs requiring limited skills be good for the unemployed?

05-31-2005, 06:00 AM	#10 (permalink)
wwcd101 Insane	I dislike shopping at the big discounters (i'm not much of a shopper anyway). People must not realize the power of their simple shopping decisions. They vote for or against WalMart every day. It's kind of like free music downloads... Thanks for listening.