Trouble in Wal-Mart's America

By Harold Meyerson
Wednesday, October 26, 2005

Is Wal-Mart going wobbly? Over the past couple of weeks, America's largest company -- linchpin of the low-wage, no-benefit economy that is increasingly the norm in America -- has announced some surprising reversals of course. In a series of speeches and interviews, chief executive H. Lee Scott unveiled four initiatives that he clearly hopes will polish the company's increasingly tarnished image.

Wal-Mart, he said, will shift to more environmentally responsible practices -- demanding greater mileage of its truck fleet and better packaging of its products. It will offer more affordable health insurance to its employees, cutting the monthly premium in some cases to just $11. It will monitor the environmental and health and safety practices of its foreign suppliers. And it will lobby for a higher federal minimum wage.

Scott's timing is anything but accidental. The sweatshop conditions in which thousands of employees of Wal-Mart's suppliers routinely work, and the depressive effect that Wal-Mart has on working-class living standards here in the United States, are receiving increasing scrutiny -- enough to impede the company's growth. Wal-Mart's attempts to open stores in the major cities of the Northeast and West Coast have been largely checked by a coalition of fearful and indignant unions, smaller retailers, churches and liberal activists. Wal-Mart's stock is down 13 percent this year. And worse is still to come. In November filmmaker Robert Greenwald will release "Wal-Mart: The High Cost of Low Price," a scathing documentation of the company's business practices at home and abroad.

So the leopard realized it was time to change its spots -- up to a point. Only 44 percent of Wal-Mart's nearly 1.3 million U.S. employees are covered under its health insurance plan; indeed, as any state government can attest, many thousands of Wal-Mart employees qualify for and routinely use the Medicaid program for the indigent. Now the company says it will make its insurance more affordable -- though it still comes with a $1,000 annual deductible, a hefty chunk of change considering that the average Wal-Mart employee makes less than $19,000 a year.

Scott's announcement that Wal-Mart wants better environmental and workplace practices from its foreign suppliers raises many more questions than it answers. The reason Wal-Mart has 3,000 factories in China making the products that go on its shelves isn't that U.S. workers can't do the work, of course. It's because China is home to more cheap labor than anyplace else on earth. In 2003 Wal-Mart imported $15 billion worth of goods from China, 11 percent of China's total exports to the United States.

Now Scott says that Chinese factories should be brought up to U.S. standards. And how amenable is China to that transition? "China actually has very good environmental and safety standards on the books," Beth Keck, Wal-Mart's director of international corporate affairs, assured me last week. Right, and the Soviet constitution under Stalin contained ringing affirmations of civil liberties. Wal-Mart didn't shift production to China because of the communist state's safety standards. On the contrary, Scott and Co. knew full well that workers in China who agitate for better safety standards are commonly arrested and occasionally tortured. Wal-Mart is in China because it's been able to forge a symbiotic relationship between its own dirt-cheap and inherently abusive labor practices and the Chinese government's totalitarian suppression of worker rights. To demand that Wal-Mart's foreign suppliers clean up their act is to demand that Wal-Mart alter its own zealous low-wage culture. Which is why Scott's pledges merit a healthy dose of skepticism.

Of all Scott's commitments, the one that does merit belief is his out-of-the-blue declaration of support for a higher minimum wage. For Wal-Mart is bumping up against a serious problem at least partly of its own making: Because it pitches its products to a disproportionately low-income clientele, its revenue rises and falls with the fortunes of the lower end of the American working class.

And those fortunes these days are anything but bright. The coming crunch in heating oil prices, the decimation of American manufacturing, the steady decline of median family incomes over the past several years, the failure to raise the federal minimum wage since 1997 and the fact that Wal-Mart is setting the pay standards for millions of American workers -- all these are combining to limit the ability of Wal-Mart shoppers to buy as much as they used to. While sales at the Neiman Marcus end of retailing have been doing just fine, the working-class money crunch is taking a real toll in Wal-Mart-land.

Wal-Mart, could, of course, raise its workers' wages, but Scott has dismissed that out of hand. So now it's the feds' responsibility to rescue Wal-Mart from the consequences of the low-wage, low-consumption economy that Wal-Mart, with such fanatical devotion, has created. For, in Wal-Mart's America, it's not clear that even Wal-Mart can thrive.

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