Wednesday, September 08, 2004

Wal-Mart & Chicago

The City of Chicago has been fighting Wal-Mart's attempts to open a store here. For decades, the company has ruined the commerce of one small town after another. With rural America conquered, they moved into the outer suburbs, then the inner suburbs, and now they want to build in the city. Alas, their reputation precedes them. Wages even lower than their prices, sexual discrimination, and the aforementioned destruction of local businesses are just a few of Wal-Mart's less endearing business practices. The City made demands regarding wages and benefits among other things. The latest I've heard is that Wal-Mart has given up on a south side location, but they are still hoping to open a store on the west side.

As a preservationist and a traveler who often visits small-town America, I have a considerable grudge against Wal-Mart. On the other hand, the bargain hunter in me has a hard time paying an extra 25% at another discount chain or even more at a local store. I recognize that this self-interest is harmful to society overall (if one person really does make a difference, as the cynic in me often wonders), which brings up an interesting dilemma. The same inner city people whose jobs are going to be impacted by Wal-Mart are the very people who need to stretch their dollars. The question is whether to accept the short-term gain of increased buying power knowing that the long-term result will be higher unemployment and/or lower wages.

Ultimately, it is a Faustian bargain that is impacting the entire retail sector. The Wal-Mart influence is encouraging or forcing other retailers to follow suit in order to offer competitive prices. One tactic is to revise (i.e., downgrade) job titles for long-term employees. The "new" jobs have a lower maximum pay rate, so employees have to accept a severe pay cut (for example, from $14/hour to $11/hour, a 20% cut, which translates to $6,000 a year less for doing the same job) or find a new job elsewhere.

Costco is a notable exception to the low wage strategy. Naturally, Wall Street doesn't like their approach (also check out the chart and commentary here).

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