What makes it ‘evil’
*

By William C. Shelton

(The opinions and views expressed in the commentaries of The Somerville News belong solely to the authors of those commentaries and do not reflect the views or opinions of The Somerville News, its staff or publishers.)

This past Friday, Walmart announced that it is dropping its plans to locate stores in Somerville and Watertown.

When the subject of a Somerville Walmart first came up, Mayor Curtatone had said, “I want you to know that I will resist Walmart here in Somerville…I’m not about to let Wal-Mart come in to wreak havoc on our local workforce and business community.”¹

Something must have happened after that, because on Friday he said he was flattered that the world’s largest retailer had been interested in Somerville.²

By contrast, key political leaders in Watertown remained adamant in their opposition. Town Council President Mark Sideris recently said, “They won’t be accepted here, and we will do whatever we can to keep them out of here.”³ But when news of Walmart’s withdrawal broke, Mayor Curtatone said he was “disappointed.”

I’m not. The mayor had it right the first time.

Walmart operates 8,500 stores in 15 different countries under 55 different names. Its annual sales are more than those of any other corporation on earth, more than the gross domestic products of most nations. It invests billions of those dollars in proclaiming itself to be principled, worker friendly, environmentally sustainable, and good for communities. In each case, the opposite is true. An avalanche of verifiable evidence documents its real practices.

Local economic impacts

The economic value that a Walmart brings to a local community is overwhelmed by the loss of jobs and businesses that it displaces. Walmart’s buying most of its goods and services from outside the community, and reinvesting its profits elsewhere as well, multiplies its local economic damage. One study found that for every $100 dollars spent in such stores, $43 re-circulates locally. But $68 does so if $100 is spent at locally owned stores.⁴

So when a Walmart comes to town, three jobs disappear for every two that it creates. Retail employment declines on average by 2.7% in counties that Walmart enters.⁵ Supermarkets and variety stores are hardest hit, falling in sales by anywhere from 10% to 40%.^6,7,8,9

A Walmart’s presence prevents new retail businesses from opening in the same zip code and drives out already existing ones in surrounding zip codes.¹⁰ A Loyola University study found that 18 months after an urban Walmart opened in Chicago, 82 of the 306 retail businesses in the surrounding neighborhood had closed.¹¹ Such impacts are why Boston’s elected leaders last year opposed a plan to build a Walmart grocery store near Dudley Square.¹²

Walmart drives out competitors by lowering prices on promotable items below its own costs, and then jacks up prices when local competitors have been driven out.¹³ When it becomes clear that Walmart will lose a predatory pricing case, it settles and keeps the settlement secret, as it did in Wisconsin¹⁴ and Oklahoma.¹⁵ The German Supreme Court, where such settlements are not so easy, did convict Walmart of predatory pricing.

Labor practices

The average Walmart employee receives $20,774 per year, well below the poverty level for a family of four. A University of California study found the average U.S. general merchandise workers makes 17.4% more than similar Walmart employees, and the average large general merchandise worker makes 25.6% more.¹⁷

Only 44% of Walmart employees receive healthcare benefits, and those that do receive inadequate coverage. In 2010, the annual deductible for a family plan was $4,400.¹⁸  A family would have to pay $5,102, or a quarter of before-tax earnings, before receiving $1 of reimbursement from Walmart.

Walmart workers have successfully brought class-action suits in Missouri,¹⁹ Colorado, Pennsylvania,²⁰ Oregon,²¹ Minnesota,²² and elsewhere because they were forced to work off the clock, were denied overtime pay, and were not allowed to take legally mandated breaks. In 2004, The New York Times got hold of an internal Walmart audit that, “pointed to extensive violations of child-labor laws and state regulations requiring time for breaks and meals.”²³

Dukes v. Walmart Stores, Inc., the largest civil rights class action suit in history, charged that Walmart discriminated against women in pay, promotions and job assignments. Every court that heard the case found for the plaintiffs, until it reached the Supreme Court, which sidestepped the charges and ruled that the plaintiffs didn’t have enough in common to constitute a class.²⁴

In my last column I described how the company systematically uses contractors who risk workers’ lives so that Walmart managers can pay bottom dollar while insulating themselves from the consequences. Sometimes their deniability wears thin. On October 23, 2003, federal agents raided 61 Walmart stores in 21 states and arrested 250 undocumented workers. When Walmart blamed the contractors, federal investigators revealed wiretapped conversations showing that the executives knew the workers were illegal immigrants.²⁵

Some Walmart defenders say that a successful cost-leadership strategy obligates Walmart-style labor practices. But year after year, Costco, where 96% of workers enjoy good health insurance, is rated one of the best places to work in America.  CEO Jim Sinegal says, “This is not altruistic. This is good business.”²⁶ He must be right, because Costco’s stock trades at 25 times its annual earnings, while Walmart’s trades at 14.

