Wal-mart

November 4, 2010
Wal-Mart: Save Money, But Exactly Who’s Living Better?

Wal-mart, the world’s largest retailer, uses the slogan “Save Money. Live Better.” to lure
unsuspecting consumers into it’s stores where they find aisle upon aisle filled with name brand items at
bargain prices. Shoppers are met with displays of everything from whole wheat bread to camping
equipment, adorned with large signs – indicating a price that is well below any other retailer in town –
sporting big yellow smiley faces. Millions of people around the globe reap the benefits of this low cost
alternative every day; but wait. How can they do that and still keep the doors open, let alone boast a net
profit of 14.3 billion dollars in 2009? It’s simple really, just keep your payroll low, encourage your
employees to subsidize their low wages with public assistance, spend taxpayers’ money, strong-arm
suppliers to sell you products for pennies on the dollar, and be sure to budget in millions of dollars to
lobby for tax laws to benefit your company. No problem!
FastCompany.com published an article by Charles Fishman in 2003 entitled The Wal-Mart You
Don’t Know. In his article, Mr. Fishman sums up his opinion of Wal-mart’s position in the marketplace
with a simple jar of pickles.
A gallon-sized jar of whole pickles is something to behold. The jar is the size of
a small aquarium. The fat green pickles, floating in swampy juice, look reptilian, their
shapes exaggerated by the glass. It weighs 12 pounds, too big to carry with one hand.
The gallon jar of pickles is a display of abundance and excess; it is entrancing, and also
vaguely unsettling. This is the product that Wal-Mart fell in love with: Vlasic’s gallon jar
of pickles. (Fishman)
Charles Fishman used the example of this jar of pickles to grab the attention of his audience
before explaining how and why the $2.97 price tag would soon bring about certain demise of business
as we once knew it. Just $2.97 for a year’s worth of pickles is how Wal-mart proved their dedication to
low prices, unfortunately, the repercussions of this huge price cut will have a lasting negative affect on
so much more. Take for example your local grocery store. Wal-mart is now selling a gallon of pickles
for less than these locally owned stores can afford to sell a quart of the same. What about the
manufacturer? Sure, if their wholesale prices are set in stone, they must be making a killing on those
gallon jars, but that’s not how business works.
In order to stay competitive, a manufacturer has to sell in volume. When Wal-mart is willing to
buy such a large quantity of a company’s product, they would obviously be willing to give a price
break. For the first few orders, things will work great, but in time, the factory begins to lose smaller
customers – either because the small orders get lost in the shuffle or because the big box stores put the
small retailer out of business – and are forced to depend solely upon Wal-mart’s business to keep their
company afloat. When this happens, the power to set prices is no longer in the hands of the
manufacturer, but in the hands of Wal-mart. What can they do when Wal-mart will only pay 50 percent
of what they are used to getting? Do they close the doors, or conform?
The result of this is lower wages for factory workers, lay-off’s, a complete redesign of the
company’s business plan, even closing U.S. plants and moving overseas in an attempt to protect what
little they have left of their investment. Wal-mart seems to have no qualms with this practice and has
obviously abandoned it’s early 1990’s claim to “Buy American”. With a large percentage of the
products on Wal-mart’s shelves sporting a tiny sticker that reads “Made In China”, Wal-mart has
become “a vast pipeline that gives non-U.S. Companies direct access to the American market”
(Fishman). Charles Fishman summed it all up by stating: “It’s the story of what that pressure does to
the companies Wal-mart does business with, to U.S. Manufacturing, and to the economy as a whole.
That story can be found floating in a gallon jar of pickles at Wal-mart.”
This shady business practice not only applies to the way Wal-mart does business with suppliers,
but it spills over into the way they treat their employees. According to a February 2010 report on
walmartstores.com, the average wage of retail associates in the company is $11.75 per hour. While this
sounds like a fair wage to those of us in the Midwest, where the cost of living is generally lower, it
actually translates to an annual income of just $20,774. “This is almost 6% below the Federal Poverty
Level of $22,050 for a family of four” (wakeupwalmart.com). Essentially, Wal-Mart is perpetuating
themselves by employing over two million associates worldwide (walmartstores.com), paying them
lower wages then offering an employee discount, ensuring that Wal-Mart’s money comes right back to
Wal-Mart.
