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What Else You Should Know About Walmart

It's not just the low wages or the near-scientific union busting. It's the preference for poverty, the business model built on turnover, the manipulative PR. Is this really the best way to bring jobs and food to the south and west sides?

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Nelson Lichtenstein, a crusading labor historian at the University of California at Santa Barbara, has written books on the history of unionism and the automobile industry, but over the last few years he's spent much of his time thinking about Walmart. To research his 2009 book on the corporation, The Retail Revolution, which is newly out in paperback, he combed through scores of articles from Discount Store News, thousands of pages of legal filings and memoirs produced by Walmart employees, and piles of transcripts of in-house management videos recorded by a production company Walmart fired in 2006. Lichtenstein even bought ten shares of Walmart stock so he could attend a stockholders' meeting. From his efforts came an excellent treatise that details the company's well-oiled distribution system, its generally shabby treatment of its workers, its rabid anti-unionism, and its evangelistic corporate culture (instead of a board of directors, the company once had a board of "servant leaders").

As Walmart has grown into one of the largest corporations in history—it's currently number one on the Fortune 500 list of top earners in the world—its business and labor practices have come under intense scrutiny. Defenders note that the company's management efficiencies have resulted in lower prices for consumers along with huge profits for shareholders. But critics like Lichtenstein say there are enormous social and economic costs to doing business Walmart's way, arguing that the company's industry-defining practices have depressed wages for American workers and hastened the flight of manufacturing jobs overseas.

Walmart has met resistance in large cities with a strong union presence, such as New York, Los Angeles, and especially Chicago, where it's been at the center of a couple of the biggest political battles in recent memory. In 2004 the Chicago City Council narrowly approved a zoning change allowing the city's first Walmart to open in the west-side neighborhood of Austin, and in 2006 the council passed an ordinance requiring the company and other big-box retailers to pay employees at least $10 an hour plus benefits. Mayor Daley vetoed that law—the first veto of his career—and in response organized labor spent millions of dollars helping elect pro-union candidates to City Council in the 2007 elections.

Now, after successfully blocking Walmart's plans to build a second store in the city for four years, union-allied aldermen have finally laid down their arms. Last week the City Council's zoning committee voted unanimously to approve a new development in far-south-side Pullman that will be anchored by a Walmart Supercenter. The Chicago Federation of Labor claims the vote came after it brokered a deal with the company to pay workers a starting wage of $8.75 an hour, 50 cents higher than the state minimum wage, with a raise of 40-60 cents after the first year. But Walmart representatives say they didn't enter into any such agreement with labor. "There were not any negotiations. There were not any proposals. There were no deals," spokesman Steve Restivo told reporters after the vote.

Either way, this breakthrough has the potential to transform Chicago. The mega-retailer already has more than 30 stores and nearly 20,000 workers in Chicago's suburbs, making it the largest private-sector employer in the region, according to Crain's. Now the company reportedly has plans to build 20 or more additional stores inside the city limits. And with Walmart desperate to open stores in New York and Los Angeles, observers like Lichtenstein believe its latest victory could have coast-to-coast significance.

I recently spoke with him about the company's history, labor practices, and attempts to grow in Chicago.

The Chicago Federation of Labor and its allies in the City Council are claiming they brokered a deal with Walmart to get the company to pay entry-level employees $8.75 an hour with a guaranteed raise after the first year. Walmart insists it was just clarifying existing policies. Does this sound like a concession on Walmart's part?

It is quite possible this is a modest victory for the unions because Walmart does pay near minimum wage for entry-level people. It jacks up its "average" wage by including lots of higher-paid nonmanagement types who are not the typical clerk.

What do you think the national significance of this "agreement" could be? Are we about to see a Walmartization of urban America?

It means that if Walmart offers just minimal concessions in urban areas, and actually treats with the unions, it can move into New York, Boston, etc. One thing to clarify is if Walmart actually did "negotiate" with unionists of any stripe.

Nelson Lichtenstein
  • brandon wu
  • Nelson Lichtenstein

One thing you write about early in the book is how Sam Walton, in pioneering the Walmart stores in the 1960s and 70s, took advantage of the rural isolation of these small towns in Arkansas and Missouri. I was wondering if you saw any parallels to what they're trying to do now, getting into these urban markets. A lot of these neighborhoods, particularly on the south and west sides of Chicago, suffer from similar kinds of economic isolation.

