BloggingStocks: ‘Is Wal-Mart’s Perspective On Labor Costs Simply Unworkable?’

BloggingStock’s Brian White doesn’t always share our viewpoint on Wal-Mart, but this week’s “Wal-Mart Weekly” column is particularly interesting. It focuses entirely on the closing of the Tire & Lube Express in Gatineau, Quebec.

It’s a good column, and not just because it gets in a few zings at Wal-Mart. It’s one of the first pieces we’ve seen that begins to take a real look at Wal-Mart’s repeated decisions to close stores rather than deal with unions and union contracts, and asks important questions from a business perspective. Is this a good policy for Wal-Mart as a company? Is the repeated antagonism of workers who unionize going to hurt Wal-Mart’s growth potential in countries like Canada and China - where unions are more powerful and prevalent? And more fundamentally - is Wal-Mart’s bare-bones-wage model really a sustainable and profitable business plan in an economy where living costs are skyrocketing?

If you’ve got time, read the whole thing:

The Wal-Mart Weekly: Is closing up a unionized shop the best strategy? [BloggingStocks]

This week, Wal-Mart Stores Inc. (NYSE: WMT) closed the first shop in North America that had been completely unionized. Does this signal anything to other Wal-Mart locations that form a collective bargaining organization? Sure: form one and the retailer would rather see the operation shut down entirely instead of having employees with any kind of power.

That may sound harsh, but it has to be the feeling around a Wal-Mart tire and lube shop in Gatineau, Quebec, which was literally closed due to its unionization last week. What better a way to leave consumers in the lurch than to close up shop on something that brings in revenue even if its employees decide to stray from Wal-Mart’s “non-union” stance in its retail locations.
Was the closing really the best answer?

With the Gatineau location in Canada the first official Wal-Mart location with an actual union contract in place, Wal-Mart’s response could be seen as severe. Was the global retailer trying to get a message out to any other Wal-Mart location in North America—“unionize and we will shut your doors?” If so, that’s no way to run a business, right? Is Wal-Mart so afraid of unions in its stores that it would rather shut them down (or pieces of them) instead of continuing to operate?

Lisette Wallingford, a frustrated customer of the Gatineau shop, expressed her disappointment: “They told me to come back today because my tires were coming in ... I think I’ll go to Canadian Tire because I can count on them.” There’s all we need to know: a frustrated customer. Wal-Mart was at least kind enough to direct customers late last week to other Gatineau-area Wal-Mart locations, with no mentioning that the closed location was due to unionization. Nice.

Wal-Mart and the living wage

So, it comes back to this: many Wal-Mart employees are apparently so underpaid that their only recourse is to try and unionize their stores in order to negotiate a better wage. That has to be a logical conclusion to why the Gatineau tire and lube shop employees wanted a union. Although these employees could seek work elsewhere, they decided to stay put with their current employer and just try for better working conditions (pay, benefits, etc.).

I can already see the “personal responsibility” crowd coming out and defending Wal-Mart’s move, while the “living wage” folks coming out in defense of the employees in question here. And there valid points to both sides. Then there’s the argument of human versus corporate interests. Either can be abused, and both regularly are in many companies. Maybe you’ve heard of the mortgage meltdown where greedy banks and greedy customers combined to undermine the entire American economy (and the global economy in many ways). I think it’s been in the news recently.

Wal-Mart’s perspective on the closings

The global retailer stated that costs associated with the new labor agreement was the ultimate cause for closing the Canadian location shortly after it was unionized. The shop’s minimum pay scale, which was $8.50 per hour before the agreement, was raised to $11.54 per hour. In addition, the new maximum wage was set at $15.25. Apparently, Wal-Mart couldn’t afford those changes.

Some customers disagreed. Customer Hélène Toutloff said, “They should go back to their own country if they don’t want to obey Quebec law,” while customer Raymond Potvin stated, “they gave me a good price last week, but now they are gone. How’s a young guy going to pay for his apartment and his car on $8 an hour? Wal-Mart is going to put these people on welfare.”

Personal responsibility versus corporate responsibility

And therein lies the argument: Is Wal-Mart putting these people on welfare, or are they going to do it themselves? It’s the classic capitalist vs. socialism argument that seems to be everywhere these days. Wal-Mart said the contract resulted in a 30% in increased costs, which had to be followed by “dramatic” price increases on products. Wal-Mart Canada spokesman Andrew Pelletier said, “the union contract that was imposed is simply unworkable.”