Taxpayer Subsidies

Since Walmart does not pay for its employees’ health insurance, you do. In 21 of the 23 states that have disclosed information, Walmart has the largest number of employees on Medicaid of any employer. In Massachusetts, over 5,000 Walmart employees and their dependents are on MassHealth.²⁷

Walmart’s CEO confessed that, “In some of our states, the public program may actually be a better value.”²⁸ Yes, and a much better value for Walmart as well.

In 2010 Walmart was forced to admit that it had failed to pay $3 billion in taxes on its prior fiscal-year earnings.²⁹ And best estimates are that Walmart avoids paying $245 million in taxes by deducting rent that it charges itself on property that it owns.³⁰

At one time, Walmart took out life insurance policies on janitors, cashiers, and stockers, making itself the beneficiary, and deducting the premiums as a business expense. The IRS subsequently closed the tax deduction and went after Walmart for back taxes.³¹

False claims

The $2.6 billion that Walmart spends annually on advertising often promotes false or misleading claims. The National Advertising Division of the Council of Better Business Bureaus is the Advertising Industry’s policeman. It regularly cites Walmart for false advertising.^32,33,34

Walmart mobilizes lobbyists and orchestrates studies representing itself as a boon to humankind. For example, a widely quoted Global Insight study paid for by Walmart claimed that the company’s low prices save consumers $263 billion annually, or $2,329 per U.S. household. But independent economists find that this statistical analysis “fails the most rudimentary sensitivity checks.”³⁵

When Walmart can’t get its way by using campaign contributions, lobbyists,³⁶ and lawyers, it’s not above bribery and cover-up.  In April, the New York Times reported that Walmart’s Mexican subsidiary had paid bribes to government officials totaling more than $24 million. The company had known about it since 2005, but had closed down its internal investigation, covered up its findings, and promoted executives responsible for it.

When the news broke, Mayor Curtatone went on CNBC to insist that, in his experience, Walmart had been completely forthright, honest, and open. He added that he was excited to learn from the world’s largest retailer. ³⁷

The foregoing merely scratches the surface of Walmart’s systematic wrongdoing. Nor is there room to analyze its supplier abuse, environmental destruction, product selection, impact on American manufacturers, or use of foreign sweatshops and prison labor. But you get the idea.

On Friday, Walmart’s spokesman explained that that the company had decided that Somerville and Walmart stores would not be sufficiently profitable. Indeed, profit maximization is the only basis on which the company makes a decision.

¹George P. Hassett, “Mayor: Wal-Mart isn’t welcome,” The Somerville News, March 20, 2006.

²Shirley Leung and Erin Ailworth, “Walmart abandons plans for stores in Somerville, Watertown,” Boston Globe, June 15, 2012.

³Dan Atkinson, “Walmart pulls out of Somerville and Watertown sites,” Somerville Journal, June 15, 2012.

⁴Civic Economics. “The Andersonville Study of Retail Economics.” October, 2004. http://www.andersonvillestudy.com/AndersonvilleStudy.pdf

⁵David Neumark & Junfu Zhang & Stephen Ciccarella, “The Effects of Wal-Mart on Local Labor Markets,” Institute for the Study of Labor, 2007.

⁶O Capps, and J.M, Griffin. “Effect of a Mass Merchandiser on Traditional Food Retailers.” Journal of Food Distribution 29 (February 1998): 1-7

⁷Kusum L. Ailawadi, Jie Zhang, Aradhna Krishna, and Michael W. Kruger. “When Wal-Mart Enters: How Incumbent Retailers React and How This Affects Their Sales Outcomes.” Journal of Marketing Research 47.4 (August 2010).

