Sunday, April 15, 2007

As We (Too Many of Us) Get Poorer

As we get poorer, the best we seem able to do is take a spiritual attitude toward the increasing numbers of Americans living at or near the poverty level. Religion has always espoused the argument that the disadvantaged should be meek, that their reward lies in the hereafter. That’s an argument of the privileged, of course and you don’t see the poor in the front pew at any church I ever attended.

As we get poorer, the best we seem able to do is take a spiritual attitude toward the increasing numbers of Americans living at or near the poverty level. Religion has always espoused the argument that the disadvantaged should be meek, that their reward lies in the hereafter. That’s an argument of the privileged, of course and you don’t see the poor in the front pew at any church I ever attended.
Walmartassociate There are new ways in these new economic times to get at that same argument and our 21st century gift to the working poor is Wal-Mart. Lordy, here I am, beating on Wal-Mart again.
Over six and a half billion people, the approximate population of the earth, shop every year at Wal-Mart. According to the company, these customers, worship at the alter of consumerism and demand the lowest possible prices.
And they get them, in part (perhaps too large a part) because W-M pays the lowest wages in the country for its ‘associates’ and caps their wages—no matter how many years they serve the company—at a rate within shotgun range of the poverty level.
Lesliedach Leslie Dach, a long time Democratic political operative, is W-M’s executive vice-president for corporate affairs and government relations (essentially the company’s spin-meister). Dach was asked by Jeff Goldberg in a not totally flattering piece in the April 2nd New Yorker,
“if it was moral for a self-styled Democrat to work for a company that, among other things, maintains a mobile squad of union-busters who can be dispatched by corporate jet to any store that gives off the faintest rumblings of union activity.”
The answer illustrates why Dach is held in such high regard at W-M. It’s also a pretty clever response to Goldberg’s loaded question, the equal to ‘have you stopped beating your wife.’
“I think, first of all, that morality is not the right language. I think the more than one hundred and thirty million people who shop at Wal-Mart each week, who are saving money so that they can lead a better life, who save money there, would be insulted by that frame. Some of these issues are complex, and the debates are complex.”
Like Don Rumsfeld, if Dach doesn’t like the language, he merely rephrases it to suit himself. First he refuses the premise and then twice uses the saving of money as an alternate answer.
The issue is not complex. W-M’s customers can hardly be insulted by Dach’s morals. Nor is Dach’s moral conduct a complex debate. Three strikes--you're out, Les. Changing the subject to saving money is hardly an answer to a question Dach didn’t want to answer.
Thus are we spun, and spun in the hands of a pro.
When questions go unanswered, we all lose. When interviewees are allowed to re-frame questions to suit themselves, the whole point of an interview is lost. Journalists seem not to understand that.
When was the last time you heard a member of the mainstream press (or any journalist) dig in and say “excuse me, you didn’t answer the question.” That should rate as at least a four-credit course in any school of journalism.
Walmart Further in the article, there’s a good deal of spin about W-M’s venture into energy savings in its stores, transport fleet and even as an issue pursued with its suppliers. 65,000 suppliers--no small deal.
A recently opened prototype super-center will save $100,000 annually on electric alone. Across its 6,400 stores worldwide, that kind of saving might not lower prices or raise wages, but would pass through $640 million to Wal-Mart’s bottom line.
The spin, according to Dach, “What we’re trying to do is make sustainability sustainable.”
Nice turn of phrase and absolutely as it should be. Coming decades won’t see any substantive environmental progress unless business makes a profit from it and I wish them well—go for it.
Costco But it’s impossible to consider Wal-Mart without discussing their impact on driving down wages. By its own admission, the average wage for full-time employees is $10.51 compared to Costco’s $17.46 and Costco is their competition.
If you accept the federal poverty level for a family of four to be $18,850, then W-M wages clear that hurdle by a mere $2,170. Costco sets the bar at a substantial $16,070 surplus, taking their workers securely into the lower middle-class.
Monawilliams Confronted with that wage issue, Mona Williams, W-M’s chief spokeswoman claimed the company profit-per-employee stands at $6,400 and every dollar added to that hourly wages subtracts $2,000 from that number. Fair enough--that certainly checks out with the company levels of profit.
But it disavows raising prices. Addressing this, Williams claims
“You could raise prices, but what about the woman shopping for Easter shoes for her kids? We can’t raise prices on her.”
Doing the math on Wal-Mart gross sales--$315 billion and profits--$11 billion (3.5%), it's pretty clear that each 1% increase in prices drops an additional $3.15 billion in the coffers. Work backward from that, taking into account W-M’s 1.8 million ‘associates’ and bingo--each 1% price increase provides 88 cents an hour in additional wages. No affect on profits. No unpleasant after-taste.
Wal-Mart could boost its average hourly wage to $19.30 by raising prices 10%, blowing by Costco (by almost two bucks) and becoming an employer of choice instead of last resort.
But we gotta get back to Mona Williams' Easter shoes. W-M sells women’s Gracie Peep-Toe Espadrilles (whatever the hell they are) at $15.88. The real question is whether W-M customers would turn their backs at $17.47 Peep-Toes.
Phrasing it as if women will be unable to buy Easter shoes for their kids is deceptive and does nothing to address the issue.

Samwaltonbook It is the business of business to make profit. Nothing wrong with that. Pointing out that Sam Walton’s wife and kids are worth more than Bill Gates and Warren Buffet combined isn’t relevant either (although it’s fun).

But wages ought to be structured in a way that encourages an expansion of product and services.
Henry Ford had this figured out when he introduced the $5 day to his line-workers and he did it at a time when that was double the prevailing daily wage.
Cars were pouring off Ford’s innovative production lines and he didn’t need cheaper workers so much as he desperately needed buyers. With his five bucks, he turned auto-workers into auto-buyers and one could say that the consumer-society (for better or worse) was born of Ford’s decision. Remember, you could buy a Model-T for 70 days worth of wages, if you could find a way to feed the kids.
Consumersociety Wal-Mart needs buyers as well. The cheapest way to increase profits in retailing is to raise per-store sales. It's the retailing Fountain of Youth. And you do that when you increase the income of your buyer-base.
Once again, we’re standing at the threshold of dwindling ability on the part of working America to partake of its fruits. Pretending to lower consumer costs for the most marginal earners of society by wreaking havoc with their take home pay is not a way forward. It’s a sure-fire way to destroy what is left of the American worker trying with less and less success to support the American family.
If Leslie Dach wants something to spin, let him contemplate how much of that additional $8.80 would end up in Wal-Mart cash registers. There’s more than one way to grow a company that’s closing in on market saturation.

And there’s surely more than one way to earn a profit.
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