Since announcing the closure of 269 stores globally (see previous post), there have been two interesting developments in the Wal-Mart saga. The company also announced that all of its workers will get a raise this month. Meanwhile, some of the workers at the Winnsboro, SC Wal-Mart Supercenter are soliciting signatures on a petition in hopes that the corporate office will reconsider closing it later this year.
While some pundits and big labor tell the story of a corporate giant squeezing suppliers, competitors and labor, a closer look at Wal-Mart tells a different story. It is probably true that Wal-Mart executives factor in some of the negative press when making strategic decisions, but most of them are based on economic reality. Wal-Mart is struggling because of a flat economy, increased preference for online shopping, and the strength of smaller discounters like Family Dollar. Its experiment with small, concept stores hasn’t worked out, at least not yet. Meanwhile, labor costs are creeping up, forcing many stores to raise wages to retain top employees and avoid costly high turnover. Wal-Mart is refocusing its strategy to deal with the changing landscape.
These recent developments underscore two realities that are often overlooked. First, the best way—if not the only way—to increase wages over the long term is not to mandate a higher minimum, but instead to grow an economy that creates more opportunities for workers. In such an environment, companies have no choice but to increase pay.
Second, current wages at Wal-Mart and other retailers are generally in line with the market. This is by definition. Most Wal-Mart workers who are legitimately underpaid—that is, they could do better elsewhere—will find other opportunities. Those that stay need something from Wal-Mart that they cannot get elsewhere. For some, it might be better hours, attractive working conditions, or a convenient location. For others, it’s a job. Companies like Wal-Mart and McDonald’s offer excellent entry-level job opportunities. Workers who prove themselves can move up or move on. Demanding higher wages so workers can stay in their current jobs long term misses the point altogether.
It’s human nature to think you’re underpaid, but when you don’t leave, you probably aren’t. The Wal-Mart workers petitioning the company to retain its Winnsboro store demonstrate that these jobs are, for many, solid employment. It’s fair to have a debate about practices at Wal-Mart or anywhere else, but it should be an honest one.