Wal-Mart's Inevitable Union

For a company that's so successful, Wal-Mart sure generates negative headlines these days. Last weekend, thousands of unofficial "greeters" met customers at Wal-Mart's Canadian stores, informing them about the company's anti-union tactics -- like closing its Jonquiere store (its first Canadian closure ever) after the workers formed a union. At U.S. stores, meanwhile, protesters handed out "Love Mom, Not Wal-Mart" leaflets for Mother's Day, protesting Wal-Mart's gender discrimination.

Wal-Mart has recently paid fines or settled lawsuits for everything from hiring illegal immigrants, to not paying overtime, to failing to report workplace accidents. It faces new challenges every week -- most recently from U.S. state officials trying to recoup welfare and health expenses paid to Wal-Mart's poverty-line workers. Meanwhile, the company feverishly tries to suppress ongoing union outbreaks in several provinces and U.S. states, and at stores in 10 other countries.

Reading these headlines, it would be easy to conclude that the incredible success of what is now the world's largest corporation is rooted solely in finding new and effective ways to exploit its workers. But this would be a mistake.

Don't get me wrong: Wal-Mart does mistreat its workers -- using tactics that aren't exactly new (after all, paternalism and union-busting have been around for as long as capitalism), but which Wal-Mart has elevated to high art. Wal-Mart's "associates" deserve much better from this dynamic company.

But mere exploitation is not actually what makes Wal-Mart tick. It's just icing on the cake. Financial analysts know that Wal-Mart's actual success is rooted in much deeper, and more sustainable, economic forces. Wal-Mart is dominating global retail trade thanks to an incredibly powerful business model, with features that are not remotely dependent on the super-exploitation of its 1.6 million employees.

The model starts with the company's large-volume, rapid-turnover stores: "Stack 'em high, watch 'em fly," as Sam Walton put it. It turns over its entire $30-billion (U.S.) inventory every 37 days -- about twice as fast as traditional department stores. It has pioneered incredible uses of information technology -- everything from mapping the buying patterns of its seven billion customers each year, to optimizing logistics and distribution, right down to centrally controlling the temperature at its 3,500 U.S. stores.

Wal-Mart's size (with $285 billion in sales last year, it's the 19th largest economy in the world) then sparks a virtuous circle. Its massive buying power allows it to bargain down its wholesalers. Then it offers even lower prices. Then it gets even bigger.

Wal-Mart's employees earn less than $20,000 each, on average. But just because a firm's workers are poorly paid doesn't make it ripe for unionization.

Unions are most effective where a company has power and profits -- and where there's realistic hope that a union could transfer some of both to the workers.

That's why unions have made virtually zero progress in some of the worst-paid job ghettoes in the whole economy -- small-scale retail, restaurants and coffee shops, other small businesses. These companies possess no power, and virtually no profits. Even Buzz Hargrove can't squeeze blood from a stone.

Wal-Mart, on the other hand, has plenty of both: lucrative 11-figure profits ($10.3-billion last year, or about $8000 per check-out clerk and shelf-stocker), and incredible global market power. Since Wal-Mart's success has next to nothing to do with its nasty, anti-union philosophy, unionization wouldn't significantly impact anything in the business plan. Indeed, Wal-Mart stores in several countries -- Germany, Brazil, soon even China -- are unionized, but that hasn't even slowed Wal-Mart's global march. Wal-Mart earned a 22-percent return on equity last year. It could give every employee an immediate 20-percent raise, and still be far more profitable than any major competitor.

Little wonder, then, that Wal-Mart's efforts to simultaneously sweet-talk and intimidate its employees into believing they're all one big happy family are getting ragged around the edges. That might just be because one widow and four heirs in that big happy family are worth $19 billion each -- while most of the rest work for near-minimum wage.

Wal-Mart's workers can smell the profitability of the company they helped build, and they know it can afford to do much better by them. Which is why they'll keep organizing themselves for a bigger slice of the pie they bake until, sooner or later, they get it.

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