There are two similarities between the very early Walmart and their recent effort to move into urban areas. One is that in rural Arkansas, in effect, the population was underserved. There were all these small stores which were kind of monopolies and had poor distribution and high prices. Walton took a look at that and saw there was a big opportunity there. Secondly, in both situations you have a large underemployed population of potential clerks, or workers in the stores, so really the wages in the stores can be quite low.

You write that opening stores in areas where a lot of people are living on the edge is actually part of their corporate strategy: their business model basically can't exist without a churning underclass.

I would add: Walmart would've been a success in any event, but it became a particularly big success because its years of great growth were, whether by luck or by planning, the same years of the Reagan, Bush, even Clinton-era transformation of the minimum wage and the decline of the unions. It took advantage of that. Walmart's always prided itself that 25,000 people apply for 400 jobs when a Supercenter opens up. But this has been the case in America in general for the last 30 years. It's not attributable to the fine job Walmart does. Whenever you have an employer of any size in any kind of urban area you'll get 25,000 applicants. Walmart often uses that as a kind of argument that "Well, we're doing great."

That's what I hear from Emma Mitts, the alderman whose ward includes the west-side Walmart, every time she's on TV.

Let me tell you about Emma Mitts. In 2007 I was at the Walmart shareholders meeting in Fayetteville [Arkansas]. They introduced her: "Now here's our special guest—Emma Mitts!" And they bring her down in front of these 15,000 cheering Walmart fanatics. And they presented her: "Here's heroic Emma Mitts, who bucked the unions and bucked the machine." I think they even said she was a local Arkansas girl who'd moved to Chicago and made good. It was a classic.

You write in your book that the Chicago Walmart debate was a particularly ugly sort of racial politics.

Basically, the black community is split and people played the race card there. It's just dynamite—it's just lying there ready to be used. And in this case, in Chicago, it's still true—the black aldermen, the black ministers, are split on this question. Some of the pro-Walmart people denounce the anti-Walmart people: "Oh, you're just a tool of the white trade union leaders." And then the other side says, "Oh, you're just an Uncle Tom, you're just a tool of white cracker Arkansas Walmart."

If you're going to employ the bottom half of the working class in America, you're going to employ a lot of Latinos and a lot of blacks, and they do. And they're very proud of that. They want to keep the bottom half of the working class at low wages and low benefits, and that affects blacks and Latinos. That's what some of these pro-Walmart ministers have to understand.

Because Walmart wants to get into Chicago so badly, it's been interesting to watch them try to manipulate public opinion—having PR firms post anonymous comments on blogs, enlisting activists to put together "grassroots" campaigns on its behalf. One of the ministers leading the charge for Walmart in Chatham, Larry Roberts, told me Walmart donated more than $1,500 in school supplies to his church last year. He doesn't see anything wrong with it. Have you seen this kind of thing elsewhere?

Walmart does that astroturfing a lot. They try to generate local groups, and in my book I talk about some of the comical failures of that. They hired [civil rights leader and former Atlanta mayor] Andrew Young at one point. They just go to the NAACP and say, "Here's a huge contribution, and, you know, you should be on our side." They go to athletic leagues and all sorts of civic organizations in the black community and start giving them money, maybe without strings attached. They just say, "Here's some money."

One thing Young got in trouble for after he was hired by Walmart was that quote about the immigrant grocers, the bodega owners, about how maybe it wouldn't be so bad if the mom-and-pop stores in the ghetto were closed down by Walmart: "Those are the people who have been overcharging us, selling us stale bread and bad meat and wilted vegetables. . . . I think they've ripped off our communities enough. First it was Jews, then it was Koreans, and now it's Arabs. Very few black people own these stores."

I have encountered that sentiment a few times from people: "We don't even like our neighborhood stores." [There's] an argument that might work in a small town in Maine—"Walmart's going to close all the mom-and-pop stores." But there's a cohort of people in certain south-side neighborhoods who say, "Great!" Actually, Andrew Young was sort of right. The local bodegas and local stores serve higher prices and rotten goods and Walmart's better. But those are not the only two alternatives.

I was stunned by the part of your book where you quote the memoir by Michael Bergdahl, the former "director of people" for Walmart, and he basically writes that, "You know, say what you will about high turnover, but it's pretty great for the bottom line."

It's not just a question of lower wages and lower benefits—you don't have a career at Walmart. Retail is not built for careers. There's a few, 10 or 15 percent, and some managers who I guess can do that. But for the basic person, you go in there and the turnover rate is so great that you leave within three or four years. And in fact today Walmart is firing—it's figuring out how to fire or ease out people who've been there 10 years, or 15, because they have higher wages.

