by Jennifer Budd

Created on: May 01, 2009

The largest and, by far, the most popular retailer in America is Wal-mart. Despite the current economic recession, Wal-Mart is turning a profit and even exceeding its sales goals. The giant retailer had a 7.2% increase in worldwide sales in its last fiscal year (ending January 31, 2009.) People are heading to Wal-mart where they know they can get a bargain. But is the drive to get a bargain priced item bad for America? I'll let the data speak for itself.

One of the biggest changes in society as a result of the huge growth of mega-retailers like Wal-Mart is in the relationship between retailers and manufacturers. With the emergence of these types of discount stores, there has been a shift in power over the last few decades that gives retailers the upper hand over its manufacturers (Mitchell 2005.) It is now the retailer dictating to the supplier what items to make and how much those items should cost. The supplier needs to stock the store shelves with products at prices the retailer expects or else the retailer will not sell their items. What do manufacturers need to do to make items cheap enough for retailers like Wal-Mart to sell? Do they cut costs by laying people off? Do they go so far as to move manufacturing plants overseas for cheaper labor? In the end, it means loss of jobs. Has consumer demand for cheap goods sent our fellow man to the unemployment line? It looks like the answer is yes. In his report, Scott (2007) found nearly 200,000 US jobs (mostly manufacturing) were lost due to Wal-Mart's trade deficit with China between 2001 and 2006.

In 2004, a report was released by the Democratic Staff of the Committee on Education and the Workforce in the US House of Representatives regarding the social and economic costs to American taxpayers when a Wal-Mart opens up. The cost of one 200 employee Wal-Mart store to federal taxpayers was estimated at $420,750 per year or roughly $2,103 per employee. Because of Wal-Mart's low wages and inadequate health insurance, the taxpayer was subsidizing such welfare programs as section 8 housing, state children's health insurance programs, and free or reduced lunches for children of Wal-Mart employees. As a result of this report, Representative George Mills of California and Senator Edward Kennedy of Massachusetts sponsored the Employee Free Choice Act (HR 3619) which would reform America's labor laws and allow for easier unionizing in places of employment. An updated version of this bill is currently being debated in both houses of Congress (HR 1409, S 560.) Additional data from the website www.walmartwatch.com also backs up this government report on what a Wal-Mart store costs the American taxpayer. The website quotes statistics from newspaper reports and the Federal Register from 2004 to 2006 that showed Wal-Mart employees and their dependents were the biggest recipients of state funded health care programs in 21 states.

Though Wal-mart may be a Godsend for the consumer trying to survive on a budget, it appears from the data that America has paid a high price for affordable goods. In the end, we need to ask ourselves: "Was it worth it?"

References:

Mtichell, Dan (2005, February 20) "Manufacturers Try To Thrive on the Walmart Workout" Business, New York Times, p39

Scott, Robert E (2007, June 27) "The Wal-Mart Affect: It's Chinese Imports Have Displaced Nearly 200,000 US Jobs" Economic Policy Institute, EPI Issue Brief # 235

The U.S. House of Representatives. (2004, February 16) "Everyday Low Wages: The Hidden Price We All Pay for Wal-Mart" Washington, DC: Report by the Democratic staff of the Committee on Education and The Workforce.

Wal-Mart Watch: Issues and Community Impact
http://walmartwatch.com/issues/community_impact/

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