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A Step Backward

Wal-Mart, already under fire for its shoddy labor practices, low pay, locking cleaning crews in at night, nonexistent benefits, encouraging their workers to make up a living wage by seeking welfare benefits, antitunionism, et al., is sinking even deeper into the mire of worker exploitation by introducing wage caps and relying more on part-timers.

Wal-Mart executives say they have embraced new policies for a large number of their 1.3 million workers to better serve their customers, especially at busy shopping times — and point out that competitors like Sears and Target have made some of these moves, too.

But some Wal-Mart workers say the changes are further reducing their already modest incomes and putting a serious strain on their child-rearing and personal lives. Current and former Wal-Mart workers say some managers have insisted that they make themselves available around the clock, and assert that the company is making changes with an eye to forcing out longtime higher-wage workers to make way for lower-wage part-time employees.

It’s one thing for a highly-paid professional like a doctor or a lawyer to be available around the clock; quite another for a part-timer with no benefits who barely makes minimum wage to do so.

Though the company denies it, there is a target for the use of part-timers vs. full-timers, and it’s a substantial change.

Investment analysts and store managers say Wal-Mart executives have told them the company wants to transform its work force to 40 percent part-time from 20 percent. Wal-Mart denies it has a goal of 40 percent part-time workers, although company officials say that part-timers now make up 25 percent to 30 percent of workers, up from 20 percent last October.

Here’s Wal-Mart’s problem: it has few new markets to break into, so its ability to grow and therefore to keep profits up is limited. So it’s going to balance its budget on the backs of its workers, which is exactly the kind of thing that’s keeping the company from establishing a presence in New York City, which is a union town. Now, NYC has Targets and Costcos and Whole Foods, all of which, if I’m not mistaken, discourage unionizing by their employees. However, they don’t do it by exploiting the workers and making them fear for their livelihoods. Costco, for example, pays quite well and still manages to turn a profit.

These companies, however, also have been relying more on part-timers, though their influence on the labor market is not as great as the 800-pound gorilla, Wal-Mart:

These moves have been unfolding in the year since Wal-Mart’s top human resources official sent the company’s board a confidential memo stating, with evident concern, that experienced employees were paid considerably more than workers with just one year on the job, while being no more productive. The memo, disclosed by The New York Times in October 2005, also recommended hiring healthier workers and more part-time workers because they were less likely to enroll in Wal-Mart’s health plan.

Other big retailers, with or without unions, have begun using more part-time workers, adopted wage caps and instituted more demanding work schedules in one form or another. But because Wal-Mart is such a giant — its $312 billion in sales last year exceeded the sales of the next five biggest retailers combined — its new labor practices may well influence policies more broadly.

The work schedules are particularly burdensome for workers with families, since child-care arrangements and simple family routines are thrown into disarray every time the worker has to move to a different shift. And the wage caps?

The adoption of wage caps has also been difficult for many workers to swallow. Workers will never receive annual raises if their pay is at or above the cap, unless they move to a higher-paying job category. Wal-Mart says the caps will encourage workers to seek higher-paying jobs with more responsibility.

To compensate for lost future wages under the new system, Wal-Mart made one-time payments of $200 to $400 to workers whose pay was near or over the caps. Several workers described that as “hush money.”

Ramiro Gonzalez, who works in the produce department of a Wal-Mart in El Paso, said that many longtime workers were fuming about the caps.

No matter how hard people work, “we won’t get anything else out of it,” said Mr. Gonzalez, who earns $11.18 an hour, or about $23,000 a year, after six years with Wal-Mart. “The message is, if I don’t like it, there is the door. They are trying to hit people who have the most experience so they can leave.”

$23,000 a year. After six years. And nowhere to go, since those higher-paying jobs within the company are going to get filled, fast. And the company isn’t happy about paying even that $23,000:

In the confidential memo sent to Wal-Mart’s board last year, M. Susan Chambers, who was recently promoted to be Wal-Mart’s executive vice president in charge of human resources, questioned whether it was cost-efficient to employ longtime workers. “Given the impact of tenure on wages and benefits,” she wrote, “the cost of an associate with 7 years of tenure is almost 55 percent more than the cost of an associate with 1 year of tenure, yet there is no difference in his or her productivity.”

The memo said, “the shift to more part-time associates will lower Wal-Mart’s health-care enrollment” even though Wal-Mart was reducing the amount of time to one year, from two, that part-time workers would have to wait to qualify for health insurance.

That’s not the only memo that has been leaked out.

