Zachary Brown

April 13, 2005

The Wal-Mart Epidemic: the Case against Wal-Mart in Vermont

By: Zachary Brown

Introduction

Everyday, communities across America from Watts, California to St. Albans, Vermont, face capitalism at its worst. A thriving menace threatens local economies, town pride and fair wages. This thriving menace is the big-box store. Across the United States, big-box stores are becoming the "template for contemporary American capitalism."[1] By offering cheap goods at prices that seem like bargains, big-box stores like Best Buy, The Home Depot, and Bed, Bath and Beyond, are cleaning up in the retail business. They do this by undercutting the little man. Local town centers and quaint "mom and pop" stores cannot compete with these corporate giants, which are able to "use [their] size and clout to bleed [their] rivals dry."[2] Ironically, it is not just these local merchants that feel the repercussions of this new market trend. Each of us will ultimately end up disadvantaged from these so-called bargains.

In Vermont, citizens concerned with urban sprawl must battle with the proverbial top dog of all the big-box retailers, Wal-Mart. As we speak, Wal-Mart executives and local developers are applying for permits that would allow for the construction of seven additional retail stores throughout the state.[3] The new developments would be equivalent in size and scale to the monstrosity found at Taft's Corner in Williston.[4] In fact, the retail store proposed for St. Albans, Vermont, would be over 145,000 square feet in size, not including the parking lot and garden center.[5] The impacts these stores will have on Vermont are tremendous, especially since Vermont's economy is so closely tied to its locally-owned downtowns and town centers.[6]

Vermont has yet to be plagued by the level of "chain store saturation" that most other towns in America experience. The reasons for this include "the state's rural character, [the] popular commitment to homegrown businesses, and [the] scrutiny of large scale development under Act 250," Vermont's uniquely protective land use regulation.[7] However, this will all change if Wal-Mart is able to introduce its seven additional big-box stores into Vermont's already "fragile" economy.[8] Moreover, the resulting adverse impacts will affect Vermont in more facets than just the economy. Accordingly, this editorial briefly analyzes Wal-Mart's impact on small-town America from an economic, social, and environmental outlook.

 

Economic Impacts

Over the past decade, Wal-Mart has become the largest, richest, most powerful corporation in the world.[9] The company grosses over 6 billion dollars each year in retail sales, netting over billion. They have recently tapped into their annual revenues "to shower conservatives in Washington with money," making Wal-Mart the second-highest contributor to the 2004 elections.[10] Because of this, many politicians and small town officials welcome Wal-Mart into their communities, expecting big returns. However, the corporation's business tactics are destroying hometown economies everyday.

For example, many believe that Wal-Mart uses its "size, market clout, access to capital, and massive advertising budget" to force local competitors out of business.[11] Over the years, the company has established a network of 10,000 suppliers, who are constantly pressured to lower their wholesale prices in order to meet Wal-Mart's demands.[12] This allows Wal-Mart to undercut the local "mom and pop" stores, who cannot compete with Wal-Mart's below-cost prices. "By slashing its retail prices way below cost when it enters a community, Wal-Mart can crush our [local] groceries, pharmacies, hardware stores, and other retailers, then raise its prices once it has monopoly control over the market."[13]

One way Wal-Mart is able to undercut local retailers is by putting pressure on suppliers to reduce costs. Wal-Mart executives are experts in cutting costs, often requiring supplying companies to open up their books for an "unnecessary costs" inspection.[14] This forces suppliers to cut costs, lower wages, and move manufacturing overseas in order to meet Wal-Mart's price demands.[15] These companies cut wages and benefits, and send more factory jobs overseas. Thus, the "Walmartization" of America is leaving U.S. towns without the good-wage paying jobs to support a local economy.[16]

Not only is Wal-Mart pushing U.S. jobs overseas through supplier coercion, but the corporation also eliminates jobs by forcing competitors out of business. A study from 1999 reports that 1.5 jobs are lost for every one job Wal-Mart creates.[17] Therefore, for every two jobs Wal-Mart brings to the table, three well-paying union jobs could be lost.[18] Moreover, studies show that for every Wal-Mart Supercenter that opens in the next five years, two supermarkets will close. Accordingly, many economists believe that when Wal-Mart enters a community, there is an overall net decrease in jobs.[19] These shameful business tactics end up costing our local economies more than they provide by way of employment opportunities.

