Does Wal-Mart Cheat the System

Introduction

Purpose of Research

This report will determine whether Wal-Mart is abusing American fair labor laws by mistreating workers, endorsing inhumane sweat shops in other countries, and disrupting economies.  Wal-Mart has been accused of abusing the fair labor laws by funding Chinese sweatshops.  These Chinese sweatshops pay their workers low wages which result in more profit for companies that buy the products.  These sweatshop workers are abused, mistreated, and overworked.  They have also been accused of abusing their own workers by terminating workers who favored unions.  They have a bad tendency to treat their own employees badly with low wages and bad benefits.  Based on the data that will be accumulated, the magnitude of the problem with Wal-Mart will be revealed.  After the information has been revealed, ideas will be proposed for reformation of our Fair Labor Association by shedding light on abuses and obstacles that keep companies from having to treat all employees “equal”.

Methods for Collecting Data

The data collected has been mainly collected throughout the World Wide Web through secondary sources like the documentary called Wal-Mart: The High Cost of Low Price by Robert Greenwald.  Search engines like Google and Fair Labor Association websites were used to find the numerous articles and websites to provide the required information.  I used different websites like Wal-Mart Corporate, Global Ethics, New York Times, Global Ethics, and various other websites. 

Preview of the Report

The next areas that will be covered based on the analyst of Wal-Mart will be: Introduction of Wal-Mart’s background information, how Wal-Mart hurts society, how society retaliates, and how to challenge Wal-Mart along with the summary and conclusion. 

Wal-Mart’s Background

The 21st Century has acknowledged Wal-Mart Stores, Inc. as one of the most successful discount retailers in the world.  Creator Sam Walton was convinced American consumers were in need of a new type of store. He did his homework of studying what retail discounting was all about before he opened his first store in 1962. He trusted his vision and today now has over 10,130 stores and club locations in 27 countries. Wal-Mart employs over 2.2 million associates nationwide and serves more than 176 million customers a year. He prides his success based on customer service along with his secret of giving the customers what they want.  Wal-Mart is the nation’s largest private-sector employer and though it is known more for its retail, it is actually now the country's largest grocer.  (Walmart Corporation, 8)

Sam’s secret is to give your customers what they want and in his autobiography, Sam said, "if you think about it from the point of view of the customer, you want everything: a wide assortment of quality merchandise; the lowest possible prices; guaranteed satisfaction; friendly, knowledgeable service; convenient hours; and a pleasant shopping experience. You love it when a store exceeds your expectations, and you hate it when a store inconveniences you, gives you a hard time, or pretends you're invisible."  (Walmart Corporation, 8)

Sam Walton’s strategy was to pass the savings he received from the wholesaler to the customer and gain his profits through volume.  Walton was considered to be a very cheap man to many.  He was said to always get a five dollar hair cut and never leave a tip despite the millions of dollars he had.  So his cost-cutting perspective on Wal-Mart came naturally to him.  (T.A, Frank, 1)

Walton preferred to hire as few people as possible, and to pay them as little as possible.  Walton noted in his autobiography that, "No matter how you slice it in the retail business, payroll is one of the most important parts of overhead, and overhead is one of the most crucial things you have to fight to maintain your profit margin”.  (T.A, Frank, 1)

Walton still managed to keep his workers happy despite the lack of pay and hours he offered.  He was known for his charisma and ability to convince workers into doing things like accept a low rate of pay.  Even when Wal-Mart had grown exponentially throughout America, he would fly from store-to-store to stay in touch with those he called his “associates” and use his charisma to his advantage to boost moral.  In many of his speeches to associates, he would tell them of limitless opportunity that can be obtained through his company.  He would boost moral by telling them ways of becoming a leader and letting them know they can be anything they want to be in this company with hard work.  (T.A, Frank, 1)

In 1985, Walton initiated a “made in America” campaign that committed Wal-Mart to purchasing American goods only if sold within five percent of the foreign competitor price.  This was meant to show the public that Wal-Mart had a conscience and wanted to gain long-term benefits.  (T.A, Frank, 1)

