Walmart

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Are You Being Served?

That was the title of an old British sitcom. It is also an appropriate question in today’s economy. David Cay Johnston does us all a favor by focusing our attention on the plight of our modern era domestic class.

I have written about this topic both directly and tangentially for years: inequality is the defining issue of our era. And what makes it most vexing is that we created the current situation via deliberate policy. It was not an accident. Nor was it some unfortunate unintended consequence of a mysterious force like a free market or globalization. It could have, and should have, been avoided.

As you know I place the economic schism of contemporary America in the context of what I see as the conflict between capitalism and democracy.

Capitalism, however we define it, tends to lead to significant concentrations of wealth. We know this because we have ample historic evidence of such an effect. Both our recent Gilded Ages were associated with huge and increasing disparities of income. And both were followed by massive collapses of the economy.  We know full well what a relatively unfettered capitalist economy looks like. We just lived through one.

Democracy , which ought not be conflated with freedom, has an opposite effect. It tends to result in a more even distribution of wealth because of the redistributive consequences of policies that appeal to the majority of voters. We know this too: the evidence of the post-war era throughout the western world supports it, as does the recent counter attack by plutocrats like Mitt Romney. His infamous 47% comment is hardly the stuff of a true believer in democracy. It was the rage of a plutocrat feeling put upon by the desires of the masses. He called them moochers. We call them voters.

When you get the two forces out of balance you end up damaging society. Too mush capitalism and you arrive at today’s inequality. Too much democracy and you lose the innovative edge that drives future prosperity. The trick is to find an acceptable middle ground where the pay-off to capital is still enough to boost growth, but not enough to plunge us all back to the dark ages of outright laissez-faire, exploitation, and mass hardship.

In my mind, growing up as I did in the UK, nothing more epitomizes a divided society than the Edwardian era. It was an age of huge wealth, rapid growth, great power, and a massively divided society. Domestic servants – my grandmother included – were a very large part of the economy. While on the surface society was both prosperous and successful, the imbalance caused by those deep divisions in wealth made it both fragile and unsustainable. When society came into contact with a disorienting event that fragility gave rise to a great reorganization of society, even though the reorganization took a generation to work through.

That even came in the form of the First World War, which shattered not just the prior complacency of the ruling class, but empowered the masses who bore the brunt of its suffering. Then came the Great Depression as a second and confirming shock after which democracy took hold sufficiently to lead to the rise of the modern middle class. We would all do well to remember that the modern middle class is not the natural progeny of market based economics, but is, instead, the offspring of the democratically enabled redistribution of wealth implied by the post-war social contract. The permanent and increasing integration of women in the workforce; the provision of retirement and other government backed benefits; and the acceptance of a balance between the returns to wages and the returns to capital all were political results of the tilt away from pure capitalism towards a greater balance with democracy. Those masses that the right wingers so revile asserted themselves through the ballot box and brought the often vacuous phrase “We the People” to life.

But after nearly forty years of regression, the near worship by our elite of market based solutions to each and every problem, the relentless pursuit of profit at the expense of wages, and the toxic criticism of the role of government we are back, as Johnston argues, in a neo-Edwardian era. Only this time it’s worse.

Whereas domestic servants like my grandmother were given room and board along with their pitiful pay, today’s equivalents are not. They both pay taxes – despite what the Romneys of the world say – and they pay for their own room and board. They are thus worse off than their predecessors. They are also more exposed to the neglect and exploitation of the maxims undergirding modern big business. As corporate America pursues profit at any expense, and decouple productivity growth from wages, it acts to drive down those wages and thus the ability of workers to progress. Big business has done more to destroy the concept of opportunity and to deconstruct our middle class than any other force. Companies like Walmart and MacDonald’s have made it socially acceptable to pay wages so low that many of their employees have to rely on welfare to sustain themselves.

Of course we all benefit from being able to buy incredibly cheap products. But the cost to society is huge. And, amongst other things, one major and little commented upon side effect of the low wage economy is that we, the taxpayers, end up having to provide welfare for those caught in it. So those supposed low costs, which is the big benefit society is supposed to reap from a low wage regime, is an illusion. We end up subsidizing the profits of the likes of Walmart whose workers can only work for those low wages as long as taxpayers help out and chip in welfare to top up their incomes.

This is not a sustainable balance for our society. We ought not subsidize the greed of the Walton family whose low wage policy means we have to pay extra in taxes to support their workforce via welfare. They ought to be able to pay for their own workers. And they ought to pay a living wage.

