Wal-Mart: Rise of the Goliath

by Liza Featherstone

Back in 1980, when Multinational Monitor was founded, Wal-Mart operated in only 11 states, with fewer than 300 stores and just over 21,000 employees. The company had no stores overseas. Its annual sales were $1 billion.

Today, Wal-Mart is a Goliath of previously unimaginable girth. Its sales totaled $256.3 billion in the fiscal year ending in January 2004. There are more than 3,600 Wal-Mart stores in the United States, including general merchandise stores, Supercenters, and a membership warehouse chain called Sam’s Club, named after company founder Sam Walton. With more than 1.3 million workers in the United States, Wal-Mart is the nation’s largest private employer. Wal-Mart has stores in every state in the union, and by March 2004, nearly 2,600 U.S. towns and cities had at least one Wal-Mart or Sam’s Club.

Topping the Fortune 500 for the past three years, Wal-Mart is the world’s largest corporation. More than twice the size of its largest U.S. competitor, Home Depot, it dominates the retail sector overwhelmingly. Wal-Mart is also the most profitable company in the world, announcing a profit of $27 billion in mid-2004.

From having almost no presence in Washington, D.C. in the 1980s, Wal-Mart is now a formidable corporate lobbyist and a top corporate contributor to political campaigns.

Most of the company’s current growth is in Supercenters, which are open 24 hours, and offer a full line of groceries. (In the United States, 48 Supercenters opened in October 2004 alone.) The Supercenters are like super-sized supermarkets: some taking up as much as 260,000 feet of store space, and employing as many as 550 workers. (The company has also developed smaller stores called Neighborhood Markets, which are just one-fourth the size of Supercenters.) Overseas, Wal-Mart operates more than 1,570 stores, in Mexico, Puerto Rico, the United Kingdom, Canada, Argentina, Brazil, China, South Korea and Germany. Every week, around the world, more than 138 million people shop at Wal-Mart.

Wal-Mart has completely transformed the retail industry with a single-minded focus on giving the customer the lowest possible price. It has many imitators: Circuit City, Dollar General, K-Mart, Toys R Us, Staples, Blockbuster, Rite-Aid, Target, Home Depot and numerous others. Wal-Mart is important not only because of its own success, and because it drives down competitors and suppliers’ prices. Journalist Bob Ortega, author of In Sam We Trust, observed in 2000 that Wal-Mart’s “way of thinking has become the norm, not just in retail, but in all businesses.”

Always low wages

Keeping prices low entails keeping wages down. The average sales clerk at Wal-Mart makes just $8.50 an hour; even working full-time, that wage would, if the worker was the sole breadwinner, leave a family of three $1,000 below the federal poverty line. Workers at Wal-Mart must also pay more than a third of their own health insurance premium — as a result, many choose to go without. Many depend, too, on publicly funded health care plans, as well as food stamps and other forms of welfare.

Last year, in California, Democratic Assembly Member Sally Leiber announced that her staff had uncovered documents that Wal-Mart had given to its employees explicitly telling them how to apply for public assistance. Wal-Mart has denied this, but the documents speak for themselves.

Welfare is quite clearly a part of the company’s business model (especially jarring considering that the company gives more than 80 percent of its corporate campaign contributions to Republicans, who would love to do away with the social safety net altogether). According to a recent University of California-Berkeley study, Wal-Mart costs California taxpayers about $86 million a year in public assistance to employees. A Georgia study found that one in four Wal-Mart workers in that state had a child enrolled in Peachcare, the state’s healthcare program for impoverished kids. When we stand in the checkout line at Wal-Mart, we may notice how much money we’re saving, but we rarely consider that we may be paying, quite literally, in other ways. The public costs don’t show up on the receipt.

Wal-Mart’s success has had a devastating impact on competitors — driving countless small businesses to close their doors, pushing large chains like K-Mart and Toys R Us into bankruptcy and forcing down wages and employee benefits throughout the retail sector. It depresses employee compensation not only because other retailers face competitive pressure from Wal-Mart, but because it provides a model of business success. As former Wal-Mart worker Linda Gruen — now an organizer with the UFCW — puts it, other companies “see what Wal-Mart gets away with.” Observing how profitable Wal-Mart is, they of course seek to do the same.

Wal-Mart’s economic impact, however, reaches far beyond the retail industry. The company also drives down wages in other sectors worldwide, by ruthlessly demanding the lowest possible price from suppliers.

According to several experts interviewed for a recent PBS “Frontline” special, Wal-Mart is one of the key forces driving the outsourcing of U.S. jobs to Asia — as only countries with the lowest-cost labor can meet the low prices the company demands.

In fact, if Wal-Mart were a country, it would be China's fifth largest export market. Wal-Mart sells 10 percent of all goods imported to the United States from China, where independent trade unions are illegal and it is notoriously difficult to monitor factory conditions. (In March 2004, the company announced that it would, for the first time, hold its board of directors meeting in China, where the company operates 35 stores, with 18,000 employees.) But Wal-Mart makes the conditions much worse than they need to be, pressuring factory bosses to cut their prices, so those bosses have no choice but to make employees work longer hours for lower pay.

To keep compensation so low, and supply chains so “flexible,” Wal-Mart has had to keep unions out of its stores, something it has done quite effectively. The story of unions’ struggle to organize Wal-Mart takes place in a context of organized labor’s declining numbers and diminishing political power, especially in the private sector, where only 8 percent of workers are now unionized. Unions rightly view organizing Wal-Mart as a struggle for their survival: the success of such a deeply anti-labor company is a powerful symbol of their own powerlessness. To unionize it would completely transform organized labor’s currently dismal position in the United States.