By the 1970’s, Wal-Mart was already using computers to link its stores to their warehouses.  This technology had put Wal-Mart ahead of its competitors like Kmart.  This technology decreased inventory discrepancies and boosted sales.  This innovation brought by Walton made Wal-Mart the leader in efficiency.  (T.A, Frank, 1)

Sam Walton died in 1992 leaving Wal-Mart in a new transition that gave a different perspective from the consumers stand point.  The company’s executives for years had explained to the public that Wal-Mart was based off of a set of principles rather than on Walton’s one point of view.  Soon after Walton’s death, Dateline NBC did a story on Wal-Mart’s “made in America” campaign and showed that some merchandise in Wal-Mart was made in far away sweatshops despite having a sign overhead saying “Made in America”.  Immediately following this news story, Wal-Mart’s stocks had dropped three percent.  The Dateline news story had only a short effect on Wal-Mart.  Soon after the Dateline special, investors were also worried that Wal-Mart would not be able to manage as it once did before Walton had died.  This caused many investors to back out and sell their stocks.  (T.A, Frank, 1)

Between 1997 and 2001, Wal-Mart seemed to be growing like it did when Sam Walton was alive, with a stock value increase of 500 percent.  Inventory had rose only 24 percent and the sales increased by 78 percent.  (T.A, Frank, 1)  After this, it seemed like it was smooth sailing for Wal-Mart and its executives.

Main Issues

How Wal-Mart Hurts

In 2005, a documentary called Wal-Mart: The High Cost of Low Price by Robert Greenwald was released to the public to show how Wal-Mart is hurting the public and not helping it.  The film mainly showed how Wal-Mart comes into communities and drives out all of the competition.  The father and son shop is no match for this billion dollar corporation that comes in and takes all of the customers.  Wal-Mart is appealing at first, but then as word spreads, people realize that Wal-Mart is basically a Chinese corporation with American executives selling only Chinese merchandise.  The money the people spend in Wal-Mart just goes and directly feedsChina’s ever expanding economy.  (Greenwald, Robert, 5)

Most of the merchandise in Wal-Mart comes from sweatshops in China.  These workers are forced to lie to Wal-Mart inspection officials about their working conditions, pay rate, and amount of days worked.  These sweatshop workers are forced to live in dorms with all of their utility expenses and rent deducted from their pay check.  They work seven days a week and make fewer than three dollars a day.  One toy car was sold by Wal-Mart for $14.96 and was assembled by a Chinese worker for $0.18.  Wal-Mart imported 18 billion toy cars from China in 2004.  The low prices that Wal-Mart provides are available because of the hard work and sweat that Chinese workers put in.  (Greenwald, Robert, 5)

In Bangladesh, there are 189,000 woman that sow garnets in sweatshops for Wal-Mart.  These workers get up at5:30in the morning and brush their teeth with their finger and ashes from the fire because they cannot afford to buy a toothbrush and toothpaste.  These people work from eight in the morning til ten at night, 14 hours a day, 7 days a week.  They make wages from 13 to 17 cents an hour.  These women are punished by their supervisors by being hit and are trapped in unbearable conditions.  These are workers that have no rights.  (Greenwald, Robert, 5)

Wal-Mart drives down retail wages by $3 billion each year.  This decrease is because when a Wal-Mart opens up in a town, the other businesses go out of business and the workers who were more than likely paid above minimum wage are then unemployed and forced to work for Wal-Mart.  Wal-Mart made $240 billion in sales in 2003, yet the workers start out with minimum wage and have incredibly high health insurance premiums.  Wal-Mart also keeps their workers part-time in order to save themselves from having to be forced to provide benefits for their associates.  (Greenwald, Robert, 5)

The average Wal-Mart hourly sales employee earns $13,861 a year and yet Lee Scott who is Wal-Mart’s CEO earned $27,207,799 in 2005.  The Walton family is among the richest people in the world averaging 18 billion dollars each.  These family members could easily put together ten billion dollars and provide health insurance for all of Wal-Mart’s workers.  The Walton family has given less than 1% of their wealth to charity, while Bill Gates has given 58% of his.  This information shows how greedy the people in charge of Wal-Mart are.  (Greenwald, Robert, 5)

