Wal-Mart's Weakness: Is the Behemoth in Trouble?


"Be very careful who you let into your neighborhood," Sandra Carpenter, a former Wal-Mart grocery manager from Maryland, warned New Yorkers considering whether to bring Wal-Mart to their town. "They will promise you everything under the sun," she said at a recent anti-Wal-Mart rally outside New York City Hall, "but at the end of the day, they will take it all back."

Wal-Mart's high-profile effort to expand into some major urban markets has suddenly cast a spotlight on the experiences of Wal-Mart workers like Carpenter and launched a battle that both Wal-Mart and the United Food and Commercial Workers (UFCW), the union that represents grocery workers, badly need to win.

We've seen this fight before. Six years ago, Wal-Mart tried hard to break ground in Chicago, New York, Washington, D.C., and other cities. Opposition was fierce, and the battles were bruising for both Wal-Mart and its opponents -- revealing institutional and political weaknesses on both sides. This round promises to do the same.

The last wave of expansion battles, particularly in Chicago, where Wal-Mart won approval to build several stores, revealed ineffectiveness and division in the labor movement. Once Wal-Mart agreed to build those stores using union construction crews, the Chicago building trades unions supported Wal-Mart's entry into the city -- a deal that struck much of the local labor movement as a tremendous betrayal. The deal also revealed how little influence labor has over Democratic-elected officials in some nominally Democratic cities. Mayor Richard Daley vetoed a bill that would have forced Wal-Mart to pay $13 per hour as a condition of operating in Chicago -- the sole veto of his epic, Mubarak-esque mayoralty.

Worse, Wal-Mart was able to focus public attention on one of labor's imperfections: At a time of declining membership, union contracts are not always that good. Wages for some UFCW workers in Chicago, contends Wal-Mart's director of community affairs, Steve Restivo, were no better than those for Wal-Mart workers. UFCW officials and academics who have studied Wal-Mart acknowledge that wages for new workers and part-timers in unionized stores may not be very high but note that unionized supermarket workers see their wages and benefits increase as they accumulate seniority on the job, which is not the case for longtime Wal-Mart workers. The company has consistently declined an invitation from New York UFCW locals to have the state controller audit its records to ascertain its actual wage levels. Nonetheless, Restivo says that Wal-Mart scored a public-relations success by publicizing the low wages paid to new hires in some unionized stores. "We were aggressive in telling that story in Chicago, Restivo says.

Understandably, this is a strategy of last resort for Wal-Mart, since the company would presumably not prefer to be dragged into a discussion of its everyday low wages. Even now, Restivo does not want to speak of "minimum" or "living" wages; he prefers words like "prevailing" or "competitive." But to fight Wal-Mart, the UFCW is going to have to become a more aggressive and strategic union, one in which nobody has a contract with Wal-Mart-level wages and everyone knows the value of a union card. Some locals are more effective than others, and the one in Chicago wasn't one of them. Another, related lesson of Chicago was that a union has to be able to mobilize its members. Dorian Warren, a political science professor at Columbia who was involved in the 2005 Chicago site battles and is now working with Jobs With Justice to keep Wal-Mart out of New York, says the local's attitude in Chicago was "definitely don't organize the members, or they could organize against you." That kind of thinking has to change.

But the battles have revealed Wal-Mart's weaknesses, too. Since most development in New York is, to say the least, not constrained by any democratic processes, Wal-Mart, in 2005, didn't feel it had to make a case to New Yorkers. This turned out to be a gross miscalculation; the City Council was so angered by Wal-Mart's arrogance -- in not showing up to City Council hearings on its proposed store -- and disturbed by the retailer's record on workers' rights issues, including sex discrimination, that elected officials actually warned Vornado Realty Trust, the developer, to expect trouble with its other projects if it let Wal-Mart into its new mall in Queens.

Five years later, as it again seeks to enter the New York market, Wal-Mart apparently hasn't learned from its 2005 rebuff: The company still doesn't show up to City Council hearings, preferring instead to denounce the democratic process -- which has included testimony from former Wal-Mart workers and academics who have studied the company -- as a circus. Members of the council are becoming irked, and even the New York Post (which, as the leading source of right-wing populism in the New York area, should be this retailer's best friend) mocked Wal-Mart's no-show performance with a picture of an empty chair and the headline, "Empty seats are hard-sell."

