The Wal-Mart Watch Blog
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| Jan 11, 2010

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When Wal-Mart opened its only store in Chicago, Illinois on the west side of the city, the retailer said, “This store will show what a great asset Wal-Mart can be to the community, as an employer and corporate citizen.”

From the very beginning of its drive to locate stores in the Windy City, Wal-Mart has based its case on jobs. One of Wal-Mart’s most visible and vocal frontmen is Alderman Howard Brookins of the city’s 21st Ward on the South Side of town. “We need jobs, plain and simple,” the Alderman has said repeatedly. Brookins has been so outspoken on the issue of Wal-Mart and jobs that the Chicago Tribune has referred to him as “the Alderman from Wal-Mart.”

But the jobs argument isn’t adding up in Chicago. A new study from Loyola University and the University of Illinois at Chicago (UIC) has put the giant retailer on the economic defensive once again.

The comprehensive study, The Impact of an Urban Wal-Mart Store on Area Businesses: An Evaluation of One Chicago Neighborhood’s Experience, found that Wal-Mart’s opening in Chicago has produced a loss of 300 full-time jobs. Researchers conclude that the probability of a local retailer going out of business during the study period was significantly higher for establishments close to Wal-Mart’s location.

The loss of jobs in the trade areas near Wal-Mart just about balanced out any ‘new’ jobs attributable to Wal-Mart. “These estimates support the contention that urban Wal-Mart stores absorb retail sales from other city stores without significantly expanding the market,” the researchers say. “What we’re seeing here is that placing a Wal-Mart in an urban setting is basically a ‘wash’ in terms of sales revenue for the city and jobs for local residents,” explains study co-author David Merriman, head of UIC’s economics department. “This means that communities around the city should not see Wal-Mart, and other big-box retailers, as a panacea to local economic struggles.”

The two universities collected data pre-Wal-Mart, post-Wal-Mart, and post-Wal-Mart long-term. Data was collected from March of 2006 until November of 2008. A total of 306 enterprises were tracked, and the research team found that 82 (27%)of them went out of business during the study period. A key finding of the survey is that the probability of going out of business was significantly higher for businesses close to Wal-Mart. Being located close to Wal-Mart was particularly toxic for retailers selling electronics, toys, office supplies, general merchandise, hardware, home furnishings, and drugs.

Based on their analysis of retail sales, the researchers conclude that “These estimates support the contention that large-city Wal-Marts absorb retail sales from other city stores without significantly expanding the market…Overall, the weight of evidence suggests that the Wal-Mart opening on the West Side led to the displacement of a range of businesses. There is no evidence that Wal-Mart sparked any significant net growth in economic activity or employment in the area.”
What you can do: The researchers in this new study suggest that their findings are very similar to a number of other studies on “the Wal-Mart effect” that have been published since the 1980s. “Under the circumstances,” the new study says, “claims that the Chicago Wal-Mart has led to significant economic development in nearby areas must be considered skeptically.”

Wal-Mart has been trying to break into the Chicago market like gangbusters since the spring of 2004—almost a six year epic struggle. The Chicago City Council responded in part to Wal-Mart’s push by passing a “big box living wage” ordinance, which Chicago Mayor Richard Daley vetoed.
The West Side Wal-Mart opened in the fall of 2006. To further enhance its chances of additional stores, Wal-Mart announced in the spring of 2006 that this West Side store was going to be part of a national campaign launched by Wal-Mart called “Jobs and Opportunity Zones (JOZ.” Wal-Mart promised that it would select five small local businesses for advertisements in local newspapers and on Wal-Mart’s in-store radio network. Wal-Mart also pledged to host workshops for small businesses on how to “survive & thrive” with a Wal-Mart nearby. A grant of $300,000 would be donated to local chambers of commerce to create effective programs for the funds.

But researchers from Loyola and UIC interviewed 2 of the 5 businesses selected to be part of the JOZ program. Both businesses claimed that Wal-Mart did buy ads for their businesses in local newspapers---but neither attended any Wal-Mart seminars---and one owner called the Wal-Mart initiative “pretty much a failure.”

This new Chicago study underscores research conducted by economists Ken Stone, Tom Mueller, David Neumark, and others that reveal the dark side of Wal-Mart’s economic impacts. One earlier study showed that each Wal-Mart worker replaces about 1.4 non-Wal-Mart retail workers. The group Retail Forward concluded in 2003 that “for every Wal-Mart supercenter that opens in the next five years, two supermarkets will close their doors.”

According to the local ABC affiliate in Chicago, Wal-Mart’s only comment about this new study was that it was funded by “a group with ties to labor.”