Finally, many Wal-Mart proponents argue that their stores revitalize the communities they enter.[20] However, studies "consistently indicate that any stores in direct competition" with Wal-Mart experience economic loss.[21] One such study found that 84 percent of all Wal-Mart sales came from existing businesses within the community.[22] In fact, some economists have labeled this phenomenon "the zero-sum game," as communities experience little or no boost in their economies because the "new big-box stores merely capture existing business in the area."[23] Moreover, while local businesses spend close to 50 percent of their revenues within their home state, Wal-Mart only spends around 14 percent within the local economy (mostly in the form of payroll), allowing the rest to flow to their headquarters in Arkansas.[24]

In reality, Wal-Mart provides very little economic advantage to the communities they enter. Studies agree that opening a Wal-Mart store leads to a net decrease in employment available to the community. Moreover, the cutthroat business tactics of Wal-Mart force local competition out of business or force them to adopt the same cutthroat strategies to stay alive, further driving down wages in local communities. Furthermore, studies show that very little of the revenue that Wal-Mart brings into a community stays in the local economy. For these reasons, we cannot allow Wal-Mart to intrude any farther into Vermont's hometown economy.

 

Social Impacts.

Wal-Mart's enormous size and "obsession with shaving costs have made it a global economic force," and this force affects wages and working conditions around the world.[25] However, as the largest, richest and most powerful corporation in the world, Wal-Mart makes business decisions that have social implications for our communities as well. The "retail giant" is easily America's largest private employer with over 1.2 million employees.[26] Therefore, the company's social repugnancies probably impact someone you know or care about. This section takes a brief look at many of the despicable tactics that allow Wal-Mart to continue to offer their "everyday low prices."[27]

For instance, Wal-Mart is continually criticized for the low wages offered even to full-time employees.[28] In fact, the "staunchly anti-union company . . . is widely blamed for the sorry state of retail wages in America."[29] By the company's own admission, "a full-time worker might not be able to support a family on a Wal-Mart paycheck," even when shopping at Wal-Mart.[30] One study by the Bay Area Economic Forum found Wal-Mart's yearly wage/benefit package was ,000 less than what local supermarkets offered their workers.[31] Further, one Congressional report stated that Wal-Mart's annual salary fell below the federal poverty level for a family of three.[32] It is not surprising that many Wal-Mart stores must replace 100 percent of their employees each year; some even experience a turnover rate of 300 percent.[33]

Employees willing to put up with such low wages are hit with another social dilemma: affordable healthcare. Because of huge premium payments and large deductibles, fewer than half of Wal-Mart's employees are insured by the company's health plan.[34] Many employees who are able to afford coverage often cannot afford the deductibles, so even insured employees end up being tax burdens on the state.[35] For example, in Georgia one study "found that 10,000 children of Wal-Mart employees were enrolled in [the state's] public health insurance plan," while the next highest employer had only 734 children enrolled.[36] Therefore, Wal-Mart employees must choose between public assistance for healthcare or forgo coverage altogether. As one politician noted, "Wal-Mart forces taxpayers to subsidize what should be company funded health plan."[37]

Both of the aforementioned problems are linked to yet another one of Wal-Mart's social anomalies: the company is adamantly anti-union. Wal-Mart employees are "advised" to avoid unions and to report any "organizing activities" to their managers.[38] Moreover, managers have "illegally confiscated union literature, threatened to close down a store if workers voted to join the union, and fired several union supporters."[39] This is significant as non-union workers earn over 26 percent less per week, roughly ,000 less per year, than unionized workers.[40] Further, over 60 percent of union workers have adequate health care coverage, which is around 20 percent more than non-union employees such as those at Wal-Mart.[41] Moreover, every Wal-Mart Supercenter sucks away over 200 union jobs, leaving the union and the employees with less bargaining power and less money for organizers and lawyers.[42] With over 100 unfair labor practice charges in the last few years -- 43 charges filed in 2003 alone -- Wal-Mart is not afraid to exploit its laborers even beyond the bounds of the law.[43]

In addition to state and federal labor standards across the country, Wal-Mart is guilty of violating many other U.S. laws that maintain social decency as well. Wal-Mart is currently involved in the largest class action suit for sexual discrimination, the largest civil rights class action in history, alleging that "Wal-Mart systematically denies women equal pay and opportunity for promotion."[44] The company also faces an employee revolt, as nearly 40 new lawsuits have emerged charging Wal-Mart with forcing employees to work overtime without pay.[45] Moreover, Wal-Mart managers are speaking out about being forced to delete hours from employee time sheets in order to lower prices on outgoing goods.[46] Wal-Mart has also faced a "barrage of lawsuits alleging that the company discriminates against workers with disabilities," and in 2001 paid over million to settle such lawsuits.[47]

If Wal-Mart is allowed to build seven additional stores in the state of Vermont, it will open our communities to the social indecencies now faced by communities all over the U.S. Vermonters have continually asked for a livable wage throughout the state, but this will not happen if Wal-Mart comes to town. The fragile economy, quaint downtowns, and local merchants cannot support this kind of social repugnancy. Therefore, we should ask ourselves if a cheap pair of underwear is worth damaging our social morale.