In some ways, however, the company is in a better political position now than it has been in the past. Says Restivo, in an implicit admission of past sins, "We're a better company than we were four years ago." He points to some undeniably impressive facts, such as the company's dramatic reduction in greenhouse gases.

The company still has a major political problem, though, that won't go away no matter how slick its spokespeople or how green its lightbulbs. Jennifer Stapleton, assistant director of the UFCW's Making Change at Wal-Mart campaign, points out, "Wal-Mart wants to talk about everything else that the progressive community cares about but not how it treats workers." That open wound -- Wal-Mart's treatment of its own employees -- has festered, and this time around, it may expose the company to even more criticism. With Wal-Mart the largest private employer in the nation, an awful lot of people have now worked for the retailer, and many of their stories are devastating. Former and current Wal-Mart workers seem to be more involved in these urban-site battles than they've ever been before. In addition to Sandra Carpenter, several other Wal-Mart employees spoke at the New York City Council hearing. Ernestine Bassett, who still works for Wal-Mart, spoke harrowingly of being denied bathroom breaks; a diabetic, she needs these breaks not just for the usual reasons but in order to give herself insulin shots.

Wal-Mart emerged from those 2005-2006 battles with one store in Chicago; a second was approved last summer, and Wal-Mart plans six more by 2013. The retailer failed to win entry to New York City or Washington, however. Wal-Mart retreated for a time, but now, out of economic necessity, it's back in the game of urban politicking.

The difference between four years ago and now is the Great Recession.

For Wal-Mart, the economic downturn has reduced the purchasing power of its patrons, making it more imperative than ever to expand its revenues by entering the big urban markets from which it's been excluded. For the UFCW and its community allies, however, economic hard times make it more difficult to keep Wal-Mart out. The urban poor are far more desperate for jobs and low prices. Wal-Mart has dramatically escalated charitable giving in the cities it's trying to enter, especially to organizations fighting hunger -- a problem that has taken on new urgency with so many out of work. It has also aggressively courted black communities in Washington, D.C., underwriting the city's Black History Month programs in February and giving generously to schools that serve primarily black students.

For all of those reasons, some urban communities may be more willing to cut a deal with Wal-Mart than they were last time around. It is pretty easy to promise "competitive" wages in neighborhoods with more than 20 percent unemployment -- there isn't any "competition." The fact that the company has been positioning itself as more socially conscious in recent years and has hired much better public-relations people may help persuade educated urbanites who don't have close ties to workers. Wal-Mart has aimed to buy off Washington, D.C.'s liberal establishment with surprising contributions to liberal think tanks like the Center for American Progress and De'mos (with which the Prospect is affiliated) and unsurprising contributions to environmental groups like the Earth Day Network. In Boston, it has made a sizable donation to Harvard. And, as if aiming to provide fodder for comedians, the company, which is still the target of the largest sex-discrimination suit in history, has also made a donation to a group called Women Work! The National Center for Women's Employment.

Wal-Mart is also making strategic political donations, including to D.C. City Council Chair Kwame Brown, whom the company probably didn't need to buy since he worked in Wal-Mart management for three years. Brown supports Wal-Mart coming to town, with some mild concessions to the community. Washington, meanwhile, is home to not one but two anti-Wal-Mart coalitions. One -- Wal-Mart Free DC -- is opposed to Wal-Mart's entry into Washington under any conditions. "We don't want Wal-Mart anywhere, ever," says Nkrumah-Ture, who briefly worked for Wal-Mart many years ago. The other, Respect D.C., a coalition backed by the UFCW's Washington local, would allow Wal-Mart to come in if the company signed a municipally enforced community benefits agreement (CBA) requiring it to pay living wages, permit organizing, and hire local residents.

