Skip to content

Low Wages: The Heavy Price of Cheap Goods

One Reason Why Wal-Mart Can Sell for Less

BENTONVILLE, Arkansas, DEC. 20, 2003 (Zenit) - Many of the gifts under the Christmas tree this year will likely have come from a Wal-Mart store. For its fiscal year ending January 2003 the retailer's sales were $244.5 billion, Reuters reported June 21. Leaving aside the auto sector, Wal-Mart accounts for roughly 9 cents of every retail dollar spent in the United States.

And the Arkansas-based firm's importance is not limited to the United States. In Mexico, for example, Wal-Mart is the biggest private employer, with 100,164 workers on its payroll, the New York Times reported Dec. 6. After only 12 years of operating in Mexico, the company has annual sales of almost $11 billion -- about 2% of the country's gross domestic product. Wal-Mart is also the largest retailer in Canada, and has stores in countries ranging from Argentina to South Korea and Germany. Every week more than 130 million customers worldwide visit its stores.

Recently, the company has come under heavy fire for its low wages and, many argue, exploitative labor practices. A front-page Washington Post study, published Nov. 6, commented on the Oct. 23 arrest of 250 illegal immigrants working for cleaning crews at a number of Wal-Mart stores.

Critics argue that the company is able to offer low prices because it relies heavily on lower-paid part-time workers. According to the Post, Wal-Mart's 1.3 million workers, strictly prohibited from joining a union, earn about $7 to $8 an hour. By contrast, the unionized workers at Kroger, a supermarket chain, make between $11 and $13 an hour, with full health benefits. Many retailers, pressured by Wal-Mart's competition, are being forced to follow the low-wage model for their workers as well.

The article cited data from a study showing that a Wal-Mart supercenter has labor costs of 20% to 30% lower than those of a unionized supermarket, resulting in grocery that is about 15% cheaper. Adding up these savings, a consultant cited by the Post, Gary Stibel, put at more than $20 billion the gain for consumers due to discount pricing. Once the gains from lower prices at competitors forced to follow suit are added in, the total benefit could top $100 billion, he added.

Research shows that 4% of the growth in the U.S. economy's productivity from 1995 to 1999 was due to Wal-Mart's efficiency alone. A three-part series on the firm, published Nov. 23-25 in the Los Angeles Times, noted that the resulting lower prices attract even union members, who would otherwise prefer to shop at unionized stores. Surveys by the Teamsters and the United Food and Commercial Workers -- the two unions most threatened by Wal-Mart -- show that many of their own members shop at the discounter.

Cheaper, or better, or else

On the negative side, by pressuring suppliers to cut costs Wal-Mart has contributed to the loss of U.S. manufacturing jobs, as producers shift operations to the Third World. As for its own employees, Wal-Mart admits that a full-time worker might not be able to support a family on a Wal-Mart paycheck, according to the Los Angeles Times.

A case in point is the textile sector. Celia Clancy, an executive vice president, oversees Wal-Mart's clothing budget, estimated at $35 billion in 2000. Clancy gives her buyers a "Plus One" mandate every year: For each item they handle, they must either lower the cost or raise the quality.

That means, for instance, that Honduras produces the same amount of Wal-Mart clothing as it did three years ago, but with 20% fewer workers. Even so, Hondurans fear that this work will soon be lost to China and other lower-wage countries. Even Bangladesh has problems meeting the Wal-Mart demands. Bangladeshi factory owners say Wal-Mart and other retailers have asked them to cut their prices by as much as 50% in recent years.

Ken Eaton, head of the global procurement division, explained that in purchasing fabrics such as denim and khaki, Wal-Mart plans to approach three to five mills around the world and pit them against each other. "We'll be putting our global muscle on them," he said.

Within the United States the pressure to cut costs has led to numerous abuses. Last year a jury in Oregon found that company managers had coerced hundreds of employees to work overtime without pay. Wal-Mart has also settled similar overtime suits in Colorado and New Mexico for undisclosed amounts, with more than 40 other cases awaiting trial.