Recent rumblings and resistance amongst low wage workers suggest that we have hit a tipping point. Or that we are close to one. The business model that companies like Walmart employ, which is based on exploitive wages offset by taxpayer subsidy, is, in fact, far worse than the old Edwardian domestic service model. The older exploitation was partially offset by a paternalism that sugar coated it for a while. Now the exploitation is both unabashed and lauded by a large part of our elite who, brought up on a steady diet of market magic economic theories, see nothing wrong with lowering wages and imposing greater burdens on those least able to carry that burden. After all, as we are told, poverty is a great incentive to the poor to get to work. And to get to work at any wage they can find. Which is usually lower than a living wage.

In this vein Rand Paul, whose economic ideas are based on the fictions of Ayn Rand and the Austrian School of thought, can credibly argue that unemployment assistance hurts workers because it stops them from seeking low wage work. This is another throw back to pre-democratic days. Samuel Smiles wrote a very popular book in the Victorian era arguing exactly the same thing. It was called “Self Help” and was aimed at the poor who, Smiles argued, could help themselves by pursuing the puritan virtues of hard work and self reliance. Government aid was seen as a hindrance to self help by conservatives then as it is is now.

But in the interim, between that old era, and today’s replication of it, we experienced the alternative. An age of government assisted and democratically enabled redistribution to mitigate the many evils of capitalism without surging all the way to outright socialism.

Marx saw the emergence of modern democracy as a step along the road to socialism. He was wrong. It was a bulwark against socialism. Modern capitalists, our plutocrats and the elite that enable them, would do well, though, to recall Marx’s insights. Capitalism has within it the engine of its own destruction. This is because of its massive and destructive influence of society. In modern terms this influence is the inequality that now threatens us all. They would do equally well to recall that it was democracy that provided sufficient respite and prevented all out socialism from emerging throughout the western world.

Getting that balance correct is crucial. Right now we have it wrong.

Are you being served?

If so, think twice. You may be the one in service.

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Another Walmart Goodie?

The Cleveland Plain Dealer reports that a Walmart in Canton Ohio is having a drive to raise food for the needy. How socially aware of them. And so unusual for Walmart, which normally displays a regard for society at the level of Attila the Hun.

Except.

In this case the food drive is designed to help Walmart employees and not the public.

I wonder whether we file this piece of corporate wisdom in the same category as the recent MacDonalds advice personal finance to its employees who were assumed, in the illustrative budget they were given, to have no heating costs and so on. Only then could they save anything given the wages MacDonalds pays.

Back to Walmart.

Now it could be that a few employees had set the drive up on their own, without management consent, and that it is thus a local well intentioned effort to help co-workers. I am suspicious though. Mainly because Walmart’s management operates along the lines of a cross between the Gestapo, the Stasi, and the NSA. Remember, this is a company that has locked its employees in so that they don’t take unauthorized breaks. So the idea of anything resembling a food drive taking place without management consent is tenuous to say the least.

Maybe Walmart could pay its employees enough that they didn’t have to rely on charity for subsistence. Then again that might disrupt this year’s divined payout to the Walton family. Or it might lower senior management bonuses. And we don’t want to do that. Personally I am surprised we haven’t seen this food drive held up as another example of the “have-nots” trying to mooch of the “haves”. I just don’t get why the little people – the kind who resort to working for below living wages at places like Walmart – can’t make do with less. It’s not as if they have important things to do, or that they work for what they earn, like, say, the Walton family does.

Horrid, don’t you think?

Addendum:

You will notice in the story that there is a fund within Walmart that gives grants to employees in need – things like being homeless count as a “need” in this case. What you might miss as you read the article is that this fund is financed by employee payroll deductions. It isn’t a company effort at all. Although the company spokesman is clearly trying to position it such that the fund is viewed as an example of Walmart’s employee outreach. The gall of the company is astonishing. More astonishing is that, apparently, homelessness is common enough amongst its employees that it gets a mention as an example of the type of problem the fund is set up to offset.

Living wages? No. That can’t be part of the problem. Can it?

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Walmart and Health Care

My reaction to Walmart has been like a lot of you: disgust. They have a corporate policy that deliberately squeezes their workers so that profits are kept high. But why do we presume that companies have an obligation to pay for health care? Why not the government? After all the government is the cheapest health care provider in America because it spreads its costs over such a large base, and has no expensive bureaucracy trying to weed out high risk patients. Health care in this country is so expensive precisely because it is privatized and consequently fragmented and focused on organizing and reducing risks to insurance companies.?

Walmart is doing us a huge favor by pointing out that society at large is a better provider than they are. Plus, if we de-couple the health care debate from Walmart we can focus instead on living wage issues by encouraging people to shop elsewhere.

