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Age of Crushing Anxiety: How the Bottom Fell Out in America

How economic security was destroyed.

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By the end of the century, corporations acknowledged that they had downgraded workers in their calculus of concerns. In the 1980s, a Conference Board survey of corporate executives found that 56 percent agreed that “employees who are loyal to the company and further its business goals deserve an assurance of continued employment.” When the Conference Board asked the same question in the 1990s, 6 percent of executives agreed. “Loyalty to a company,” Welch once said, “it’s nonsense.”

1990

In 1938, while campaigning, successfully, to persuade Congress to establish a federal minimum wage, President Franklin D. Roosevelt told a crowd in Fort Worth, “You need more industries in Texas, but I know you know the importance of not trying to get industries by the route of cheap wages for industrial workers.” In fact, Southern business and political leaders knew nothing of the sort. What prevented most American corporations from establishing facilities in the South was its oppressive weather and even more oppressive racial discrimination.

By the 1970s, the South was both air--conditioned and moderately desegregated. The decade was the first in the 20th century that saw more Americans moving into the region than leaving it. Indeed, during the 1970s, just 14 percent of newly created jobs were located in the Northeast and Midwest, while 86 percent were located in the Sunbelt. 

The definitive Southern company, and the company that has done the most to subject the American job to the substandard standards of the South, has been Wal-Mart, which began as a single store in Rogers, Arkansas, in 1962. That year, the federal minimum wage, set at $1.15 an hour, was extended to retail workers, much to the dismay of Sam Walton, who was paying the employees at his fast-growing chain half that amount. Since the law initially applied to businesses with 50 or more employees, Walton argued that each of his stores was a separate entity, a claim that the Department of Labor rejected, fining Walton for his evasion of federal law.

Undaunted, Wal-Mart has carried its commitment to low wages through a subsequent half-century of relentless expansion. In 1990, it became the country’s largest retailer, and today the chain is the world’s largest private-sector employer, with 1.3 million employees in the United States and just under a million abroad. As Wal-Mart grew beyond its Ozark base, it brought Walton’s Southern standards north. In retail marketing, payroll generally constitutes between 8 percent and 12 percent of sales, but at Wal-Mart, managers are directed to keep payroll expenses between 5.5 percent and 8 percent of sales. Managers who fail at this don’t remain managers for long. While Wal-Mart claims the average hourly wage of its workers is $12.67, employees contend it is several dollars lower.

When a Wal-Mart opens in a new territory, it either drives out the higher-wage competition or compels that competition to lower its pay. David Neumark, an economist at the University of California, Irvine, has shown that eight years after Wal-Mart comes to a county, it drives down wages for all (not just retail) workers until they’re 2.5 percent to 4.8 percent below wages in comparable counties with no Wal-Mart outlets. 

By controlling a huge share of the U.S. retail market, including an estimated 20 percent of the grocery trade, Wal-Mart has also been able to mandate reduced prices all along its worldwide supply chain. In response, manufacturers have slashed the wages of their employees and gone abroad in search of cheaper labor. The warehouse workers who unload the containers in which the company’s goods are shipped from China to the U.S. and repackage them for sale are retained by low-wage temporary employment agencies, though many of those workers have held the same job for years.