In August, Wal-Mart sent all store managers a confidential document called “Facility Manager Toolkit.” It instructed them to tell workers that the new pay system helped “establish pay levels that are competitive in the local job market, helping us to attain and retain the talent we need.”

If a worker asked whether the wage caps were “one more attempt to get rid of long-service Wal-Mart workers,” the manager was to respond that this was “not an attempt to ‘get rid’ of long term associates,” but was “consistent with our objective to maintain internally equitable pay levels,” according to the document. The memo was supplied to The New York Times by WakeUpWalMart.com, a group funded by the United Food and Commercial Workers, which has tried to organize Wal-Mart workers in the past.

The sad thing is, things are so bad that even though some employees have quit over this new policy, the company says it receives seven applications for each opening. People need work, bad, and if their options are limited enough, they’ll accept wage caps because they have nothing better. OTOH, at some point, Wal-Mart will go just too far and the drive to unionize Wal-Mart employees will catch fire.


14 thoughts on A Step Backward

  1. The part that has confused me a bit is this:

    “Given the impact of tenure on wages and benefits,” she wrote, “the cost of an associate with 7 years of tenure is almost 55 percent more than the cost of an associate with 1 year of tenure, yet there is no difference in his or her productivity.”

    It seems pretty relevant. Obviously, in some jobs, you’re worth more as you get more experience. I’ll be a better lawyer in 10 years than I am now.

    But then again, I also used to work at some entirely menial jobs when I was younger. Would I have been a better _____ if I had an extra 6 years experience? i doubt it: my experience wouldn’t have enhanced my worth to my employer at all.

    A lot of jobs at Walmart fall in that category. They always will–it’s a factor of what walmart DOES. Some folks will always be stocking, cleaning, rearranging, opening packages, and–like Ramiro Gonzalez–working in the produce department.

    There are only so many managersd necessary. And managers don’t leave as often. The reality is that many organizations don’t expect people to move up INTERNALLY, they expect them to move OUT. Most McDs burgerflippers don’t become McDs managers–they go on to other jobs.

    I don’t like walmart’s policies and I don’t shop there. But I am uncomfortable with the concept you seem to be getting at: that walmart “owes” someone higher wages, if the employee isn’t “giving” walmart anything etxtra for the increase in pay.

  2. There are definitely unionized Costcos, and as I understand it, they are not as virulently anti-union as Whole Foods.

    And Sailorman, Wal-Mart owes its workers a living wage, period. That’s the cost of doing business.

  3. “And Sailorman, Wal-Mart owes its workers a living wage, period. That’s the cost of doing business.”

    It is?

    How much more is a produce stocker worth per hour?

    The problem with the “living wage as a cost of doing business” theory is that some jobs, some people, and perhaps some entire industries create situations where the only justification for paying someone more is that they, well, need more money.

    The thing which confuses me is: sure, they need more money. A lot of people need more money. They would like more money. They can, possibly, even GET more money (somewhere else). But if they’re only doing work that is “worth” $10/hour to the company… why should the company pay them more?

    I mean, sure: I recognize that there are a lot of folks who work at jobs where the skills, training, conditions, and pay are very umatched. Public school teachers are in that category, for example. But I’m not sure that a stocker is, if they’re getting paid $23k a year.

    If you do only work that has little value, why should I pay you more? Saying “because I need more” (the “living wage” answer) doesn’t really answer the question. Nor does it address the incentive issues.

  4. It’s one thing for a highly-paid professional like a doctor or a lawyer to be available around the clock; quite another for a part-timer with no benefits who barely makes minimum wage to do so.

    Another complication of being available around the clock is other jobs — if Wal-Mart isn’t paying its employees a living wage, it’s entirely possible that they’re taking on one or two more jobs to stay afloat. Also, many doctors and lawyers are paid a flat salary in addition to hours worked (depending on their situation), and some aren’t even paid by the hour at all, making it financially reasonable for them to always be available. But for solely per-hour wages, it is utterly unfair to expect workers to be available 24/7 as those are potential billable hours they’re not being paid for.

    I hope I’m articulating the difference between the situations properly; it made sense in my head!

  5. This sounds kind of like what we had when I worked at the Famous Players Coliseum (a wretched chain cinema owned, at the time, by Viacom, but now owned by Cineplex-Galaxy).

