Markets
In Praise of Wal-Mart
For millions of people, Wal-Mart is a lifesaver that provides what they want at prices they can afford.
By Jeremy J. Siegel, Contributing Editor
From Kiplinger's Personal Finance magazine, January 2007
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Wal-Mart is certainly a company that merits superlatives. It is the world's largest retailer, with more than 4,000 stores in the U.S. and nearly 2,300 abroad. Annual sales exceed $330 billion, a figure larger than the gross domestic product of all but 20 nations. Wal-Mart is the largest private employer in the U.S. and the second-largest employer overall, behind only the federal government. Its 1.3 million domestic workers would more than fill all of the ballparks in the major leagues, and the number of shoppers over a two-week period exceeds the population of the U.S.
But few companies arouse as much passion as Wal-Mart. Critics contend that the company treats its workers badly, denies them benefits and buys its products from sweatshops in developing countries. Criticism of the company mounted after author Barbara Ehrenreich went underground to "expose" Wal-Mart in her 2001 bestseller, Nickel and Dimed. On top of this, some urban scholars blame big-box retailers in general, and Wal-Mart in particular, for putting mom-and-pop stores out of business, hastening the decline of downtowns and depersonalizing the shopping experience. Attacks on Wal-Mart almost surely contribute to its share price being lower than it ought to be. (Read Kiplinger's recent coverage of Wal-Mart and an outlook from KiplingerForecasts.com. Plus, see Kiplinger's stock picks for 2007.)
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A different picture
But when I examine the facts surrounding Wal-Mart, a very different -- and far more favorable -- picture of the company emerges. For millions of people, Wal-Mart is a lifesaver that provides what they want at prices they can afford.
I'm not saying that Wal-Mart is without fault. No large employer is. But if jobs at Wal-Mart are as bad as critics assert, why is it that 25,000 people applied last January for 325 job openings at the company's new store in the Chicago area? This huge rush to get jobs at Wal-Mart is not because there are no jobs elsewhere. The current unemployment rate of 4.4% is well below recent levels and has been lower in only four of the past 35 years. Applicants want these jobs because Wal-Mart pays more than $10 an hour, on average, which is considerably higher than the U.S. and state minimum-wage rates, whether or not you include benefits in the calculation.
And although Wal-Mart workers lacked benefits in the past, this is changing. The company now offers as many as 18 health-care plans for as little as $11 a month in many locations. But critics would like to force Wal-Mart to pay even higher wages and offer even more benefits. Recently, the Chicago City Council voted to hold Wal-Mart and other large store operators to higher wage standards than other employers in the city.
Fortunately, Mayor Richard Daley vetoed the Wal-Mart bill. This type of legislation sends the wrong message to prospective employers -- namely, "We will penalize you for being a large, efficiently run company that offers consumers the lowest prices." Would Chicago prefer less-efficient companies with higher prices and fewer jobs? That would have been the outcome had the bill become law.