“Wal-Mart is the juggernaut,” says one organizer. So far, however, the attempt to organize Wal-Mart has, in the United States, been a total failure.

That’s one thing that hasn’t changed since Multinational Monitor’s founding. At that time, the Teamsters were trying to organize the company’s distribution centers, an effort that lost momentum due in part to company founder Sam Walton’s zealous willingness to break the law in order to defeat the union, even firing pro-union workers, as Wal-Mart has been doing ever since.

Beginning in the late 1980s, the United Food and Commercial Workers (UFCW) began to realize that Wal-Mart’s rapid growth and competitiveness posed an urgent threat to its members’ jobs. The first Supercenter opened in 1988, in Washington, Missouri.

Wal-Mart had historically been concentrated in “right-to-work” states in the South, but as it grew, it encroached upon more traditionally unionized western and Northeastern regions. Despite the obvious threat, the union effort was half-hearted until the late 1990s, when supermarkets began losing market share to Wal-Mart and it became painfully obvious that Wal-Mart threatened the UFCW’s very survival.

Even then, the union has been unable to fight Wal-Mart on its own. Devoting insubstantial resources to the organizing campaign (only 2 percent of its national budget), the UFCW is constantly stymied by Wal-Mart’s limitless resources to hire union-busters and, equally significantly, fight court challenges to its violations of organizing rights.

In the United States, only one group of Wal-Mart employees has successfully organized. In February 2000, 10 meat cutters in a Jacksonville, Texas Wal-Mart voted 7 to 3 to unionize their tiny bargaining unit. Two weeks later, Wal-Mart abruptly eliminated the butchers’ jobs by switching to prepackaged meat and assigning the butchers to other departments, effectively abolishing the only union shop on its North American premises. After more than three years, in June 2003, a federal labor judge ruled this move illegal, and ordered Wal-Mart to restore the department and recognize the butchers’ bargaining unit. Wal-Mart has appealed that decision, but of course, most of the original butchers have left the company, so whatever the outcome, Wal-Mart wins. That incident typifies the way in which for Wal-Mart going to court for violating labor laws is simply part of the cost of doing business (and not a very big one).

In early 2004, after striking for months, grocery workers in California were forced to accept a vastly reduced health plan, as supermarkets, anticipating competition from new Wal-Mart Supercenters throughout the state, began refusing to compromise with the union. They’re not alone. Supermarkets all over the country have been lowering wages and decimating workers’ health plans.

Says Russ Davis of Massachusetts Jobs With Justice, who has worked closely with grocery workers in the Northeast who are struggling to maintain their standard of living, “It’s all about Wal-Mart.”

Susan Phillips, vice president of the UFCW and head of its Working Women’s department, agrees. For any private-sector union in the United States today, she says, “anytime you go into negotiations, its like there’s this invisible 800-pound gorilla sitting in the room at the bargaining table.”

As long as Wal-Mart workers remain unorganized, that gorilla will continue to set the agenda.

Taking on Wal-Mart

Labor may be waking up. The AFL-CIO has recently announced a campaign to fight Wal-Mart and the “Wal-Martization” of U.S. jobs, and Andy Stern of the Service Employees International Union (SEIU) has proposed financing it by allocating $25 million of the AFL-CIO’s royalties from purchases on its Union Plus credit card — appropriately enough, since at least 30 percent of purchases on that credit card are made at Wal-Mart. It’s unclear still what this campaign will look like, and what institutional forms it will take, but at least the labor movement — and not just the UFCW — is finally having a conversation about what to do about the Wal-Mart problem.

Communities — often working closely with unions — have had far more success fighting Wal-Mart than labor has had in organizing it, preventing at least 13 Wal-Mart Supercenters from opening in 2004. Labor and community groups in Chicago prevented Wal-Mart from opening a store on the city’s South Side. Wal-Mart does plan to open a store on the city’s West side, but may yet be thwarted by an ordinance that would force the retailer to pay Chicago workers a living wage. Citizens in Inglewood, California defeated a Wal-Mart Supercenter in a voter referendum. In Hartford, Connecticut, labor and community advocates just won passage of an ordinance protecting their free speech rights on the grounds of the new Wal-Mart Supercenter, which is being built on city property. Similar battles are raging nationwide. The company’s growth has been slowing down slightly, and Wal-Mart CEO H. Lee Scott blames some of that slowdown on organized community opposition.

Wal-Mart’s critics have also been able to attract more media attention recently — stories in which Wal-Mart appears in a negative light now appear in the papers almost every day. It’s essential — and not easy — to figure out how this growing anti-Wal-Mart sentiment in our culture can be strategically deployed to benefit workers and communities. Should the goal be to block Wal-Mart from opening new stores wherever possible, or to force the company to win back the public trust by making more ethical use of its enormous power?

Perhaps, for example, we should demand that since Wal-Mart doesn’t want to pay for employees’ health insurance, Wal-Mart’s highly paid Washington lobbyists should push for national healthcare, which would benefit everybody.

Destroying — or changing — Wal-Mart will require many more local mobilizations, and more coordination between community and labor groups fighting the company. It will also probably require a progressive movement serious about taking power and reining in corporate criminals like Wal-Mart — a movement that is emerging, but still lacks the institutions and structures — including political parties — to wield much national clout. Over the next quarter-century, for such a movement, Multinational Monitor will be an invaluable resource. But let’s hope that when we celebrate MM’s fiftieth anniversary, Wal-Mart — and its many imitators — will be a mere footnote.

Liza Featherstone is the author of Selling Women Short: The Landmark Battle for Women's Rights at Wal-Mart in which some of the material in this article appears. She is also a contributing editor at The Nation magazine.