There are a variety of ways that Wal-Mart could increase their sales associates’ wages without
feeling the squeeze on it’s bottom line. For instance, “according to a 2007 report, if Walmart started
paying a $10/hour minimum wage, its workers could each earn $1,020 to $4,640 more per year, before
taxes. By passing this cost directly to shoppers, the average consumer would need to pay only 36 cents
more per shopping trip, or $9.70 per year” (Dube). Another rather sickening fact, recounted on the
wakeupwalmart.com website, is that Wal-Mart reported (in a Definitive Proxy Statement filed with the
Securities and Exchange Commission on April 20, 2009) that“in 2008, Walmart CEO Mike Duke
received $12.2 million in total compensation, or 587 times the annual income of the average full time
Walmart Associate.”(36) It’s hard to believe that one employee would be worth such an enormous
salary while so many other employees are forced to accept public assistance to subsidize their income,
though they work as close to full time as Wal-Mart will allow.
Not to worry though, at least these under-paid workers are offered health insurance benefits to
offset those low wages. Well, maybe not. Found in information taken from Wal-Mart’s own guide to
annual enrollment for the benefit year 2010, Wal-Mart does offer health care benefits to their
employees for just “$27 per pay period for family coverage, or $702 per year, however this plan has a
high annual deductible of $4,400” (wakeupwalmart.com). Along with that, “associates covered by the
health plan face a $10,000 out-of-pocket maximum” (wakeupwalmart.com). The Wakeup Walmart
website did the math and determined that “if you consider the $10,000 out-of-pocket maximum in
addition to the $702 annual premium, that same family could pay almost 52% of their annual income
before Walmart’s insurance begins to pay.”
Disclosures of Employers Whose Workers and Their Dependents are Using State Health
Insurance Programs, an article found on the goodjobsfirst.org website, shows that in almost every
state, Wal-Mart employees and their families rank in the top five recipients for public health care
assistance. One example found in this article was a summary of data that the St. Petersburg Times
published in March 2005. The Department of Children and Families reported on the employers in the
state of Florida with the most workers enrolled in Medicaid or KidCare Insurance; both taxpayer
funded programs. Wal-Mart topped the list with a total of 13,675 associates or their dependents using
tax dollars to stay healthy. Obviously, the health care package offered by the world’s largest retailer just
isn’t within reach of it’s average employee. The good news here is that Wal-Mart actually recognizes
this problem and in a 2005 speech, “former President and CEO Lee Scott admitted … ‘In some of our
states, the public program may actually be a better value – with relatively high income limits to qualify,
and low premiums” (wakeupwalmart.com). Wait! What? Is he seriously encouraging his employees to
seek public assistance without shame for the shady business he’s running? How convenient for Wal-
Mart, but very inconvenient for the taxpayer. Reported in a 2004 article entitled Hidden Cost of
Walmart Jobs: Use of Safety Net Programs by Walmart Workers in California, Wal-Mart associates cost
California about $86 million in public assistance.
If that sounds like an exorbitant amount of money, you might be surprised to find out just how
much money Wal-mart is not contributing to the IRS. Information taken directly from Wal-mart’s
Financial Statement, found on msn.com, showed some staggering numbers! In 2001 Wal-mart showed
a net income of approximately 6.3 billion dollars. Of that 6.3 billion, they paid 36.5 percent in taxes.
