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12.19.03
Politics and Economy:
Wal-Mart and the World
More on This Story:
Overview

It has been an up and down year for the world's largest retailer Wal-Mart. While the company broke new financial records, it also faced numerous lawsuits and a public scandal over a federal raid in October that netted illegal aliens employed as cleaning staff. (Get more facts and figures on Wal-Mart.)

The debate over Wal-Mart's effect on American towns and the American workforce is not new. "Wal-Martization" has become a code word for suburban sprawl. Yet this fall, the volume of that debate appears to have been turned up. TIME magazine ran a story about the demise of toy retailer FAO Schwarz titled "Will Wal-Mart Steal Christmas?" In October, BUSINESSWEEK magazine asked "Is Wal-Mart Too Powerful?" In addition to news stories, opinion pieces abound. From the FORT-WORTH STAR TELEGRAM: "World's biggest company isn't purely a success story;" and from Cindy Rodriguez of the DENVER POST: "Wal-Mart's bargains may prove costly."

This is not to say that Wal-Mart faces a solid wall of criticism. In December 2003, THE NEW YORK TIMES ran a piece called "Is Wal-Mart good for America?" In the article economist Robert Reich suggested that Wal-Mart was the logical end product of an economy that places primary value on low prices. W. Michael Cox, chief economist of the Federal Reserve Bank of Dallas, was quoted as saying: "Wal-Mart is the greatest thing that ever happened to low-income Americans. They can stretch their dollars and afford things they otherwise couldn't."

Some of the controversy surrounding Wal-Mart retail model relates to how these low prices are achieved. NOW's story investigates the role of wages, health care and tax abatement in keeping personnel costs at a minimum at Wal-Mart.

The Case of Overtime Pay

Last year NOW and THE NEW YORK TIMES investigated in "Off the Clock" allegations that Wal-Mart pressured workers to work overtime hours without pay. In December of 2002 an Oregon court ruled against the massive chain in an overtime pay case. Wal-Mart had previously settled two similar cases in New Mexico and Colorado. In addition, Wal-Mart faces numerous additional lawsuits related to overtime pay and a proposed large class-action sex discrimination suit.

The Case of the Undocumented Workers

In October 2003, Wal-Mart received another blow. Hundreds of undocumented workers at 61 Wal-Mart stores in 21 states were arrested in an operation launched by the Department Of Homeland Security on immigration charges. The investigation centered around Wal-Mart's use of janitorial contractors. If the government can prove Wal-Mart knowingly hired undocumented immigrants, it could be fined up to $10,000 per illegal worker.

Wal-Mart as Grocer

In 2003 Wal-Mart made great inroads as a grocer. Its sales now account for an ever-increasing percentage of American grocery sales. According to THE ECONOMIST, Wal-Mart's sheer bulk buying power, the efficiency of IT structures and a non-unionized workforce combine to enable it to sell brand-name products at a significant discount. Recently, consulting firm Retail Forward released a report that concluded that for every Wal-Mart Supercenter that opens in the next five years, two supermarkets will close their doors. That would mean the loss of 2,000 more stores in five years, or 400 a year.

Wal-Mart Facts and Figures

World's largest retailer, 2003:  Wal-Mart
United State's largest private employer, 2003:  Wal-Mart
Wal-Mart's worldwide workforce:  1.3 million
Wal-Mart's most 2002 annual sales figures:  $245 billion
Gross Domestic Product of Switzerland, 2002:  231 billion
Number of Wal-Mart stores worldwide:  4,300
Number of Wal-Mart stores opened on October 29, 2003:  39
Average hourly wage of Wal-Mart employee, 2001:  $8.23
Average hourly wage of unionized supermarket workers:  $10.35
Wal-Mart's price of Kellogg's Corn Flakes vs. competitors price:  56%

Sources: THE NEW YORK TIMES; BUSINESSWEEK; THE ECONOMIST; THE BERGEN RECORD, FORT WORTH FORT WORTH STAR-TELEGRAM; DENVER POST; FAST COMPANY; THE OLYMPIAN; Retail Forward; CIA World Factbook; Wal-Mart Corporation

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