Readers are urged to call Chicago Mayor Richard Daley at (312) 744-3300 and leave the following message: “I’m calling to ask Mayor Daley to please refrain from talking about a south side Wal-Mart project as a jobs or revenue project. I urge the Mayor to read through the new Loyola University study on the economic impacts of the existing West Side Wal-Mart store. This study should dispell any notion that Wal-Mart is a job-generator. Chicago has nothing to gain from Wal-Mart---except low wages, Chinese imports, and windy rhetoric. Chicago already has plenty of all these things.”

| Jul 02, 2009

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Here are what the voices on the Internet are saying about Wal-Mart’s support of employer-mandated health care...not surprisingly, it hasn’t taken long for most to deduce that Wal-Mart is hardly acting in an altruistic way.

Number one on Wal-Mart’s hit list? Easy. Target. Because small businesses would either be exempt from the mandate or face a less-strenuous requirement, it would be Wal-Mart’s large competitors (and more specifically those who have to this point been better at managing health care costs than Wal-Mart) that would feel the brunt of the hurt.

Jonathan Cohn at The New Republic:

I don’t want to make too much of this: Wal-Mart may chicken out once the specifics of an employer mandate end up on the table. Even if they don’t, they may not lift a finger to help. And, make no mistake, Wal-Mart is acting--as it always does--out of pure self-interest.

My undestanding is that, after all of these years, Wal-Mart has suddenly found itself in the same situation its competitors once did: Dealing with unpredictable health costs and facing new competition from businesses that have found ways to spend even less on employee health benefits. Is there some justice there? You bet.

Reihan Salam with the National Review:

There is another way of looking at this. As a large, powerful, deep-pocketed firm, Wal-Mart can sustain regulatory burdens that mom-and-pops and new entrants can’t. And so burdensome regulations are invariably Wal-Mart’s ally. Jonathan Rauch explained this dynamic brilliantly in his book Government’s End. It makes perfect sense for Wal-Mart to back a regulatory initiative that hurts its bottom line as long as it hurts its competitors more.

Megan McArdle for The Atlantic:

Wal-Mart is always going to have a seat at the table when employer mandates are discussed, because Wal-Mart is the nation’s largest private employer.  Target and Macy’s probably won’t have a seat at the table.  So Wal-Mart can influence the rules in ways that benefit Wal-Mart at the expense of the competition.

Jeffrey Young in The Atlantic:

Based on the axiom that nobody in business or politics acts strictly out of altruism, it’s safe to assume that Duke and Wal-Mart’s board of directors concluded that backing the employer mandate would provide the company with some kind of competitive advantage. When I originally reported the story, it wasn’t immediately clear to me what that might be, though I suspected it must have had something to do with Wal-Mart’s calculation of how much money the mandate would cost them relative to other retailers.

Michael Cannon, for the Cato Institute:

A couple of years ago, I shared a cab to the airport with a Wal-Mart lobbyist, who told me that Wal-Mart supports an “employer mandate.” An employer mandate is a legal requirement that employers provide a government-defined package of health benefits to their workers...But it all became clear when the lobbyist explained the reason for Wal-Mart’s position: “Target’s health-benefits costs are lower.”

I have no idea what Target’s or Wal-Mart’s health-benefits costs are.  Let’s say that Target spends $5,000 per worker on health benefits and Wal-Mart spends $10,000.  An employer mandate that requires both retail giants to spend $9,000 per worker would have no effect on Wal-Mart.  But it would cripple one of Wal-Mart’s chief competitors.

U.S. Chamber of Commerce, quoted nearly everywhere (here courtesy again, of Mr. Jeffrey Young):

The U.S. Chamber of Commerce took a pretty nasty swipe at Wal-Mart when I emailed them for a comment. Here’s the statement the Chamber’s press office sent me, attributed to James Gelfand, its senior manager for health policy: “Some businesses make the decision to use the government as a weapon against their competition. We do not agree with this method.” Ouch.

| Jun 25, 2009

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We hate to say “I told you so,” but....

Marc Gunther on ClimateBiz discussed Wal-Mart on his blog yesterday, and points out something we’ve been trying to get across as well. Even as its greenhouse gas emissions have begun to fall, the company’s overall carbon footprint has continued to rise.

As Gwen Ruta of the Environmental Defense Fund, a Wal-Mart partner, writes in her frank assessment of the company’s 2009 sustainability report, the problem is that all the good things that Wal-Mart is doing—increasing its use of renewable energy, driving efficiency in individual stores, improving its fleet operations and pushing up its recycling rate—are offset by the fact that the company is adding more stores and selling more stuff.

In late 2007 we released our own environmental report, in which we brought up the following:

Wal-Mart’s new stores will use more energy than its energy-saving measures will save. Its fleet of trucks, massive overseas shipping to import its goods, and the increasing vehicle miles traveled by its consumers all contribute heavily to CO2 emissions and the number of ozone-causing particulates released into the air. Its huge stores and even larger parking lots contribute to the degradation of our water supply, affecting our drinking water and the viability of aquatic life.

