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D.C. draws Wal-Mart into Democrats’ political battle over wages
“You can have a workforce which rapidly turns over if you have the technology there, which means you can just slot one person into the job with no training and no sort of background,” he said. “Wal-Mart has to hire something on the order of half a million workers every year just to maintain its current workforce.”
After Wal-Mart proved how profitable this approach could be, its model was followed widely by other retailers — “in the whole fast-food world, the whole world of contingent workers,” he said. “This is sort of a new American model for labor, for the workforce, and Wal-Mart has been right there at the forefront of that.”
But the model is running into intense opposition as Wal-Mart makes the transition from countryside to city, prompting the company to downplay its leading role in the industry.
Mr. Restivo, the Wal-Mart spokesman, insists Wal-Mart’s wages and benefits are in the same ballpark as those of other major retailers, and it should not be singled out and forced to pay wages that are 50 percent higher than unionized competitors such as Safeway and Giant. Moreover, the average wage at Wal-Mart stores, at $12.67 an hour, already is in the range targeted by the D.C. City Council, he said.
The share of Wal-Mart workers who are paid so little that they qualify for Medicaid benefits is about the same as other retailers — 5 percent, Mr. Restivo said. After six months on the job, full-time workers with low wages are offered insurance options with premiums of $17 a pay period. With health care benefits available to even part-time workers, Mr. Furman said, Wal-Mart’s health care plans are better than average for the retail industry.
The company also has attempted to mollify its left-wing critics by adopting aggressive environmental goals such as using only renewable energy to power its stores, pledging to buy $50 billion in goods from U.S. manufacturers this year, and joining first lady Michelle Obama’s campaign to make healthy options available in “food deserts” found in inner cities.
In the District, the retailer signed a “Community Partnership Initiative” with city officials that included pledges to contribute some $21 million to local charities, create a workforce development program for low-income and at-risk residents, use local small and minority-owned businesses to build its planned six-story stores, and pay some $2 million to help finance any needed transportation improvements.
Searching for growth
As it struggles to gain footholds in some cities, Wal-Mart is having to fight criticism from another surprising quarter these days — investors who are increasingly worried that Wal-Mart has hit a wall in its efforts to sustain growth in the U.S. The company’s sales at established U.S. stores declined during the first two quarters of 2013 — something that has not happened since the recession. Wal-Mart officials attributed the softness largely to higher gas prices and the reinstatement of the federal payroll tax at the beginning of the year, both of which hit low-income shoppers particularly hard.
The news of a second quarterly downturn in U.S. sales had a devastating impact on Wall Street this month, triggering a 226 point drop in the Dow Jones stock index on Aug. 9. One Fortune magazine columnist suggested that Wal-Mart should reconsider its low-wage policies in the District because the company needs to keep establishing stores in U.S. cities if it hopes to satisfy investors’ demands for growth.
“Given the small impact” a “living wage” increase to $12 an hour would have on prices, the company’s intransigence in the face of political opposition “is a bit illogical,” said Adam Hartung, a business strategist and contributor to Forbes magazine. He said the living wage movement reflects the public’s deep dissatisfaction with poverty-level wages and Wal-Mart is foolish to fight the trend.
“Fighting trends is expensive,” and will eventually alienate even the investors Wal-Mart hopes to please, he said.
But Mr. Restivo, the Wal-Mart spokesman, dismissed such talk, saying Wal-Mart already has been welcomed and operates stores in some of the nation’s largest cities, including Baltimore, Chicago, Houston, Philadelphia, Sacramento, Calf., Atlanta, Phoenix, Dallas, Denver, Oakland, Calif., Honolulu, Cleveland, Portland, Ore., Las Vegas and Minneapolis. Noticeably absent from the list, however, is New York, where union resistance to Wal-Mart wage levels is intense like it is in Washington.
Wal-Mart announced its campaign to enter urban markets several years ago as it was experiencing a slump during the recession. More recently, it has been expanding online sales and replacing existing stores with “supercenters” as much as seeking new locations to maintain growth in the U.S. Like many U.S. corporations, Wal-Mart now sees the biggest opportunities for growth in developing markets like China, and has been trumpeting its growth overseas in recent earnings announcements.
As its opportunities for growth in the U.S. have dwindled, Wal-Mart has been forced to cut costs more ruthlessly than ever to maintain profits, including keeping a tighter lid than ever on wages and fiercely resisting political efforts requiring it to pay more.
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