Well, Wal-Mart may be in trouble if both scenarios are true: Wal-Mart finds it too expensive to agree to increased wages for lower-paid employees at a single store, while living costs are so much higher now than in the past that workers just can’t afford to live on Wal-Mart’s existing non-union pay scale.

This situation is certainly going to raise its head again as it’s hard to imagine that none of its 3,000+ U.S. locations won’t try to unionize at some point in the next decade. Wal-Mart may save customers money, but at the expense of incessant penny-pinching. And since in Wal-Mart’s case labor is its biggest expense, this means keeping employee costs low.

Is Wal-Mart’s perspective on labor costs “simply unworkable” too? With costs going up for fuel, food and everything in between, Wal-Mart employees will feel the pinch first. That pinch will turn into a tourniquet. At that point, those who can’t leave Wal-Mart employment may try to work in some kind of union activity into more of the retailer’s North American locations. Wal-Mart can’t just shut those locations down when this starts happening. Or, can it?

Posted by Media Team on Tuesday, October 21, 2008

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COMMENTS

Walmart Launches Election Web Video
Reported by: Carley Gordon
Monday, Oct 20, 2008

You’ve heard from the McCain/Palin camp, and you’ve heard from Obama and Biden. Now you can see and hear even more on Walmart’s homepage.

“Customers already go to our websites. They’re among the most heavily visited sites in the country, and so they’re there already, and we think that it’s natural that they’ll be interested in getting information about the candidates and interested in using the voter guide to get information about the candidates,” explains Walmart spokesperson Greg Rossiter.

At least that’s what company executives are hoping. Monday, the retail giant launched web videos of the presidential candidates speaking out on key issues. It’s all part of Walmart’s continuing effort to engage its customers and employees in this year’s presidential election. Company representatives say they’re not encouraging folks to vote either way. They just want voters familiar with the issues at hand.

“This is an extraordinarily important election. It’s a very important time at this stage for the country and we’d like to be able to contribute to our customers’ and associates’ understanding of the candidates’ views on important issues that we’re all faced with,” says Rossiter.

The videos will be online up until Election Day. If you’d like to see them visit:

www.walmart.com
www.samsclub.com
www.walmartstores.com

The videos are also posted on a website for the exclusive use of the company’s employees.

ddrb in
Tuesday, October 21 at 11:32 PM

‘Change’ Can Lead to Catastrophe

Tuesday, October 21, 2008 12:33 PM

By: Thomas Sowell

Telling a friend that the love of his life is a phony and dangerous is not likely to get him to change his mind. But it may cost you a friend.

It is much the same story with true believers in Barack Obama. They have made up their minds and not only don’t want to be confused by the facts, they resent being told the facts.

An e-mail from a reader mentioned trying to tell his sister why he was voting against Obama but, when he tried to argue some facts, she cut him short: “You don’t like him and I do!” she said. End of discussion.

When one thinks of all the men who have put their lives on the line in battle to defend and preserve this country, it is especially painful to think that there are people living in the safety and comfort of civilian life who cannot be bothered to find out the facts about candidates before voting to put the fate of this nation, and of generations yet to come, in the hands of someone chosen because they like his words or style.

Of the four people running for president and vice president on the Republican and Democratic tickets, the one we know the least about is the one leading in the polls — Barack Obama.

Some of Sen. Obama’s most fervent supporters could not tell you what he has actually done on such issues as crime, education, or financial institutions like Fannie Mae and Freddie Mac, much less what he plans to do to stop Iran from becoming a nuclear nation supplying nuclear weapons to the international terrorist networks that it has supplied with other weapons.

The magic word “change” makes specifics unnecessary. If things are going bad, some think that what is needed is blank-check “change.” But history shows any number of countries in crises worse than ours, where “change” turned problems into catastrophes.

In czarist Russia, for example, the economy was worse than ours is today and World War I was going far worse for the Russians than anything we have faced in Iraq. Moreover, Russians had nothing like the rights of Americans today. So they went for “change.”

That “change” brought on a totalitarian regime that made the czars’ despotism look like child’s play. The communists killed more people in one year than the czars killed in more than 90 years, not counting the millions who died in a government-created famine in the 1930s.

