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What Walmart Costs Us in Corporate Welfare

This information comes from a very inspiring group of people, ex-minimum wagers who worked for Walmart. They have had the guts to take a stand against this blood-sucking company. Read this story and visit their site.
Due to low pay and lack of health care, Wal-Mart employees are eligible for federal assistance. The estimated total amount of federal assistance for which Wal-Mart employees were eligible in 2004 was $2.5 billion ("Harper's Index," Harper's Magazine, Vol. 310, No. 1858, 3/2005)
According to a study by the Institute for Labor and Employment at the University of California-Berkeley, California taxpayers subsidized $20.5 million worth of medical care for Wal-Mart in that state alone.[Sylvia Chase, "The True Cost of Shopping at Wal-Mart," Now with Bill Moyers, Transcript (December 19, 2003).] In fact, Wal-Mart personnel offices, knowing employees cannot afford the company health plan, actually encourage employees to apply for charitable and public assistance, according to a recent report by the PBS news program Now With Bill Moyers.

Public Subsidies. For instance, the Southern California Association of Governments calculated that the Southern California wage multiplier was 2.08, meaning that for every $1 reduction in wages, the community lost an additional $1.08 in indirect impacts. The study done in Southern California calculated that, if area grocery workers were paid Wal-Mart wages, more than $1.6 to $3 billion per year would be lost ("The Impact of Big Box Stores in S. California," Dr. Marlon Boarnet).

It is common for Wal-Mart, the world's largest corporation, to expect and receive taxpayer-backed subsidies for building stores and distribution centers ("Millions in subsidies paid for Wal-Mart jobs", Palm Beach Post, 8/30/2003). Economic development through taxpayer-backed incentives is a questionable policy. In fact, the National Governor's Association passed a resolution stating that "The Governors believe that the public and private sectors should undertake cooperative efforts that result in improvements to the general economic climate rather than focus on subsidies for individual projects and companies."

After conducting its own study, the Palm Beach Post reported that Wal-Mart has directly received at the minimum $150 million in direct incentives from municipal, county, state, and even federal governments to open 47 distribution centers in 32 states. The Palm-Beach Post reports that this figure is only a start--- and likely grows by tens of millions when less quantifiable breaks such as government bond financing and enterprise zones are taken into account (Palm Beach Post, 8/30/2003).

For example, the Palm-Beach Post reports that in Lewiston, Maine, provided Wal-Mart with $17 million in state and local incentives in February 2002 for a 400,000-square-foot food distribution center that is to employ 150 workers when it opens in 2005. The incentive package included free land and water and sewer improvements (Palm Beach Post, 8/30/2003).

For more information on taxpayer-backed subsidies and corporate accountability, visit Good Jobs First at www.goodjobsfirst.org.

The Democratic Staff of the Committee on Education and the Workforce estimates that one 200-person Wal-Mart store may result in a cost to federal taxpayers of $420,750 per year - about $2,103 per employee. Specifically, the low wages result in the following additional public costs being passed along to taxpayers:

$36,000 a year for free and reduced lunches for just 50 qualifying Wal-Mart families.
$42,000 a year for Section 8 housing assistance, assuming 3% of the store employees qualify for such assistance, at $6,700 per family.
$125,000 a year for federal tax credits and deductions for low-income families, assuming 50 employees are heads of household with a child and 50 are married with two children.
$100,000 a year for the additional Title I expenses, assuming 50 Wal-Mart families qualify with an average of 2 children.
$108,000 a year for the additional federal health care costs of moving into state children's health insurance programs (S-CHIP), assuming 30 employees with an average of two children qualify.
$9,750 a year for the additional costs for low income energy assistance.
_Wal-Mart freely acknowledges shifting its health care costs to taxpayers and responsible employers. A company spokesman said, "[Wal-Mart employees] who chose not to participate in [Wal- Mart's health plan] usually get their health care benefits from...the state or federal government" (UPI, 12/2/98).
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Community Impact
Lower wages mean less money for the community. Experts explain that the surrounding community suffers when employers pay low wages. When an employer pays low wages to its employees, the employees have less money to spend on goods and services in the community, which in turn reduces the income and spending of others in the community. In other words a reduction in wages has a multiplier impact in the surrounding area.
Iowa Study. One of the most cited studies on Wal-Mart's impact on local communities was performed by economist Kenneth Stone at Iowa State University in 1993. Stone looked at the impact of Wal-Mart on small towns in Iowa. He found a 3% spike in total retail sales in communities immediately after a Wal-Mart opened. But the longer term effects of Wal-Mart were disastrous for nearby independent businesses. Over the course of the next several years, retailers' sales of mens' and boys' apparel dropped 44% on average, hardware sales fell by 31%, and lawn and garden sales fell by 26%. Likewise, a Congressional Research Service report in 1994 explained that Wal-Mart uses a saturation strategy with store development. In other words, it builds stores in nearby connected markets in order to stifle any competition in the targeted area by the size of its presence. [Jessica Hall and Jim Troy, "Wal-Mart Go Home! Wal-Mart's Expansion Juggernaut Stumbles as Towns Turn Thumbs Down and Noses Up," Warfield's Business Record 1 (July 22, 1994)]