Also, it’s a little ironic that this holiday season Walmart is doing well because low wage earners are flocking to it to save money and thus pay for their higher heating bills! We are all going to lose the working person vote if we keep shooting at the store they feel is the best deal in town for prices. It is an easy tactic for a populist right winger to criticize leftist elitists who don’t even have to shop at Walmart. Compare that with the relative complexity of building the left wing argument that, somehow, those low prices are a bad thing — even for people who don’t work at Walmart.

That’s why while I dislike the bare bones, and what I think is unethical, nature of Walmart’s strategy I use them as an example of why business should not be responsible for health care [rather than waste time trying to make them, responsible]. There must be an increasing number of business executives who would agree with the need for a debate about publicly, rather than privately, funded health care. They are drowning in benefit costs [think GM], and would love nothing more than to see the country as a whole step up and take on the job they are failing at.

By the way: in a perverse way the accounting profession, hardly a bastion of liberal thinking, is going to help us: upcoming accounting standard changes will force companies to recognize on the underfunding of benefits their balance sheets. The red ink will scare even more executives our way if we are sensible about the way we cooperate with them.

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More on Walmart

Following up on my note yesterday about Walmart: Rep. Anthony Weiner, Sen. Ted Kennedy, and Sen. Jon Corzine recently introduced the Health Care Accountability Act in Congress, which would require states to disclose the names of large employers whose workers are on Medicaid as a result of the companies refusal to provide insurance benefits. The purpose of this, of course, is to make public the names of companies inflicting costs onto already stretched state budgets. This Federal legislative effort comes on top of the local effort in Maryland to force companies to provide health care insurance — which failed because the Governor, Republican Robert Erlich, caved in to intense lobbying from Walmart and vetoed the bill. Most recently was the leaked memo from Walmart describing how the company planned to cull ill or potentially costly employees from its payrolls so as to reduce health care expense. Clearly up until now Wal-Mart shows no sign of accepting that its behaviour is anti-social. So we need to push back.

As a society we have three ways to respond to ‘Walmarting’ — allow me to coin the phrase. One is to accept that companies can do anything they want, and we all just have to live with the consequences, however nasty they are. Second, we can oppose the company’s actions and try to get them to change [Walmart Watch and Wake Up Walmart are two organizations dedicated to this]. Or, third, we can accept that big companies will always be rapacious and use things like cutting benefits as a way to shore up profits, but realize that we can legislate to get a national health care system so that unethical behaviour by companies doesn’t mean that our fellow citizens have to suffer. Of course we’d all like to think that Walmart and others had some ethics, or social awareness, but they don’t. So I for one will use ‘Walmarting’ as a rallying cry for national health care, which taxes on Walmart profits will help pay for. I can see some neat justice in that.

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Walmart

In case you hadn’t noticed Walmart is now the subject of a class action suit in Missouri where it is accused of systematically forcing its workers to work ‘off the clock’ and of deducting breaks from worker’s time worked. Times must be hard when the nation’s largest employer has to rob its workers like this. I generally don’t like to pick on individual companies, but Walmart will always be an exception: its policies are brutally anti-worker. A substantial number of its employees are so poorly compensated that they cannot support their families even though they are full time workers. [The two most common jobs at Walmart — ‘Sales Associates’ and ‘Cashiers’ earn between approximately $12,000 and $14,000 per year. The national Poverty Line, as determined by the Federal Government, is $15,260 for a family of three]. Its lack of health care benefits is legendary, so bad is its health care plan that many of its employees have to use public assistance to care for their children’s basic needs. That means that you and I are picking up the tab while Walmart reports growing profits and pays its shareholders dividends.

That is the point of my criticism: we are subsidizing Walmart so that they can turn around and offer low prices. Those low prices are only possible because Walmart has taken a page from Scrooge’s book. If it paid a decent wage and gave decent benefits its prices would have to go up. This is a problem for consumers: we like low prices, but do we all realize that some of our taxes are used to offset their underpayment of wages? When we add the tax subsidy and the prices together to get the true economic cost of the products sold by Walmart they don’t look so cheap! Moreover, if Walmart’s competition starts to play the same game, and who could blame them for trying to survive, everyone starts to lose. Wages are bid down, benefits are slashed and the social cost of welfare rises. Walmart thinks it is being smart dumping part of its costs onto the taxpayer, so far it’s been successful. But no wonder its image is awful amongst labor groups: Walmart is relentlessly anti-worker. We should be relentlessly anti-Walmart until it changes.