The Daily Sandwich

"We have to learn the lesson that intellectual honesty is fundamental for everything we cherish." -Sir Karl Popper

Location: Boston, Massachusetts, United States


Friday, June 16, 2006

Wal-Mart could boost wages and keep prices the same

It's the company that makes progressives queasy and conservatives proud. They can hire illegal immigrants, give their executives ungodly bonuses, drive small businesses owners and manufacturers into bankruptcy, and send thousands of jobs to China-- but as I've been told, I'm being ridiculous. They just do what every business does. And only some commie would want them to change.

Wal-Mart Stores Inc. could significantly increase employee wages and benefits without raising prices, and still earn a healthy -- albeit smaller -- profit, research released on Thursday concluded.

The Economic Policy Institute study comes as the world's biggest retailer faces a barrage of criticism from labor unions, politicians and community activists, who say it pays poverty-level wages and drives competitors out of business.

Wal-Mart, which has taken steps to improve its health care and other benefits, argues that its low prices boost consumers' buying power and increase their standard of living. The retailer regularly cites a Global Insight study that found Wal-Mart saves U.S. families more than $2,000 per year.

"The more important question for the future isn't whether Wal-Mart is a force for good or evil in the American economy, but whether the economic benefits provided by Wal-Mart can be preserved even if their labor compensation is dramatically improved," economists Jared Bernstein and Josh Bivens wrote.

They concluded that if Wal-Mart reduced its profit margin to about 2.9 percent, where it stood in 1997, from the 3.6 percent margin it recorded last year, that would free up some $2.3 billion to pay workers without raising prices. That works out to just under $2,100 per non-managerial employee, the researchers calculated.

They noted that rival Costco Wholesale Corp. (Nasdaq:COST - news) posted a profit margin of about 2 percent in 2005. The study did not mention Target Corp. (NYSE:TGT - news), Wal-Mart's biggest competitor in the discount sector, which reported a 4.7 percent profit margin for last year.

In a telephone interview, Bivens said his research was aimed at refuting "outsized" claims that Wal-Mart saved consumers hundreds of billions of dollars and that its margins were so thin that it simply could not afford to pay employees more without forcing low-income consumers to foot the bill.

"I always thought that they had really, really tight profit margins," he said. "They're really a microcosm of the U.S. economy. They are very, very good at generating income, but it needs to be spread out more equitably."

His research refuted many of the findings from the Global Insight study released last year regarding how much money Wal-Mart saved consumers.

I didn't always hate Wal-Mart. It's corporate ethos used to be buying American to help Americans. It's in the wake of founder Sam Walton's death that many policies have shifted to robber baron mode. And do his billionaire kids really need a few billion dollars more?