Wal-Mart’s response has been that by increasing its market share, it can replace less efficient competitors and thereby reduce emissions in the retail sector as a whole, even as it continues to expand. That might ultimately be true in the far, far distant future, especially if one day every store is a Wal-Mart. But in the interim, Wal-Mart’s total carbon emissions continue to outpace its efficiency gains. And as Gunther so eloquently adds:

If the Earth’s atmosphere could speak, it would tell us that it doesn’t care about efficiency or renewables or recyling—or market share.

Wal-Mart’s Big Problem: Climate Change [ClimateBiz]

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| Jun 18, 2009

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By this time we should all be aware of the controversies surrounding credit companies - in addition to increasingly complex and confusing options for credit applicants, credit card issuers have been raising interest rates and fees for many current borrowers, many of whom were in complete compliance with their card holders’ agreements when their rates were raised. This is a major reason behind the call for continuing credit card reform.

What many people might not be aware of is the struggle between credit companies and the retailers at which their cards are used. As Bloomberg explains, this could end in a giant Visa vs. Wal-Mart rumble:

Lawmakers are promising new rules to bring down the interchange fee, a charge on purchases sometimes topping 3 percent that’s split by the two banks serving the customer and merchant. Supporters of the legislation include the biggest retail chains, restaurants and small businesses, which say the fees erode profit and inflate prices...Interchange is the second-biggest cost after payroll, Target said, and merchants want to negotiate lower payments collectively without running afoul of antitrust law.

The issue has become such a hot topic, the Government Accountability Office has been ordered to study the effect interchange fees have on both consumers and merchants. The “interchange fee” is the fraction of every credit card transaction that the card’s issuer retains. When combined with additional smaller fees levied by a retailer’s own bank (to which the retailer first submits the transaction), interchange fees can cut into retailer revenue - especially important for those retailers with slim profit margins.

Interchange fees have risen over time - interesting, since technological advances would suggest the cost of such transactions should go down - and the result is a growing battle between retailers and card issuers. Wikipedia provides a surprisingly simple example of how the fees work:

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| Jun 11, 2009

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Image above from the Center on Budget and Policy Priorities

When Wal-Mart’s use of an intricate web of subsidiaries to avoid state taxes was discovered, the N.C. Secretary of Revenue famously sent tax lawyers and auditors after the world’s biggest retailer. With state economies strapped for cash, North Carolina is now looking to halt such shenanigans before they can start.

A proposed “combined-reporting” law would require companies with multiple subsidiaries operating in several states to file tax returns as a single business. Opponents of this legislation have given lawmakers the shivers...But in the face of the state’s biggest budget crisis since the Great Depression, combined reporting took a first step Tuesday toward becoming law. After a contentious House Finance Committee meeting, the Democrat-led committee voted along party lines to approve a larger tax package that includes combined reporting.

Combined reporting basically treats a parent company and its subsidiaries as one entity for tax purposes. A driving force behind the move was the public realization of just how much money North Carolina has been losing through loopholes in its tax laws.

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| Jun 02, 2009

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According to the Courthouse News Service, Wal-Mart has been using a sales tax loophole to swindle customers out of a full refund on returned merchandise. Basically, the lawsuit claims that when customers have purchased items at a store that charges a particular sales tax, and have returned the item at a store in an area with a lower sales tax, Wal-Mart has refused to return the difference in paid tax if the rate at the point of sale is higher than that at the store where the merchandise is being returned.

(Plaintiff John) Whitewall says he bought a Blue Ray disc player from Wal-Mart’s store in Collinsville, Ill. for $214.04, at an 8.1 percent sales tax rate. But when he returned the player to Wal-Mart’s store in Glen Carbon, Ill., he received only $211.56, because that store has a 6.85 percent sales tax.

This seems like such a small issue - $3.50 or $4 dollars on a sale - but multiplied over thousands of transactions it has the potential to add up. Wal-Mart has had similar issues with returns before - late last year the Connecticut Attorney General began looking into Wal-Mart after charges began surfacing that major retailers (most notably Wal-Mart) were violating state law by charging a second sales tax when merchandise paid for with cash was exchanged. You can refresh your memory on that story here and here.

The lawsuit was filed as a national class action, and we’ll continue checking for updates. You can read the complaint here. The lawsuit is seeking actual damages, plus any additional damages the court would deem appropriate - read: punitive damages in an amount high enough to make Wal-Mart consider changing its practices.

It’s unclear if the plaintiff has examples beyond his own - the complaint mentions only the Blu-ray player purchase - but I have to believe they have additional plaintiffs. A class action based on one case is, after all, not really in much danger of moving forward as a class action.