Stuck on the bottom

Concern over low-paying jobs is not limited to Wal-Mart. The trend to part-time work, outsourcing, and greater flexibility has trapped many in low-wage employment, noted Business Week in its Dec. 1 issue. The problem affects more than a quarter of the U.S. labor force, around 34 million workers.

Adding to concern is evidence that relative income mobility is declining, meaning that those on the lower rungs are finding it harder to improve their lot. The article cited a study by the Federal Reserve Bank of Boston that showed how 49% of the families that started the 1970s poor, were stuck there at the end of the decade. In the 1990s this figure rose to 53%.

Beth Shulman, ex-union official and now a consultant, addressed this problem in her recent book, "The Betrayal of Work." Shulman noted that it is not only a question of pay, with a quarter of workers earning less than $8.70 an hour. As well, many of these workers lack basic entitlements such as health care, sick pay, paid vacations or retirement benefits. And added to the physically arduous nature of many of these jobs is the emotionally degrading way in which many are treated.

Moreover, such a situation creates many social ills and "undermines the country's moral foundations," Shulman argues. Leaving such a numerous group without the chance to share in economic progress "impairs the functioning of America's democracy and communities," she adds.

Another recent book on this subject, "Low-Wage America," is made up of case studies in 25 industries. Edited by Eileen Appelbaum, Annette Bernhardt and Richard Murnane, the book also identifies a number of factors behind the low-wage problem. The majority of low-wage workers, the authors note, lack educational qualifications beyond a high school diploma, and many immigrants are without even this basic credential.

Added to this is the effect of information technology and the globalization of markets that have increased pressures on wages. Associated with this has been the deregulation of industries such as telecommunications, financial services and airlines, which has increased competition and the pressure to reduce costs. Unions have also seen their power decline in past years, and the real value of the minimum wage has fallen by 28% in the period from 1974 to 2001.

But not all is bad news. A number of case studies show that some companies have chosen an alternative strategy to that of always seeking to lower wages and benefits. Reducing labor turnover and increasing productivity by making jobs more interesting, increasing training and fomenting better relationships with workers has enabled some firms to lower their costs without cutting wages.

As John Paul II noted in his 1981 encyclical "Laborem Exercens," No. 3: "human work is a key, probably the essential key, to the whole social question." Further on he commented: "The justice of a socioeconomic system and, in each case, its just functioning, deserve in the final analysis to be evaluated by the way in which man's work is properly remunerated in the system." Worth keeping in mind in deciding which business strategy to adopt.


Catholic Online CA, US
Catholic Online - Publisher, 661 869-1000



Goods, Commerce, Labor, Human, Economic, Social

More Catholic PRWire

Showing 1 - 50 of 4,718

A Recession Antidote
Randy Hain

Monaco & The Vatican: Monaco's Grace Kelly Exhibit to Rome--A Review of Monegasque-Holy See Diplomatic History
Dna. Maria St. Catherine Sharpe, t.o.s.m., T.O.SS.T.

The Why of Jesus' Death: A Pauline Perspective
Jerom Paul

A Royal Betrayal: Catholic Monaco Liberalizes Abortion
Dna. Maria St.Catherine De Grace Sharpe, t.o.s.m., T.O.SS.T.