By not offering adequate pensions along with wages, Wal-Mart shifts retirement cost onto communities. When employees retire without adequate savings and benefits, they are less able to pay for health care, housing, and food. Communities and taxpayers bear the cost as retirees make up the difference through programs such as Medicaid. Other employees, recognizing the inadequate retirement benefit, may be forced to continue working past retirement age, increasing their risk for injury, and increasing the chance that they will end up in a hospital at community expense.

Wal-Mart has vacated stores in hundreds of communities. The Dallas Morning News reports that Wal-Mart Realty, the real estate division of Wal-Mart, explained that the Company's rapid expansion of Supercenters, which are discount stores combined with a full-size grocery store, and Sam's Clubs, which are membership warehouse clubs, has contributed to hundreds of vacated stores for lease or for sale across the country ("Wal-Mart site: Use as is or rebuild?", Dallas Morning News, 2/20/02). When Wal-Mart decides to convert a discount store into a larger Supercenter, it is often cheaper or easier simply to relocate entirely. In fact, retail expert David Brennan, associate professor of marketing at the University of St. Thomas, in St. Paul, Minn, notes that Wal-Mart stores relocate so regularly that, "it is not uncommon to relocate right across the street" ("Home Depot to Move from Old to New Store Next Door," Providence News-Journal, 8/17/03).

Other experts point out the economic volatility of the discount retail industry leads to a greater chance of vacancy: "Big box retailers will most likely enter a community, boosting overall retail sales and tax revenues, only to be among the first to consolidate or fold when conditions begin to change" ("The Impact of Big Box Stores in S. California, " Dr. Marlon Boarnet).

Wal-Mart's stores are uselessly large for other tenants. An average discount store is 96,883 square feet, which is the size of two football fields. Wal-Mart's Supercenters are on average nearly twice as large at 186,495 square feet. Sam's Clubs are on average 125,000 square feet or the size of three football fields (Wal-Mart Annual Report 2003). Wal-Mart plans on relocating or expanding 140 Supercenters and 20 Sam's Clubs in 2004 (Wal-Mart Press Release 10-03).

It is not easy to fill a vacated Wal-Mart store. Few non-retail companies need the large space of an empty Wal-Mart store. Real estate brokers explain that Wal-Mart will not sell or lease these empty stores to what it considers as competitors. A president of a major real estate developer in Dallas explained that when Wal-Mart moves out of a store, "They're not going to be very receptive to any retailer going into it and even if they sell it, they might put a non-compete clause in there. Why would they want more competition when they're fixing to build a mega-million store around the corner. They're going to be very protective of who goes in there" (Dallas Morning News 2/20/02 Wal-Mart site: Use as is or rebuild?). A president of a real estate brokerage firm in New York City succinctly explained, "They're not going to lease to Kmart" (Arkansas Democrat-Gazette, 1/28/01).

These relocations add up to millions of vacant square feet. In 1999, Paul Carter, the President of Wal-Mart Realty, reported that Wal-Mart will "vacate about 5 to 6 million square feet this year" ("Wal-Mart, Communities Find Uses for Stores," New Orleans Times-Picayune 4/8/1999). This amounts to Wal-Mart vacating more retail space in 1999, than the entire 110-story Sears Tower. These vacated stores accumulate each year. In 2001, the Arkansas Democrat-Gazette reported that Wal-Mart controlled around 30 million square feet of vacant retail space through ownership or leases (Arkansas Democrat-Gazette, 1/28/01). To put it another way, Wal-Mart has enough empty retail shells to fill all of the offices of the Pentagon-- five times over. In fact, in 2003, The Orlando Sentinel reported that Wal-Mart was trying to lease 400 vacant stores ("Many Smaller Retailers to Feel Effects of Kmart Closures", Orlando Sentinel, 2/3/2003). This represents more than a tenth of its entire store base.