Class Sues Wal-Mart Over Returns Policy [Courthouse News Service]

| Jun 01, 2009

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According to Bloomberg, Wal-Mart has won preliminary court approval to pay as much as $85 million to settle 30 wage/hour lawsuits. The lawsuits claimed the company didn’t pay employees for all hours worked, forcing them to miss breaks and forgo overtime pay.

Late last year, Wal-Mart announced that it would settle 63 wage and hour class action lawsuits that have been pending against the company for several years. There were just under 80 such suits pending against Wal-Mart at the time, so it represented a pretty large legal housecleaning. This $85 million settlement covers just under half those cases as part of the larger agreement made back in December, which could cost the company up to $640 million before all is said and done.

Following the initial settlement, we noted that what these cases revealed through evidence and employee testimony was a “corporate culture” and systematic approach geared towards cutting labor costs, by dictating managers hire below the “preferred” staffing levels and rewarding managers for keeping labor costs down. Steven Greenhouse on TPM has pointed out that while store management is ultimately responsible for setting schedules, pressure often comes from the top:

Robert Eckert, a former assistant store manager at several Wal-Marts in California, said: “They tell you that working off the clock is against the law, is not allowed by Wal-Mart, and then they tell you to get the job done. But they didn’t give you the budget to get the job done. It is clearly understood that if you don’t make payroll, it’s a serious issue and you can lose your job over it.”

For more information on wage theft in general, you should check out Kim Bobo’s “Wage Theft in America: Why Millions of Working Americans Are Not Getting Paid - And What We Can Do About It.”

As for the $85 settlement, a Federal Judge in granting temporary approval called the wage theft agreement “fair, reasonable, and adequate.” Merely adequate for the workers, perhaps, but no doubt a “steal” for Wal-Mart.

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| May 26, 2009

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In today’s Wall Street Journal, Home Depot co-founder Bernie Marcus acknowledges he sees in the retiring Justice David Souter a jurist with a “moderate or restrained record” – one which plaintiffs’ lawyers and unions would hope to avoid in a replacement. Earlier today President Obama announced his nominee to replace Justice Souter on the U.S. Supreme Court – Sonia Sotomayor, of the U.S. Court of Appeals for the Second Circuit – and the question now: Is this a good thing for businesses like Wal-Mart?

The primary reason for asking this question at this time is because there exists the very real possibility that at some point in the relatively near future, Wal-Mart’s lawyers will be defending their client before the very Court that Judge Sotomayor is being nominated to.

Just two months ago, the Ninth Circuit Court of Appeals re-heard en banc arguments in the well-traveled Dukes v. Wal-Mart sex discrimination case – plaintiffs are hoping the full court will affirm a previous Ninth Circuit decision that upheld the lawsuit’s ability to proceed as a class action. If that happens, Wal-Mart will have two options – accept the decision and proceed to trial, or appeal the decision to the U.S. Supreme Court.

Should Wal-Mart come out on the short end of the Ninth Circuit and find itself in front of the Supreme Court, Sotomayor could be the newest of the nine justices the company will have to convince in order to have Dukes’ class action status removed. Judge Sotomayor’s voting record is now being parsed, and certainly as the vetting process moves forward, we’ll learn more about what kind of effect she could have on a potential Dukes decision. Most view her record as decidedly moderate, though she has implied in the past that the gender and ethnicity of judges should and does influence their judicial decision-making.

As a woman and a minority, could this be a bad omen for Wal-Mart? We’ll see...until then, however, we’ll have to make do with some of her career highlights, which you can find after the jump…

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| May 22, 2009

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HUGE CROWD COMES TO OPPOSE 'WILDERNESS WAL-MART' AT PUBLIC HEARING

• Opposition to Wal-Mart Near Va. Battlefield [Washington Post]
  Wal-Mart officials have a return date in Virginia to discuss their proposal to build a Supercenter near a Civil War battlefield.
  

• Public Speaks On Wal-Mart [Free Lance-Star (Va.)]
  A public hearing last night on a proposal to build a Wal-Mart Supercenter near the Wilderness Battlefield park drew a big crowd, but little noise and no vote.
  

• Orange Wal-Mart Plans Spark Debate [WCAV-TV (Va.)]
  Plenty of folks who live near the proposed Wilderness Wal-Mart are excited to see it coming; yet many others are fighting to keep it away.
  

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| May 21, 2009

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Over 50 religious leaders from a variety of faiths and denominations came to Capitol Hill this week to lobby members of Congress and show their support for the Employee Free Choice Act. The group has formed a coalition called Faith Leaders for Workplace Fairness, which made its first public announcement in support of the labor reform bill on a conference call with press last week. The coalition has called the legislation a “moral imperative” and a civil and human right. Check out the video of their visit below.

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