Wal-Mart: A Template for 21st Century Capitalism?

Working at Wal-Mart Wal-Mart defends its low wage/low benefit personnel policy by arguing that it employs workers who are marginal to the income stream required by most American families. Only seven percent of the company’s hourly “associates” try to support a family with children on a single Wal-Mart income. The company therefore seeks out school-age youth, retirees, people with two jobs, and those willing or forced to work part-time. The managerial culture at Wal-Mart, if not the formal company personnel policy, justifies its discrimination against women workers, which now compose two-thirds of the workforce, on the grounds that they are not the main family breadwinner. Not since the rise of the textile industry early in the 19th century, when women and children composed a majority of the labor force, has the leadership of an industry central to American economic development sought a workforce that it defined as marginal to the family economy.

Wal-Mart argues that the company’s downward squeeze on prices raises the standard of living of the entire U.S. population, saving consumers upwards of $100 billion each year, perhaps as much as $600 a year at the checkout counter for the average family. A McKinsey Global Institute study concluded that retail-productivity growth, as measured by real value added per hour, tripled in the dozen years after 1987, in part due to Wal-Mart’s competitive leadership of that huge economic sector. “These savings are a lifeline for millions of middle- and lower-income families who live from payday to payday,” argues Wal-Mart CEO H. Lee Scott, “In effect, it gives them a raise every time they shop with us.”

But why this specific, management imposed trade off between productivity, wages, and prices? Henry Ford used the enormous efficiencies generated by the deployment of the first automotive assembly line to double wages, slash turnover, and sell his Model T at prices affordable even to a tenant farmer. As historian Meg Jacobs makes clear in Pocketbook Politics: Economic Citizenship in Twentieth-Century America, the quest for both high wages as well as low prices have been at the heart of America’s domestic politics throughout much of the 20th century. And when social policy tilts toward the left, as in the Progressive era, the New Deal, and on the World War II home front, workers and consumers find their interests closely aligned. They see the relationship between wages and prices as a fundamentally public, political issue and not merely a dictate of corporate management or the interplay of market forces. Thus, as late as 1960 retail wages stood at more than half those paid to autoworkers, in large part because the new unions and the New Dealers had sought to equalize wages within and across firms and industries. But by 1983, after a decade of inflationary pressures had eroded so many working class paychecks, retail wages had plunged to but one third of that earned by union workers in manufacturing, and to about 60 percent of the income enjoyed by grocery clerks in the North and West. And this is just about where retail wages remain today, despite the considerable rise in overall productivity in the discount sector.

Indeed, if one compares the internal job structure at Wal- Mart with that which union and management put in place at GM during its mid-twentieth century heyday, one finds a radical transformation of rewards, incentives and values. GM workers were often lifetime employees so factory turnover was exceedingly low: these were the best jobs around, and they were jobs that rewarded longevity. Auto industry turnover is less than eight percent a year, largely a result of normal retirements. At Wal-Mart, in contrast, employee turnover approaches 50 percent a year, which means it must be even higher for those hired at an entry-level wage. Turnover at K- Mart is somewhat lower and Costco, which provides even higher wages and benefits, reports a rate of