Environmental Impacts

Because Wal-Mart is the richest, largest, most powerful company in the world, bent on exploiting its employees and host communities, one may suspect that Wal-Mart's business tactics cause some adverse environmental impacts. From noise pollution to storm water runoff, Wal-Mart is not without its share of environmental liabilities.

As big-box stores become the retail norm, more open space is needed for development. Some estimates suggest the amount of open space used for retail in the last twenty years has tripled, "not counting the acres of parking and miles of roadways needed to access these stores."[48] Moreover, every new Wal-Mart store generates an added 3,300 daily trips in the residing community, creating more traffic and more air pollution.[49] These trips usually fall outside the walkable downtown areas, as it is much cheaper to lay down asphalt on undeveloped land outside the city or town.[50]

Speaking of asphalt, a typical big-box store requires over 1000 parking spaces to support the thousands of new car trips these stores create.[51] "From an environmental standpoint, parking lots rank among the most harmful land uses in any watershed," as nothing produces more runoff or delivers it faster to the local waterways than parking lots.[52] Storm water runoff contaminants such as sediment, phosphorus, nitrogen, trace metals, and hydrocarbons are continually being drained into local streams, brooks, rivers, and any other water body within the watershed. In May 2004, the Environmental Protection Agency fined Wal-Mart .1 million for Clean Water Act violations caused from excessive runoff.[53] This was not the first time EPA hit Wal-Mart for storm water violations, as this kind of pollution has drastic repercussions.[54]

Wal-Mart and other big-box stores are now getting into the habit of closing down older stores to build brand new Supercenters right down the block. In fact, "not only are Supercenters far grander, [around] 200,000 square feet or about six football fields, but they leave vacant older Wal-Mart stores behind."[55] Some experts believe that more than 500 million square feet of retail space sits unused nationwide.[56] This "inefficient use of land" has drastic environmental consequences, such as loss of habitat and biodiversity, and increase of automotive and related pollution.[57]

Environmental preservation is very important to the people of Vermont. Our passage of Act 250, for example, protects our pristine landscapes. Again, if Wal-Mart is able to move forward with its plan, Vermont will lose many of its cherished values. Therefore, allowing Wal-Mart into our communities runs counter to the goals set by our legislature and our people. We should keep this in mind when pondering whether Wal-Mart's bargains are good for Vermont.

 

Conclusion

In 2004, the National Trust for Historic Preservation added the state of Vermont to its list of 11 "Most Endangered Historic Places."[58] The reason for this designation was Wal-Mart's plan to develop seven new stores in our quaint communities.[59] However, mere designation is not enough. Communities everywhere are questioning whether Wal-Mart's cutthroat business tactics are "in their best interest."[60] Vermonters need to take action to prevent the economic, social, and environmental repercussions that impact our communities when Wal-Mart comes to town. Over 200 communities have stopped big-box stores like Wal-Mart from entering their communities.[61] Through community organization, Vermont can preserve the local economy that ties our communities together making one big, happy, hopefully non-endangered state.

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[1] David Moberg, The Wal-Mart Effect, at http://www.alternet.org/story/18926/ (June 2004).

[2] Shenandoah Ecosystems Defense Group, et al., What's Wrong with Wal-Mart, available at http://www.tradelocal.org/arts/wrongwal.htm (last visited Nov. 12, 2004).

[3] Smart Growth News, Threat of "Behemoth Stores" Lands Vermont on the NTHP's Annual List of Endangered Places, Smart Growth Online, available at www.smartgrowth.org/news/articles/asp?art=4098 (last visited Jan. 21, 2005).

[4] Vermont Natural Resource Council, The Wal-Mart Plan, available at http://www.keepvermontsmall.org/walmart_plan.html (last visited Nov. 24, 2004).

[5] Smart Growth News, supra note 3.

[6] Stacy Mitchell, 10 Reasons Why Vermont's Homegrown Economy Matters, Institute for Local Self-Reliance, at 1 (Oct. 2003) (Stating that "throughout Vermont, one can find hundreds of independent, locally owned retail stores," which still command "a substantial share of economic activity and resources." These small town stores would be at great risk to Wal-Mart cutthroat tactics).

[7] Id.

[8] Id. at i. (Comments from Paul Bruhn, Executive Director of the Preservation Trust of Vermont.).

[9] Anthony Bianco and Wendy Zellner, Is Wal-Mart Too Powerful?, Business Week (Oct. 6, 2004).

[10] David Sirota, Christy Harvey, and Judd Legum, The High Price of Wal-Mart, AlterNet, at www.alternet.org/story/17761/ (Feb. 2004).