Other despotic regimes in China, Cuba, and Iran were similarly replaced by people who promised “change” that turned out to be even worse than what went before.

Yet, many today seem to assume that if things are bad, “change” will make them better. Specifics don’t interest them nearly as much as inspiring rhetoric and a confident style. But many 20th century leaders with inspiring rhetoric and great self-confidence led their followers or their countries into utter disasters.

These ranged from Jim Jones who led hundreds to their deaths in Jonestown to Hitler and Mao who led millions to their deaths.

What specifics do we know about Barack Obama’s track record that might give us some clue as to what kinds of “changes” to expect if he is elected?

We know that he opposed the practice of putting violent young felons on trial as adults. We know that he was against a law forbidding physicians to kill a baby that was born alive despite an attempt to abort it.

We know that Obama opposed attempts to put stricter regulations on Fannie Mae — and that he was the second largest recipient of campaign contributions from Fannie Mae. We know that this very year his campaign sought the advice of disgraced former Fannie Mae CEO Franklin Raines.

Fannie Mae and Raines were at the heart of “the mess in Washington” that Barack Obama claims he is going to clean up under the banner of “change.”

The public has been told very little about what this man with the wonderful rhetoric has actually done. What we know is enough to make us wonder about what we don’t know. Or it ought to. For the true believers — which includes many in the media — it is just a question of whether you like him or not.

Larry in USN WWII (Ret)
Wednesday, October 22 at 10:42 AM

The government run healthcare is pathetic. Military families live in poverty and get mediocre healthcare. It’s relatively free, hence, the low quality. VA Care? Don’t get me started. VA Healthcare is poorly funded and managed. I don’t think more money would help without better management. Obivously you guys aren’t familiar with government run anything.

The Waltons made $0 from the sweat of workers. Workers made every dime they had from the initial investment of Sam Walton. The Waltons made their $90 billion from the value of their stock. Other people think that the Waltons’ shares are worth $90 billion and so they are.

Wal-Mart has not “changed for the worse” since Mr. Sam died. They are merely continuing their practices, albeit on a larger scale. Don’t try and use that crap on me. Show me the wonderful wages and benefits offered to employees prior to 1992.

EllisW in~~~~~~~~~~~~~~~~~~~~~~~~~~~~NOTE: And show me now, how WalMart is concerned about DIS-continuing Sam’s negative practices?

ddrb in
Wednesday, October 22 at 03:33 PM

“They (Wal-Mart) should go back to their own country if they don’t want to obey Quebec law.” ~ Hélène Toutloff

Unfortunately, Hélène, Wal-Mart doesn’t obey US law any better than Canadian. We were kinda hoping Wal-Mart would repatriate to China but they don’t want them either.

(Just to remind everyone that the Thomas Sowell Larry loves to quote is the same guy that fills in for radio comedian Rush Limbaugh.)

What’s good for Wal-Mart is BAD for America!

Ken V in Texas
Thursday, October 23 at 05:01 AM

Sowell thesis: What some portray as “authentic black culture” is actually a relic of a highly dysfunctional white southern redneck culture. Such a dysfunctional white culture Sowell maintains, in turn derived from the ‘Cracker culture’ of certain regions in Britain, mainly the harsh English borderlands, origin of many ‘cracker’ migrants. Sowell gives a number of examples that he regards as supporting the lineage, including an aversion to work, proneness to violence, neglect of education, sexual promiscuity, improvidence, drunkenness, lack of entrepreneurship,… and a style of religious oratory marked by strident rhetoric, unbridled emotions, and flamboyant imagery.

Sowell also provides figures to support his argument that there was a far bigger divide between the cracker/redneck culture of the Southern and Applachian regions and the culture of more northerly Americans, than between whites and blacks. E.g. Northern blacks tried to stop redneck blacks coming up from the South, and the same happened between northern whites and redneck whites. This thesis is the title essay of Sowell’s book Black Rednecks and White Liberals.~~~~~~~~~~~~~NOTE: Well,I guess that explains West Virginia. Hardly any minorities, but the citizens of that state have lowest incomes,literacy,or employment figures(of those who CAN work) for the ENTIRE country.

ddrb in
Thursday, October 23 at 11:31 AM

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