    We would be scheduled for “on call” shifts, where we had to call in to see if they needed us, which they didn’t more often than not. Failing to call in would carry the same consequences as failing to turn up for a shift. Mostly they just served to fuck up your life outside the Coliseum by turning whole days (sometimes days at a stretch) into waiting games. Sometimes they’d call you in even after they told you they didn’t need you, and get really angry if you’d gone out, again even if they’d already said they didn’t need you. The pay was minimum wage with no promise of raises whatsoever, and at the time I worked there (they have changed this since) you were automatically sacked after 2 years if you hadn’t gotten a promotion.

  6. The problem with the “living wage as a cost of doing business” theory is that some jobs, some people, and perhaps some entire industries create situations where the only justification for paying someone more is that they, well, need more money.

    Right. Why is that a problem? Perhaps it will be clearer if I rephrase: Walmart (and anyone else who wants to be in business) should be forced to pay a living wage.

  7. Quick question about the post, Zuzu:

    …encouraging their workers to make up a living wage by seeking welfare benefits…

    Isn’t that the point of welfare benefits?

  8. Wal-Mart makes hundreds of billions of dollars a year in sales and can afford to pay its workers a living wage. And yet, the company hands out welfare application forms to its new hires because it won’t pay a living wage and is stingy with benefits and full-time employment. As a result, the taxpayers have to take on the burden of insuring workers employed at a company owned by the richest family in America.

    I don’t think that’s the purpose of welfare benefits. That is, if you’re looking at it on the macro level.

  9. As a result, the taxpayers have to take on the burden of insuring workers employed at a company owned by the richest family in America.

    The purpose behind welfare, as I understand it, is income redistribution–from wealthier to less wealthy–towards the goal of making sure that people living at or near poverty have enough money to live. Walmart’s owners and stockholders pay taxes that pay into welfare programs, as do people who shop at Walmart. A portion of their income goes to pay for welfare programs, that in turn pay to raise Walmart employee’s incomes. Why should Walmart be ashamed of making it easier for its employees to collect those benefits, which are designed specifically for that very purpose? Shouldn’t other low-paying firms do the same thing?

    I understand the beef that some people have with Walmart’s labor practices, but I have to confess I don’t understand this particular one at all. It seems like you have them coming and going–On the one hand, they don’t pay enough, on the other hand, they cynically use the welfare system to… encourage their low-paid employees to get assistance?

  10. Why should Walmart be ashamed of making it easier for its employees to collect those benefits, which are designed specifically for that very purpose? Shouldn’t other low-paying firms do the same thing?

    Why shouldn’t Wal-Mart be asked to use the profits it makes to pay its workers a fair wage? Why should I and other taxpayers be asked to subsidize Wal-Mart’s practices when they are a very profitable business?

    Look, the money from the stores is going somewhere, and it’s not to the workers or to the government. It’s going to the shareholders and the corporate executives and the Waltons. They’re making quite a handsome living off the labor of their own underpaid workers as well as off the labor of people like me, who work for other employers and yet have to subsidize the Wal-Mart empire’s profits through our taxes.

    Yes, welfare exists to help individuals with their needs. But a real problem exists when the largest retailer in the country accounts for a disproportionate number of working people who file for assistance.

  11. The point of welfare is not to enable companies not to pay their employees properly. Ideally, if you have a job you should not need to collect welfare.

    Yes, Shankar, what Wal-Mart is doing is cynical. They aren’t shouldering the responsibilities that they should be as an employer, and they are forcing other institutions to pick up the slack, and they aren’t doing it because they can’t afford to operate any other way, they are doing it out of greed. It is their policy to encourage their employees to seek what are generally considered fair employee benefits through other avenues.

    Wal-Mart also drastically reduces their health care benefits paid by strongly encouraging their employees to get health care coverage through the employees’ spouses’ employers. They shift what should be their operational costs onto other employers and the government, then turn around and claim, “Look! Our prices are lower because our overhead’s lower!” Meanwhile, other companies watch Wal-Mart’s serious indifference to their employees and figure that if Wal-Mart can do it then so can they… prompting a race to the bottom in terms of taking care of their workforce.

  12. They aren’t shouldering the responsibilities that they should be as an employer, and they are forcing other institutions to pick up the slack, and they aren’t doing it because they can’t afford to operate any other way, they are doing it out of greed.

    Yep. Profits first. People last.

    Don’t ya just love Zuzu’s Wal-Mart posts? Makes me feel all warm and fuzzy when I see ’em getting torched on here.

  13. Sailorman: Nobody is expecting Wal-Mart to pay the shelf-stocker enough so that he can buy a second home in Aspen. What people expect Wal-Mart to do is pay the shelf-stocker enough so that he can eat food. The bottom line is that every human being deserves a basic standard of living, and to deny people that is immoral.

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