Figure 1

Average Wal-Mart hourly employee in comparison with Federal Poverty Line

Source: (Greenwald, Robert, 5)

Wal-Mart encourages their employees to go on different government programs like Welfare and Medicaid instead of paying them enough to not need these programs.  As a result, in Florida, Wal-Mart has the highest amount of workers eligible for Medicaid than any other company.  They have an outstanding number of 12,300 workers on Medicaid in Florida.  In California, Wal-Mart costs taxpayers 86 billion dollars a year.  County wide, Wal-Mart costs taxpayers 25 million dollars a year.  Country wide, taxpayers pay $1,557 billion dollars to support their employees a year.  This is because Wal-Mart has government programs like food stamps, Medicaid, subsidized housing, Welfare, and income tax credits pick up the slack.  (Greenwald, Robert, 5)

In a study done in 2007, Steven Greenhouse from The New York Times found that Wal-Mart was violating federal law and infringing on its employees rights who were conspiring to unionize.  Human Rights Watch found that Wal-Mart broke the law by firing people who favored unions, eavesdropped on employees, and trained surveillance cameras on them.  The Human Rights Watch wrote, “While many American companies use weak U.S.laws to stop workers from organizing, the retail giant stands out for the sheer magnitude and aggressiveness of its anti-union apparatus”.  The Human Rights Watch report found that there were 292 cases brought up against Wal-Mart.  (Greenhouse, Steven, 4)

Wal-Mart forces workers to work off-the-clock and finish jobs that they did not have enough time to complete.  This is part of the anti-overtime policy that Wal-Mart maintains in order to keep from having to pay them over-time.  If they do not finish the job they are doing and work off-the-clock, they are fired.  They make them work off-the-clock to keep from having to provide full-time benefits to workers, so they keep the hours part-time.  Wal-Mart employees say that they have been cheated for hundreds of millions of dollars in over-time pay that they say is owed to them.  In Texas, Wal-Mart workers have been cheated for up to 150 million dollars in unpaid over-time work.  Wal-Mart managers are accused of removing extra over-time hours on the payroll for workers and given the permission to do so.  (Greenwald, Robert, 5)

Illegal immigrants were being paid by Wal-Mart to clean the store throughout the night when the stores are closed.  These illegal immigrants were locked inside the store until the manager would come in the morning.  There were 250 undocumented immigrants arrested in 61 Wal-Mart’s across America.  (Greenwald, Robert, 5)

Wal-Mart was accused of discriminating towards woman and people of color.  There are claims of management talking about how useless woman are.  Some stores only had a few female workers, and they would have the women do all the dirty work like clean the bathrooms everyday.  Women accuse Wal-Mart of promoting men over women because of discrimination.  There are also many reports of racist remarks in which certain individuals would never have the chance for a promotion because of their skin color.  (Greenwald, Robert, 5)

How Society Retaliates

In September 2005, Wal-Mart was accused of turning a blind eye on the sweatshops around the world.  There was a law suit filed by the International Labor Rights Fund based off of 15 workers in Bangladesh,China,Indonesia,Nicaragua, and Swaziland.  They say that production demands by Wal-Mart cause employers to routinely abuse them.  They say that Wal-Mart violates its own code-of-conduct for ethical working conditions to boost profits.  Wal-Mart has been accused of physically abusing employees, locking workers in facilities, punishing workers who try to unionize, withholding months of pay, paying workers below the legal limit, and forcing workers to work overtime without compensation.  (Global Ethics, 2)

In January, 2006,Maryland gave final approval to a “Wal-Mart Bill” that forces Wal-Mart to pay eight percent of their payroll on health benefits for their associates.  This Maryland bill convinced 30 other states to consider this same bill to be passed.  (T.A, Frank, 1) This is just one way of retaliation that people are using to counter the negative affects of Wal-Mart.

In Honolulu, occupy movement protesters stand in front of a Wal-Mart on Keeaumoku Street to speak out against the company.  They accuse Wal-Mart of supporting child labor and suppressing its work force.  "Sweat shops in China and around the world produce these products," said Alala Zusman, one of the protesters. "People are paying low prices at Wal-Mart, and when Wal-Mart came in here, this neighborhood lost a lot of mom-and-pop stores."  (HawaiiNews Now, 7)  The occupy movement is directly impacting the Wal-Mart corporation by making people aware of the negligence the company is participating in. 

