Chain of Greed

The Walmart Regime Squeezes ItsSuppliers and the U.S. WorkforceWalmart has long been reputed topay its direct employees poverty wages.A 2011 study found that Walmartemployees earn approximately 12percent less than retail workers overall,and more than 14 percent lessthan workers in other large retail establishments.23 In numerous states,Walmart tops the list of companieswith employees on public assistance,even after the company rolled out itsmuch-publicized (if largely unaffordable)health care plan. 24Walmart’s model of consistent lowprices and rigorous tracking of salesdata enable the retail giant to avoidwhat one Walmart CEO called the“peaks and valleys in volumes thatdrive labor costs through the roof.” 25Furthermore, studies show that whena new Walmart store opens, overallretail employment levels—includingthe new Walmart jobs—in the surroundingarea decrease; according tothese researchers, Walmart expansionsexercise a kind of reverse rippleeffect on the local economy. 26These practices force competitors toscramble to match Walmart’s laborcosts. By 2005, Walmart’s move intothe grocery business had increased toa 20 percent market share nationally,27 compelling competitors to pushback against long-standing wagefloors for their own employees. 28Chains like Albertson’s, Kroger, andSafeway have abandoned some markets,29 and in others have themselvesadopted low-price strategies triggeringmassive strikes by unionized groceryworkers seeking to protect theirworkplace standards. A five-monthstrike by tens of thousands of Californiagrocery workers in 2004 resultedin a two-tiered wage system and theloss of some health care benefits. 30“Walmart has sufficientmarket share to set theoverall terms of economicrelationships throughoutits supply chain.”Walmart has also faced charges of liabilityfor worker safety hazards relatedto its construction contractors. 31A lawsuit was recently filed againstWalmart in Massachusetts on behalfof a worker who was electrocuted todeath while performing demolitionwork at a Walmart store. The suit allegesthat the Walmart contractorhired unlicensed electrical firms andthat similar charges were broughtagainst the same contractor in Louisiana.Another Walmart contractorwas sanctioned in Indiana as a resultof a massive explosion on Walmartpremises that killed another workerand injured two others. 32Walmart’s policy of enforcing everlowerprices implicates wages andworking conditions throughoutWalmart’s supply chain as well. Waltonfamily heir and Walmart chairRob Walton once wrote, “The manufacturer’sprice is something that’sdetermined largely by the negotiatingpower of the retailers that carryhis merchandise.” 33 And Walmart hasa great deal of that negotiating power.Whereas observers of the marketonce worried that an over-large manufacturercould boost its own profitsby squeezing retailers, the oppositecaution now prevails.While Walmart does not technicallyhold a monopsony—it is not theonly buyer in the market—it has sufficientmarket share to set the overallterms of economic relationshipsthroughout its supply chain. 34 AsWalmart and its big-box retail peershave grown, they have achieved a levelof dominance that affects – indeed,sometimes dictates—their suppliers’own pricing, profit margins, and operationaldecisions. Even manufacturingbehemoths are not immuneto the pressures Walmart can imposeon their profit margins, and by extension,their employment practices.Walmart’s stated “Plus One” bargainingstrategy, which requires that allsuppliers and contractors reducetheir price of goods, increase qualityor increase speed of delivery everyyear, vividly exemplifies the pressurethat squeezes contractors’ marginsand incents low-road employmentbehavior like cutting corners on06