Seems fair considering that is about to what any grocery store, tanning salon, video arcade, or used
book store might pay in yearly income tax. Granted, those stores are probably not even netting a
million dollars per year, let alone 6.3 billion, but in the interest of capitalism, it does seem fair. Moving
from 2001 though to 2010, the chart shows that Wal-mart had a net income of over 14 billion dollars,
yet only paid 32.35 percent of that in taxes. How can this possibly be? In America, when we earn more
money, we are placed into a higher tax bracket, therefore paying more money to the IRS. Why doesn’t
the largest retailer in the world have to do the same?
A quick internet search resulted in page after page of how this is happening. The Wall Street
Journal published a Jesse Drucker article in 2007 that claims Wal-mart is “cutting taxes by paying rent
to itself.”
The arrangement takes advantage of a tax loophole that the federal government
plugged decades ago, but which many states have been slower to catch. Here’s how it
works: One Wal-Mart subsidiary pays the rent to a real-estate investment trust, or REIT,
which is entitled to a tax break if it pays its profits out in dividends. The REIT is 99%-
owned by another Wal-Mart subsidiary, which receives the REIT’s dividends tax-free.
And Wal-Mart gets to deduct the rent from state taxes as a business expense, even
though the money has stayed within the company. (Drucker)
Goodjobsfirst.com offers a list of more specific subsidies. A search for Ft. Wayne, Indiana on
their website shows that one particular store – on the south side of town – has received 3.16 million
dollars in tax money. According to the narrative on the Wal-mart subsidies page, “The facility is part of
the redevelopment of a ‘dead mall.’ It is located within a Community Reinvestment Enhancement
District (CRED) that allows … sales tax that would have been collected by the state to be diverted back
to the store.” This website has published data for Wal-mart stores in every state in the continental
United states with one store in Florida receiving over 23.8 million dollars of your money!
It has been argued that Wal-mart is good for the community because it creates jobs and
stimulates the local economy. While that is a good argument, we should examine it a little more closely.
Yes, jobs are created, but they basically replace the jobs lost by the small businesses that Wal-mart
undermines. And how can they say they stimulate the local economy when so much of the money
earned by Wal-mart employees goes right back to Wal-mart? Another thing that has been said is that
with the current economic crisis, a staggering number of families are forced to choose between
groceries and gasoline. For these families Wal-mart offers an opportunity to have both without breaking
the bank, however, this situation seems to be playing right into Wal-mart’s hand.
Knowing how Wal-mart treats their employees, how they force suppliers to take their
companies overseas just to survive, how they spend billions in tax dollars each year, it seems that
something should be done about this. We are Americans, free to spend our money where we choose,
but after seeing how much Wal-mart is hurting our country, our communities, and our economy, why
would anyone choose to spend their hard earned money there? They’re already manipulating the system
to get our tax money, isn’t that enough?
Reckard 7
Works Cited
Disclosures Of Employers Whose Workers And Their DependentsAre Using State Health Insurance
Programs. April 12, 2010. Good Jobs First. November 8, 2010. Web.
http://goodjobsfirst.org/corporate_subsidy/hidden_taxpayer_costs.cfm
Friendly Landlord Wal-Mart Cuts Taxes By Paying Rent To Itself. February 1, 2007. Wall Street
Journal. November 15, 2010. Web. http://www.uic.edu
The Real Facts About Wal-Mart: Walmart’s Healthcare. WakeupWalmart.com. October, 28, 2010. Web.
http://wakeupwalmart.com/facts//healthcare.html
The Real Facts About Wal-Mart: Walmart’s Wages. WakeupWalmart.com. October 28, 2010. Web.
http://wakeupwalmart.com/facts/wages/html
The Wal-Mart You Don’t Know. Charles Fishman. December 1, 2003. FastCompany.com. November 8,
2010. Web. http://www.fastcompany.com/magazine/77/walmart.html
Wal Mart Stores Inc: Financial Statement. January 31, 2010. MSN Money. November 8, 2010. Web.
http://moneycentral.msn.com
Wal-Mart Subsidies in Fort Wayne, IN. Wal-Mart Subsidy Watch. November 8, 2010. Web.
http://walmartsubsidywatch.org

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~ by Stacy on February 4, 2015.

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