As shown previously, Wal-Mart was retaliating against workers who were in support of a union.  Wal-Mart is afraid of unions because if there is a union that forms, Wal-Mart will be forced to pay higher wages and to provide better benefits.  Society retaliates by sending complaints to organizations like the Human Rights Watch.  Those 292 cases brought to the Human Rights Watch were consolidated to 39 complaints, which left 17 administrative law judges to rule that Wal-Mart had violated labor laws.  (Greenhouse, Steven, 4)

In Colorado, workers took Wal-Mart to court because of the off-the-clock work Wal-Mart was having them do.  Wal-Mart paid 50 million dollars to settle this suit.  Wal-Mart is also fighting lawsuit battles with hundreds of thousands of employees in 31 states over the unpaid off-the-clock work that has been done.  (Greenwald, Robert, 11)

Wal-Mart faced a class action lawsuit from lawyers representing 1.6 million former and current female workers for discrimination.  (Greenwald, Robert, 5)  In 2011, female workers in Texas and California were suing Wal-Mart for discrimination.  The Texas lawsuit reports that Wal-Mart was paying woman at lower rates than men as well as keeping them from being promoted.  The lawsuit said. "Wal-Mart's managers rely on discriminatory stereotypes and biased views about women in making pay and promotion decisions”.  The group of woman plaintiffs consisted of 45,000 former and current Texas Wal-Mart workers.  It is said that many other state bound lawsuits will be filed against Wal-Mart for discrimination.  (Herbst, Moira, 7)

A Chandler, Arizona Resident by the name of Sandra Laney was notified that there was a plan to build a Wal-Mart near her house.  She felt it was inappropriate to place a Wal-Mart in walking distance of two schools and the residential neighborhood.  She then started a campaign to say “no Wal-Mart in our neighborhood”.  She formed a petition for town hall and collected 4,000 signatures against the location spot that Wal-Mart would be built upon.  (Greenwald, Robert, 5)

The Wrap Up

How to Challenge Wal-Mart

People have the power to take control of their environment through democracy and hold companies accountable for their actions.  In our country, we have the right to choose what is built in our community and what is not.  There are now many communities around the country coming together to campaign against Wal-Mart being build in their neighborhoods.  These campaigns convince the numerous town halls to not allow such Wal-Mart super centers to be built and disrupt the local economy.  Many communities come together and start coalitions to map out ways to say “no” to Wal-Mart.  These coalitions put on rallies, post flyers, inform the media, and bring in resources to make their case against Wal-Mart and not allow them in their community. 

Wal-Mart has totally withdrawn from South Korea Germany, but not because they were thrown out.  It was because these two countries have big unionization policies and a sense of culture rather than on the low price of material goods. (Rosenfeld, Herman, 9) What South Korea and Germany did in regards to unionization laws can be done in America. 

Government policy change can be another step into challenging Wal-Mart by instituting new laws that keep Wal-Mart from hurting society.  When Wal-Mart violates a labor law, they discretely do so and cover their tracks by preventing retaliation.  When they do get into trouble for violating the labor laws they only get a fine that they can easily pay with their billions of dollars.  Most of the time their huge lobby of lawyers can smart talk themselves out of being in trouble.  If the federal government instituted new government regulations on off-shore sweatshop work, then Wal-Mart might choose to buy from local industries.  The federal government could push for more accessible unionization by workers for certain companies in which if their employees feel they are mistreated, paid low wages, and given bad benefits. 

The local city governments should be accountable for their actions when allowing big corporations to move into their towns and disrupt their economies.  They must do their homework on the corporation and figure out if this company is beneficial to their local economy or harmful.  In many situations, a city will allow Wal-Mart to come in and it put all the local businesses out of business.  The money then that is put into that Wal-Mart from local residents is mostly transferred to the major corporate executives and not adequately distributed with the town residents.  When money is spent on local small businesses, that money is then put into the pockets of the workers who then circulate the money to the rest of the town.  The local city governments should have stricter laws and regulations on incoming businesses.  If the local government doesn't change their laws and value the local small business, then it is up to the people of the town to take charge and make sure their economy doesn't take a hit.