⁸Vishal P. Singh, Karsten T. Hansen, and Robert C. Blattberg. “Impact of a Wal-Mart Supercenter on a Traditional Supermarket: An Empirical Investigation.” February 2004.

⁹Kenneth E. Stone, Georgeanne Artz, and Albery Myles. “The Economic Impact of Wal-Mart Supercenters on Existing Businesses in Mississippi.” Mississippi University Extension Service. 2002.

¹⁰Srikanth Paruchun, Joel Baum, David Potere, “The Wal-Mart Effect:  Wave of Destruction or Creative Destruction?,” Economic Geography 85.2 (2009) 209-235

¹¹Julie Davis, David Merriman, Lucia Samyoa, Brian Flanagan, Ron Baiman, and Joe Persky. “The Impact of an UrbanWal-Mart Store on Area Businesses: An Evaluation of One Chicago Neighborhood’s Experience.” Center for Urban Research and Learning, Loyola University Chicago. December 2009. www.luc.edu/curl/pdfs/Projects/WalMartReport2009122.doc

¹²Casey Ross, “City won’t back a Walmart in Roxbury,” Boston Globe, October 4, 2011.

¹³MacPherson; Lintereur, id

¹⁴“Walmart Settles Predatory Pricing Charge,” The Hometown Advantage, October 1, 2001

¹⁵“Crest Foods sues Walmart claiming predatory pricing,” The Oklahoma City Journal Record, August 4, 2006.

¹⁶“German High Court Convicts Walmart of Predatory Pricing,” Independent Business, February 1, 2003.

¹⁷Arindrajit Dube, and Steve Wertheim. “Wal-Mart and Job Quality – What Do We Know and Why Should We Care?” UC Berkeley Center for Labor Research and Education. October 16, 2005.

¹⁸This figure comes from a guide to annual enrollment distributed to Walmart employees and reported in a highly critical analysis by the Public Advocate for the City of New York.

¹⁹“Walmart to face employee suit in Missouri,” USA Today, November 2, 2005

²⁰“Walmart Hit with $78M Fine”, Associated Press, February 11, 2009

²¹“Walmart Loses Unpaid Overtime Case,” Associated Press, February 11, 2009

²²Steven Greenhouse, “Walmart Faces Fine in Minnesota Suit Involving Work Breaks,” New York Times, July 2, 2008.

²³Steven Greenhouse, “In-house audit says Walmart violated labor laws,” New York Times, January 13, 2004.

²⁴”Dukes v. Wal-Mart Stores, Inc.,” Wikipedia

²⁵“250 Arrested at Walmart,” CNN Money, October 23, 2003.

²⁶Steven Greenhouse, “How Costco became the Anti-Wal-Mart,” New York Times, July 17, 2005.

²⁷“Hidden Taxpayer Costs,” Good Jobs First, January 18, 2012. This report reviews verifiable sources on a state-by-state basis.

²⁸Susan Butcher, “Walmart: the $288 billion welfare queen,” Tallahassee Democrat, Aril 19, 2005.

²⁹Wal-Mart Store, Inc., Form 10K for fiscal year ended January 31, 2010. Consolidated Financial Statements, Note 8, page 36.

³⁰United Food and Commercial Workers International Union. “Outline of Data and Methodology for Estimating Amount of Tax Avoided By Wal-Mart.”

³¹Frank Reynolds, “Walmart Gambled, Lost $1.3B on ‘Dead Peasant’ Policies, Insurers Say,” Andrews Publications, September 8, 2005.

³²“Walmart should modify “unbeatable” ads: group, Reuters U.S., June 22, 2009.

³³Jack Neff, “NAD tells Wal-Mart to stop savings claim,” Advertising Age, March 31, 2008

³⁴“Ad Group Critical of Wal-Mart Claim,” Supermarket News, June 23, 2009.

³⁵Jared Bernstein, L. Josh Bivins, and Arindrajit Dube, “Wrestling with Wal-Mart: Tradeoffs Between Profits, Prices, and Wages.” Economic Policy Institute, June15, 2006 http://walmart.3cdn.net/9cf653d28499b22180_cum6bhjdb.pdf

³⁶Center for Responsive Politics, Influence & Lobbying, Wal-Mart Stores

³⁷“Debate over Wal-Mart’s Expansion,” CNBC, 24 April 2012, 11:15 AM EDT.