Embrace every moment as sacred time
Mary Regina Morrell

My Dad
JoMarie Grinkiewicz

Letting go is simple wisdom with divine potential
Mary Regina Morrell

Father Lombardi's Address on Catholic Media
Catholic Online

Pope's Words to Pontifical Latin American College
Catholic Online

Prelate: Genetics Needs a Conscience
Catholic Online

State Aid for Catholic Schools: Help or Hindrance?
Catholic Online

Scorsese Planning Movie on Japanese Martyrs
Catholic Online

2 Nuns Kidnapped in Kenya Set Free
Catholic Online

Holy See-Israel Negotiation Moves Forward
Catholic Online

Franchising to Evangelize
Catholic Online

Catholics Decry Anti-Christianity in Israel
Catholic Online

Pope and Gordon Brown Meet About Development Aid
Catholic Online

Pontiff Backs Latin America's Continental Mission
Catholic Online

Cardinal Warns Against Anti-Catholic Education
Catholic Online

Full Circle
Robert Gieb

Three words to a deeper faith
Paul Sposite

Relections for Lent 2009
chris anthony

Wisdom lies beyond the surface of life
Mary Regina Morrell

World Food Program Director on Lent
Catholic Online

Moral Clarity

Pope's Lenten Message for 2009
Catholic Online

A Prayer for Monaco: Remembering the Faith Legacy of Prince Rainier III & Princess Grace and Contemplating the Moral Challenges of Prince Albert II
Dna. Maria St. Catherine Sharpe

Keeping a Lid on Permissiveness
Sally Connolly

Glimpse of Me
Sarah Reinhard

The 3 stages of life
Michele Szekely

Sex and the Married Woman
Cheryl Dickow

A Catholic Woman Returns to the Church
Cheryl Dickow

Modernity & Morality
Dan Shea

Just a Minute
Sarah Reinhard

Catholic identity ... triumphant reemergence!
Hugh McNichol

Edging God Out
Paul Sposite

Burying a St. Joseph Statue
Cheryl Dickow

George Bush Speaks on Papal Visit
Catholic Online

Sometimes moving forward means moving the canoe
Mary Regina Morrell

Action Changes Things: Teaching our Kids about Community Service
Lisa Hendey

Easter... A Way of Life
Paul Spoisite

Papal initiative...peace and harmony!
Hugh McNichol

Proclaim the mysteries of the Resurrection!
Hugh McNichol

Jerusalem Patriarch's Easter Message
Catholic Online

Good Friday Sermon of Father Cantalamessa
Catholic Online

Papal Address at the End of the Way of the Cross
Catholic Online

Cardinal Zen's Meditations for Via Crucis
Catholic Online

Interview With Vatican Aide on Jewish-Catholic Relations
Catholic Online

Pope Benedict XVI On the Easter Triduum
Catholic Online

Holy Saturday...anticipation!
Hugh McNichol

Never Miss any Updates!

Stay up to date with the latest news, information, and special offers.

Learn about Catholic world

Catholic Online
Inform - Inspire - Ignite

Catholic Online Saints
Your saints explained

Catholic Online Prayers
Prayers for every need

Catholic Online Bible
Complete bible online

Catholic Online News
Your news Catholic eye

Daily Reading
Today's bible reading

Lent / Easter
Death & resurrection of Jesus

Advent / Christmas
Birth of Jesus

Rest of Catholic Online
All Catholic world we offer

Products and services we offer

Catholic Online Shopping
Catholic medals, gifts & books

The California Network
Inspiring streaming service

Advertise on Catholic Online
Your ads on

Catholic Online Email
Email with Catholic feel

Catholic Online Singles
Safe, secure Catholic dating

The California Studios
World-class post production service

Learn the Catholic way

Catholic Online School
Free Catholic education for all

Student Classes
K-12 & Adult Education Classes

School Teachers
Teacher lesson plans & resources

Support Free Education
Tax deductible support Free education

Connect with us online

Catholic Online on Facebook
Catholic social network

Catholic Online on Twitter
Catholic Tweets

Catholic Online on YouTube
Enjoy our videos

Catholic Online on Instagram
Shared Catholic moments

Catholic Online on Pinterest
Catholic ideas style inspiration

Catholic Online Logo

Copyright 2018 Catholic Online. All materials contained on this site, whether written, audible or visual are the exclusive property of Catholic Online and are protected under U.S. and International copyright laws, © Copyright 2018 Catholic Online. Any unauthorized use, without prior written consent of Catholic Online is strictly forbidden and prohibited.