Summary

Wal-Mart was started by a man who was stingy and cheap within himself.  So he ended up forming a monster corporation that kept the same stingy self-less morals as a set of standards.  This company has been made to care about nothing else besides itself and the top members that control everything.  The main workers that control the micro aspects of the company are treated and paid badly.  Yet these workers are the most important aspect of the company, and the company would not be what it is today if it was not for them. 

The data presented shows the numerous allegations brought upon Wal-Mart for breaking fair labor laws.  All around, the data shows that Wal-Mart does nothing but hurt society instead of help it.  Wal-Mart might stimulate the federal economy in a macro sense, but it hurts millions of people lives around the world.  Whether you are the sweatshop worker in China making 17 cents an hour or you’re the owner of a local hardware store in a small town and are forced to close your business because Wal-Mart moved in.  Either way these many people are being hurt every single day by Wal-Mart. 

The other solutions that were presented show that there is something the people can do.  If everyone works together they can pass new regulation laws, form unions, and keep Wal-Mart from ruining local economies. 

Conclusion

The people with the most money in this country have the most power.  Our laws are put to protect the people, yet the few rich people in the country are able to buy their way into congress to bend the laws to their will.  No matter how hard you try to keep Wal-Mart out of your city, you might gain enough signatures to keep Wal-Mart out for years, but eventually Wal-Mart will be too powerful and rich to contain.  The only thing that the average Joe has an advantage over is the power in numbers and in his dollar.  If all the people come together and unite under one cause, then the lawmakers have to listen to their cries.  Eventually the people’s voice will be heard by congress and change will be done to eliminate the unfair treatment done to workers around the world by Wal-Mart. 

Bibliography

1.  A, Frank T. "CorpWatch : A Brief History of Wal-Mart." CorpWatch : A Brief History of Wal-Mart. Apr. 2006. Web. 08 May 2012. <http://www.corpwatch.org/article.php?id=13796>.

2.  "Ethics Newsline® » News » Lawsuit Claims Wal-Mart Condones Overseas Sweatshops." Ethics Newsline® » News » Lawsuit Claims Wal-Mart Condones Overseas Sweatshops. Institute for Global Ethics, 19 Sept. 2005. Web. 08 May 2012. <http://www.globalethics.org/newsline/2005/09/19/lawsuit-claims-wal-mart-condones-overseas-sweatshops/>.

3.  "Fair Labor Association." Fair Labor Association. 2011. Web. 08 May 2012. <http://www.fairlabor.org/>.

4.  Greenhouse, Steven. "Report Assails Wal-Mart Over Unions." The New York Times. The New York Times, 01 May 2007. Web. 08 May 2012. <http://www.nytimes.com/2007/05/01/business/01labor.html?_r=1>.

5.  Greenwald, Robert. Wal-Mart: The High Cost of Low Price. Brave New Films, 4 Nov. 2005. Movie.

6.  "HawaiiNews Now - KGMB and KHNLOccupy Honolulu Protestors Gather at Walmart." Occupy Honolulu Protestors Gather at Walmart. Hawaii News Now, 25 Nov. 2011. Web. 08 May 2012. <http://www.hawaiinewsnow.com/story/16120810/occupy-honolulu-protestors-gather-at-walmart>.

7.  Herbst, Moira. "Wal-Mart Sued in Texas for Gender Discrimination." Reuters. Thomson Reuters, 29 Oct. 2011. Web. 08 May 2012. <http://www.reuters.com/article/2011/10/29/us-wal-mart-lawsuit-idUSTRE79S0L620111029>.

8.  "History." Walmart Corporate. Web. 08 May 2012. <http://www.walmartstores.com/AboutUs/297.aspx>.

9.  Rosenfeld, Herman. "GlobalResearch.ca - Centre for Research on Globalization." GlobalResearch.ca - Centre for Research on Globalization. 13 Mar. 2007. Web. 08 May 2012. <http://www.globalresearch.ca/index.php?context=va>.