The other thing is that unionized grocery stores have the same entering salary, which is lower than it used to be: $10 an hour or even less. Walmart goes on and on: "Oh, we pay the same wage as beginning workers at Safeway or Kroger." But because of seniority, because of grievances, because of benefits, because of a wage progression, you can have a career at unionized grocery stores and you can stay there 20 years and you get better wages and you aren't edged out. It means a certain kind of stability takes place in a unionized firm, even when the wages are not that much greater.

Still, I might add that Walmart is not quite the bad boy of a few years ago because the company did support the Obama health-care plan, and once that goes into effect most Walmart workers will be eligible for Medicaid or big insurance subsidies.

You talk about how Walmart has essentially undone the New Deal by gaming the labor laws that are still on the books.

Take unemployment insurance. In theory, unemployment insurance is supposed to work this way: if a company lays you off because sales go down—and that happens at Walmart in January—then you can receive a substitute for your income until you get rehired. And this was designed in the 1930s for cyclical industries like steel and auto. The government and the reformers wanted steady employment. So companies that did a lot of that cyclical hiring and firing were charged more money.

Walmart didn't like that. They wanted to save money. So they issued edicts to their managers that said, "When January comes and you've got to basically lay people off, don't just lay them off. Don't say to them, 'You're laid off, because there's no work,' i.e., 'You can go to the state employment office and get your check.'" No. They say, "You cut back the hours, and you put them on the night shift." And then they quit! That's how the constant churning of the workforce is very useful to Walmart.

Overtime pay—this is another thing Bergdahl talks about. Walmart is extremely militant on not paying overtime because it's time and a half. The whole key is that store managers at Walmart are rewarded on the basis of keeping labor costs low and they're penalized if they don't. And frankly being a store manager is pretty miserable at Walmart because you are constantly fighting to keep your labor costs down. And if you don't, you can get fired. About 10 percent of all store managers are fired every year, and these are the people who do want to have a career at Walmart, who are making $150,000 to $200,000 a year. The computers in Bentonville are relentlessly keeping track of every penny they spend on labor and basically telling them cut cut cut.

That's something that you write about a lot: the central control. One thing that really struck me was the way that they've taken the ability of managers to set the schedules for individual employees out of their hands—a computer in Bentonville just makes the schedule for them.

The managers can overrule that, but the scheduling is increasingly centrally controlled. They're given the schedule, they're given a kind of theoretical labor budget. And maybe it rains that day, or maybe there's an accident—all sorts of things happen that they have to adjust for.

The other thing, by the way, is very recently—and here the Walmart PR people will say, "Hey, look, we're now getting our act together" [since losing a $172 million lawsuit in 2005]—they've made it very clear that everybody has to take their lunch break. And, in fact, if you're at the cash register and the time for your lunch break comes, the cash register will automatically shut down. This is a way of mechanically or electronically trying to solve a problem which really is baked into the cake, which is this relentless pressure on the managers and the assistant managers to cut labor costs. So if you can't squeeze by not having people take their lunch break, the managers will find some other way to do it.

Still, I wonder if you admire some of the things that Walmart has done. Things that Sam Walton did early in the history of the company, the way that he foresaw how important streamlining transportation networks was going to be, the way they used computers and satellite links before other retailers did—isn't it kind of a wonder to behold?

Of course. I'm in favor of assembly lines and long-distance telephone lines. Technological change, globalization—I'm in favor of these things. It's just a question of under what conditions that will take place. That's why I studied Walmart and why earlier I studied the automobile industry. These were two great industries with two productivity-enhancing technologies and techniques, and they have a tremendous potential for transforming society. And the auto industry, when the union came in, the union captured a portion of that tremendous productivity, and as a result we had the highest standard of living for the working class anywhere in the world for a couple generations.

You write a lot about Walmart's antiunionism, which crystallized in the mid-90s when a Walmart lawyer distributed this over-the-top memo at an Indiana distribution center demanding that each and every employee carry "his or her own weight" in the anti-union fight. Has that stridency been tempered at all?

No. There is no tempering. When it comes to unionization, it's absolute. Someone just called me up the other day about this, from Colorado, about what they thought originally was a racial question. It wasn't racial at all—it was a union question. These West African employees of Walmart were all being fired and they thought it was racially inspired. It was, on one level. But what it really was is these West Africans, who all knew each other, were getting together and protesting to Walmart that their wages were being cut or something. And really, Walmart right away saw, correctly, that there was a kind of solidarity among these West Africans, so they just began to fire them.