[11] Jim Hightower, How Wal-Mart is Remaking Our World, AlterNet, at http://alternet.org/story/12962 (April 2002).

[12] Cleeland, Iritani, and Marshall, Scouring the Globe to Give Shoppers an .63 Polo Shirt, Los Angeles Times, Nov. 24, 2003, available at www.latimes.com/business/la-fi-walmart24nov2403,1,1287969.story.

[13] Hightower, supra note 10, at 5.

[14] Id. at 4.

[15] Id. at 5 (Stating that Wal-Mart is the "world's most powerful private force for lowering labor standards . . . everywhere.")

[16] Moberg, supra note 1, at 2 (Stating that Wal-Mart's low road labor strategy drives these companies to cut wages, leading critics to call this phenomenon the Walmartization of America).

[17] Id. at 2.

[18] Hightower, supra note 10, at 5.

[19] Bianco and Zellner, supra note 8.

[20] Shenandoah Ecosystems Defense Group, supra note 2, at 3 ("While representatives of Wal-Mart claim to bring job and prosperity to localities," the bigger-picture suggests otherwise).

[21] Id.

[22] Id., quoting Muller and Humstone, What Happened When Wal-Mart Came to Town? A Report on Three Iowa Communities with a Statistical Analysis of Seven Local Counties, for the National Trust for Historic Preservation, at 8 (May 1996).

[23] Bianco and Zellner, supra note 8 (Kenneth E. Stone, an economics professor at Iowa State University, coined the phrase, "Zero Sum Game.").

[24] The Institute for Local Self-Reliance, The Economic Impact of Locally Owned Businesses vs. Chains: A Case Study of Midcoast Maine, (Sept. 2003).

[25] Cleeland, Iritani, and Marshall, supra note 11, at 1.

[26] Representative George Miller, The Hidden Price We All Pay for Wal-Mart, Democratic Staff on Education and the Workforce, at 3 (Feb. 2004).

[27] Bianco and Zellner, supra note 8 (Stating "at Wal-Mart, ‘everyday low prices' is more than a slogan; it is the fundamental tenet of a cult masquerading as a company.").

[28] Stan Cox, Wal-Mart's Wages Don't Support Wal-Mart Workers, AlterNet, at www.alternet.org/story/17761/ (June 2003).

[29] Bianco and Zellner, supra note 8.

[30] Goldman and Cleeland, An Empire built on Bargains Remakes the Working World, Los Angeles Times, at 2 (Nov. 23, 2003).

[31] John Ritter, California Tries to Slam Lid on Big-Boxed Wal-Mart, USA Today (Mar. 2, 2004).

[32] Rep. George Miller, supra note 25, at 4.

[33] Hightower, supra note 10, at 3.

[34] Rep. George Miller, supra note 25, at 7 (Other national firms cover around 66 percent of their employees with company paid health care plans).

[35] Goldman and Cleeland, supra note 29, at 10.

[36] Sirota, Harvey, and Legum, supra note 9, at 1.

[37] Rep. George Miller, supra note 25, at 8.

[38] Goldman and Cleeland, supra note 29, at 8.

[39] Id. at 9.

[40] Rep. George Miller, supra note 25, at 4.

[41] Id. at 4.

[42] Goldman and Cleeland, supra note 29, at 8.

[43] Rep. George Miller, supra note 25, at 3.

[44] Bianco and Zellner, supra note 8.

[45] Goldman and Cleeland, supra note 25, at 5 (An Oregon jury found Wal-Mart's behavior willful and illegal).

[46] Rep. George Miller, supra note 25, at 6.

[47] Id. at 14.

[48] Stacy Mitchell, supra note 5, at 8.

[49] John Ritter, supra note 30.

[50] Stacy Mitchell, supra note 5, at 8.

[51] Id. at 9.

[52] Id. (Quote by Tom Schueler, Center for Watershed Protection).

[53] Vermont Natural Resources Council, supra note 3.

[54] Id. (Stating that the EPA fined Wal-Mart million in 2001 with pollution that kills fish and destroys habitat.)

[55] John Ritter, supra note 30 (Al Norman of SprawlBusters says that vacant stores have increased by 371 "dead" stores.).

[56] Stacy Mitchell, supra note 4, at 9.

[57] Id.

[58] National Trust for Historic Places, America's 11 Most Endangered Historic Places, available at www.nationaltrust.org/11most/2004/vermont.html (last visited on Nov. 26, 2004).

[59] Id. (Stating that Vermont now faces an invasion of "behemoth stores that could destroy what makes Vermont Vermont.).

[60] John Ritter, supra note 30.

[61] Id.