Hundreds of jilted communities are left paying the price. A vacant property drains the value from the surrounding area, whether it be commercial or residential. For instance, in Elizabethtown, Kentucky, Wal-Mart deserted an 83,000 square foot discount store for a larger Supercenter. The empty discount store has remained empty four years later and counting. The property manager of the former Wal-Mart location explained that Wal-Mart ignored the property, "Wal-Mart walked off and didn't seem to care what happened to the store they're still paying rent on...the disarray of the way the store looked on the inside, it looked like a disaster." Ultimately, the manager explained that, "It leaves the perception that we're not taking care of things out here, and that's not the case at all" (Arkansas Democrat-Gazette, 1/28/01).

The Los Angeles City Council commissioned a report in 2003 on the effects of allowing Wal-Mart Supercenters into their communities. The report, prepared by consulting firm Rodino and Associates, found that Supercenters drive down wages in the local retail industry, place a strain on public services, and damage small businesses.

The findings of the Rodino report are alarming. The labor impacts of a Wal-Mart Supercenter on low-income communities include:

"Big box retailers and superstores may negatively impact the labor market in an area by the conversion of higher paying retail jobs to a fewer number of lower paying retail jobs. The difference in overall compensation (wages and benefits) may be as much as $8.00."
"Lack of health care benefits of many big box and superstore employees can result in a greater public financial burden as workers utilize emergency rooms as a major component of their health care."
"A study conducted by the San Diego Taxpayers Association (SDCTA), a nonprofit, nonpartisan organization, found that an influx of big-box stores into San Diego would result in an annual decline in wages and benefits between $105 million and $221 million, and an increase of $9 million in public health costs. SDCTA also estimated that the region would lose pensions and retirement benefits valued between $89 million and $170 million per year and that even increased sales and property tax revenues would not cover the extra costs of necessary public services."
"[The threat of Wal-Mart's incursion into the southern California grocery market] is already triggering a dynamic in which the grocery stores are negotiating with workers for lowered compensation, in an attempt to re-level the `playing field.'
"One study of superstores and their potential impact on grocery industry employees found that the entry of such stores into the Southern California regional grocery business was expected to depress industry wages and benefits at an estimated range from a low of $500 million to a high of almost $1.4 billion annually, potentially affecting 250,000 grocery industry employees ... [T]he full impact of lost wages and benefits throughout Southern California could approach $2.8 billion per year." [Rodino Associates, Final Report on Research for Big Box Retail/Superstore Ordinance, prepared for Industrial and Commercial Development Division, Community Development Department, at 18-20 (October 28, 2003).]
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Wal-Mart & Child Labor
In January 2004, the New York Times reported on an internal Wal-Mart audit which found "extensive violations of child-labor laws and state regulations requiring time for breaks and meals."[Steven Greenhouse, "In-House Audit Says Wal-Mart Violated Labor Laws," New York Times 16A (January 13, 2004).] One week of time records from 25,000 employees in July 2000 found 1,371 instances of minors working too late, during school hours, or for too many hours in a day. There were 60,767 missed breaks and 15,705 lost meal times.[Steven Greenhouse, "In-House Audit Says Wal-Mart Violated Labor Laws," New York Times 16A (January 13, 2004).]
According to the New York Times report: "Verette Richardson, a former Wal-Mart cashier in Kansas Ci ty, Mo., said it was sometimes so hard to get a break that some cashiers urinated on themselves. Bella Blaubergs, a diabetic who worked at a Wal-Mart in Washington State, said she sometimes nearly fainted from low blood sugar because managers often would not give breaks."[Steven Greenhouse, "In-House Audit Says Wal-Mart Violated Labor Laws," New York Times 16A (January 13, 2004).]

A store manager in Kentucky told the New York Times that, after the audit was issued, he received no word from company executives to try harder to cut down on violations: "There was no follow-up to that audit, there was nothing sent out I was aware of saying, `We're bad. We screwed up. This is the remedy we're going to follow to correct the situation.'"[Steven Greenhouse, "In-House Audit Says Wal-Mart Violated Labor Laws," New York Times 16A (January 13, 2004).]

Wal-Mart & Undocumented Immigrants
In March 2005, Wal-Mart agreed to pay $11 million to settle federal allegations it used undocumented immigrants to clean its stores.

Since 1997, federal authorities have uncovered the cases of at least 250 undocumented immigrants who were employed by janitor contracting services and hired by Wal-Mart in 21 states. Many of the janitors - from Mexico, Russia, Mongolia, Poland and a host of other nations - worked seven days or nights a week without overtime pay or injury compensation. Those who worked nights were often locked in the store until the morning.

homepage: homepage: http://www.wakeupwalmart.com

Thanks 02.Jul.2005 17:35


Excellent article.