Essential Report

Wal-Mart Reaping What It Sowed

Aug 17, 2012

The gyrations of stock markets, the Euro crisis and the conflicting predictions about the direction of the economy are related to one basic point: average people are tapped out. Wal-Mart tells us the story in pretty simple terms.

Turns out, who knew, but a paycheck isn’t what is used to be:

The Bentonville, Ark, retailer has rebounded from an earlier domestic slump, and reported that sales at U.S. stores open at least a year rose 2.2%, growing for a fourth consecutive quarter.

Still, customers living paycheck-to-paycheck “remains pronounced” in the U.S, said Chief Executive Mike Duke. There are “continuing economic pressures.”

Wal-Mart has been challenged recently as its core lower-income customers in the U.S. contend with high gasoline prices and persistently high unemployment levels. The company also expects inflation to rise in the back half of the year, particularly on food and drought-related items like corn and soybeans.

Wal-Mart cautioned that it is now seeing in international markets the same “paycheck cycle” it saw in the U.S., where customers buy immediately after payday and then make smaller purchases as money runs out. The trend has become particularly pronounced in the U.K., where customers at Wal-Mart’s Asda grocery stores are “clearly stretched,” Chief Financial Officer Charles Holley said during a conference call with reporters Thursday morning. [emphasis added]

For anyone but the elites who want to pay attention, this should come as no shock. Decade after decade, we see the same story: corporations demand wages cuts from workers partly to underwrite huge pay packages for CEOs: financiers try to game a system that ends up collapsing, leaving average people to pay the bill; and political leaders spend too much time trying to appease bond holders, and, rather than spend more money to create decent-paying jobs, they get obsessed with a non existent debt and deficit crisis.

And, by the way, Wal-Mart whinges but, in fact, thrives and grows based on a model of poverty. It pays its workers wages that don’t allow a decent standard of living—and is virulently anti-union to boot. Those obscenely low wages force Wal-Mart workers to shop at Wal-Mart, where prices are low, low, low…for the people who can’t make it from paycheck to paycheck. At the same time, the Wal-Mart heirs are collectively worth about $80 billion—but it never occurs to them to, for example, give their workers even decent health care benefits to ward off poverty.

The logical person would pause and wonder: isn’t the Wal-Mart model self-defeating. The answer is of course, “yes”—but only if you believe in a world of equity, fairness and a decent standard of living for all.

This is all worth remembering when we read about the absurd agenda of the Coalition and its business allies who want to undo the basic fair standard of living enjoyed by workers. Recall what the review of the Fair Work Act found:

After considering the economic aspects of the Fair Work Act the panel concludes that since the Fair Work Act came into force, important outcomes such as wages growth, industrial disputation, the responsiveness of wages to supply and demand, the rate of employment growth and the flexibility of work patterns have been favourable to Australia’s continuing prosperity,” it says. It also criticises Work Choices. ”Of the four bargaining frameworks over the last 20 years, Work Choices is least like the others. Its period of effective operation was relatively brief and during that period it was significantly amended.” [emphasis added]

So, there you have the stark choice: the Wal-Mart model of poverty versus the Fair Work model of spreading prosperity.


@jonathantasini

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