The Walmart conundrum

On Black Friday, protests at many Walmart stores did little to slow the flood of deal-seeking shoppers.
Walmart is brilliant at meeting demand with supply. It provides U.S. consumers with inexpensive goods, particularly important for America’s expanding low-income class.
What’s not to like?
Unfortunately, the positives come with negatives.
As north Alabama has discovered, Walmart’s immense size and its ability to control supplier costs means its presence in a community tends to squeeze out local business owners and their employees.
One way Walmart manages to underprice smaller competitors is by purchasing inventory from overseas. Such goods are cheaper because the foreign laborers who produce them make low wages. Walmart, in other words, effectively pits U.S. workers against foreign workers, and the result is downward pressure on U.S. wages.
The wages and benefits of Walmart employees, critical to low prices, are troublesome. According to some studies, Walmart workers average less than $9 per hour. Most lack health insurance. The result is that some must supplement their wages with government assistance. According to a 2005 study, Walmart had more employees with children on Medicaid than any other Alabama employer.
Many Walmart workers are among the “working poor” that bedevil policy makers even as they drain state and federal budgets.
Blaming Walmart does no good. Its executives have a duty to shareholders to maximize profit, which includes minimizing labor expenses. They’ve been successful in this goal, as indicated by the fact that founder Sam Walton’s heirs rank high on the list of the world’s wealthiest people.
Is America content with a situation in which its citizens can work hard without escaping poverty? Is it content with employers providing wages and benefits so low that taxpayers must provide indirect subsidies? On the other hand, are Americans willing to tinker with capitalism to correct a growing social problem?
The solutions are not easy, but the problems are real.

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Filed under Capitalism, Health care, Poverty

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