That's against the law, isn't it?

It technically violates the Wagner Act, so yes. But Walmart never fires anyone, technically speaking, for forming a union. They fire them for being a lousy worker, supposedly. The labor law has been eroded everywhere, not just Walmart. If you want to stop a unionization campaign, if you really want to do it, you can do it. I mean, it takes some money, it takes some effort, but you can do it. You just put someone on the night shift and just reduce their hours to 15 a week, and then they quit. That's the end of it.

Walmart's strategies have been mimicked by a lot of the other big-box retailers. In particular, you write that Target has just as bad or perhaps even worse labor practices than Walmart.

People haven't focused in on that because, you know, Walmart's the big boy, and Target is still about a fifth the size. This is what UFCW organizes around—that Target is just as tough, and they are. And also, on the health benefits, Target is basically the same as Walmart, if not slightly worse. Target, and all retail really, except for unionized grocery stores and a few other stores like Costco and Bradley's, they're all militantly antiunion. Home Depot even more so.

But here's the rationale—if you force Target to adhere to some guidelines, it won't make a difference because Walmart's still the big boy in town. And if Walmart caves on whatever the issue is, then all the others are going to as well. The logic of it is that Walmart is setting the standard and is setting the terms, and if you could crimp Walmart, then you will, ipso facto, crimp everybody else.

Proponents of the Walmart stores here argue that not a dime of city money will be used to build the stores, but what they don't say is that a lot of city money will end up being used to prep the site and for infrastructure such as sidewalks and sewer lines.

There's a report from 2005 or 2006 where they go through hundreds and hundreds of examples of Walmart, both distribution centers and stores, where they try to gain some tax advantage, or they use this TIFs thing—tax increment financing. There are various ways of getting what are basically subsidies for these stores. And the bludgeon that Walmart has is, "Well, if we don't build it here, we'll build it three or four miles away, and then you'll lose everything. And then we'll be draining your town of sales tax revenue."

You also write about the success of "community benefit agreements" in California, where retailers that want to come into certain neighborhoods have to agree to pay certain wages and offer certain benefits in exchange for zoning clearances and, in some cases, construction subsidies. Can you give an example of where that's been a success?

The Staples Center in LA. The unions, community groups, this organization called LAANE—Los Angeles Alliance for a New Economy—when they were building the Staples Center, they sort of pioneered it there, and they got all these agreements: local hiring, they wouldn't stop unionization, that there would be union construction. And the people putting up the Staples Center were happy to do it because it meant they didn't have to fight these groups all the time when it came to zoning and such. And this is actually a lot of stores, shopping centers, depending on the strength of the community groups, are willing to do these kinds of negotiations.

What Walmart doesn't want to do is get in a situation where it's mandated by living wage ordinances or something else that they're going to have to pay the same wage as a unionized grocery in urban areas. Because they want to beat unionized groceries, and unionized groceries are mainly in the urban areas—exactly where Walmart is not. And by now stores like Kroger and Safeway have just as many efficiencies in their supply chain as Walmart does. It's like how everyone had the assembly line by 1920. In a funny way, the wage differential is now even more important as a competitive advantage that Walmart has over unionized groceries.

One of the more comical details you uncovered is something called the "Union Probability Index"—a rating given to each store that measures how likely it is to "go union."

Originally it was called the "Union Probability Index," and then they changed it to something like "Unaddressed People Issues." This is classic—this is how paternalistic engagement turns into militant antiunionism. Forty years ago Walton would have these meetings in the stores [between executives and store-level employees] called "grassroots" meetings. They'd say, "Oh, what's going on? What are your problems?" Then the firm got bigger, so they started doing it with surveys. They'd give them a sheet of paper and say, "What do you like about the store? What don't you like?" And then they put it on computers, and they made it more scientific, and, of course, what they do is they analyze all this sentiment from their workers. And when people complain about their supervision at a high level, that would go into the Union Probability Index, or the Unaddressed People Issues index.

So they turned what had been this grassroots feedback mechanism into a manipulative weapon to target possibilities of resistance. And I've seen some of their analysis of it—the top issues are always wages, benefits, and shifts. And typically in the north you get higher indexes than in the south. And then Walmart pays special attention to those stores and watches them more closely. And if there is any concerted opposition, they come down like a ton of bricks. I'd put it like this: if a union erupts in a store, a union effort or anything, the manager will be fired within a year. Period.

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