Wal-Mart, however, doesn't see any difference between the two camps. Restivo says that Wal-Mart will agree only to "prevailing," not "minimum" wage standards and won't agree to allow workers to form a union. Any CBA that the UFCW would agree to, then, is off the table. While Restivo says that Wal-Mart has signed CBAs "all over the country," including at its stores in Chicago, none of them are legally binding. Neither do they commit the company to anything that goes beyond its normal labor practices. For its store in the Pullman neighborhood of Chicago, scheduled to open in 2013, Wal-Mart agreed to "make a good-faith effort" to offer employee discounts and to bring new jobs and tax revenues to the area. Not a word about permitting union organizing or meeting specific wage standards. The Pullman CBA states that wages will be "competitive" -- as almost all wages are in a market-based system.

Still, the cities where Wal-Mart wants to open stores -- which also include Minneapolis, Boston, and many more -- have millions of consumers, and Wal-Mart can't necessarily afford to blow off all their demands. The recession has changed the game for Wal-Mart, perhaps even more than for its opponents. Years ago, retail analysts probably would have predicted that recession -- and weak recovery -- would be great for Wal-Mart. After all, recessions produce a lot of poverty, and the poor have been Wal-Mart's best customers. But it hasn't worked out that way.

With unemployment high, Wal-Mart's core customers have become simply too poor and too frugal to do much shopping. The retailer has been losing out to dollar stores, where one can make smaller purchases: The poor are becoming too poor to buy in bulk. As fuel costs become a daily nail-biter for so many, it's also important that the dollar stores are more easily reached on foot or by bus. Wal-Mart's sales have been lagging; the retailer's February earnings report disappointed expectations on Wall Street that were already low. On top of these recent woes, financial analysts have agreed for some time that Wal-Mart has saturated rural and suburban America, that efforts to expand overseas haven't gone well, and that the company needs new markets. Urban America is the only place left for Wal-Mart to grow.

The company's business model has run its course, insist many at the UFCW, and the company has to be in these urban markets now. Pat Purcell of New York's Local 1500 says, "Last time [coming to New York] was, on Wal-Mart's part, a desire. This time it's a need."

To be sure, Wal-Mart is no stranger to cities. The retailer has operated for years in such nonunion bastions as Dallas, Houston, and Atlanta. But there are major, and more unionized, cities in the Northeast, mid-Atlantic, Midwest, and on the West Coast that the company has to crack. Wal-Mart needs urban America. But its progressive, labor, and small-business opponents hope to prove that it's not mutual -- that urban America doesn't need Wal-Mart.

Wal-Mart's predicament has the ring of an Aesopian morality tale. The retailer's business practices have contributed to the immiseration of the American working class. Its relentless price pressure on manufacturers drove even more of them overseas, and the jobs with them. Wal-Mart's low wages and staunch opposition to unions helped keep wages low in retail, a sector so large it can affect the wages in other industries. As many have noted, Wal-Mart seemed to be pursuing a kind of reverse Fordism. While Henry Ford thought he needed to pay workers well enough that they could buy his products -- cars -- Wal-Mart liked to pay workers badly enough that they could only afford to shop at Wal-Mart. But today, Wal-Mart's own practices of reducing incomes to poverty levels may actually be hurting the company. Some at the UFCW wonder if now, improving the lot of the working class is actually in Wal-Mart's self-interest. Could Wal-Mart's interests eventually align with labor? A massive increase in the minimum wage, the extension of unemployment benefits -- all these tamely social democratic measures now could benefit Wal-Mart by giving the working poor a little more money to spend. So might more widespread union membership.

Restivo loves to say that Wal-Mart won in Chicago when its approach to the community changed from "transactional to transformational." That has a nice ring to it. But he is not, apparently, referring to a real transformation of the company's own management philosophy. When I ask Restivo if allowing union organizing at Wal-Mart might actually be in the company's interests, he insists that Wal-Mart employees have always "chosen" to reject union representation.

Wal-Mart has a curious idea of "choice," judging from the stories of former employees like Kenneth James, a former Wal-Mart associate of the month, who gave testimony at the New York City Council hearing. After James tried talking to his co-workers about their union rights, he says his weekly hours were cut from 40 to 18. He then faced eviction and homelessness -- which he avoided only thanks to the mercy of his landlord and by quitting Wal-Mart in order to cash in his 401(k).

These are the realities of Wal-Mart's attitude toward unions. But even union-busting companies sometimes allow workers to form unions once it becomes economically painful not to. The question is: Will American unions ever be able to bring enough pain to Wal-Mart?

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