Wal-Mart, “Always Low Prices, Always.” It is well known that one of the great keys to Wal-Mart’s formidable success is its lower-than-low cost of doing business. Wages in particular are as low as can be. Minimum wages and minimum benefits: that’s the way Wal-Mart stays ultra competitive.
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Between Wal-Mart’s business practices in increasing their profits and the need to recognize their social and ethical responsibilities, Wal-Mart needs to find a comfortable balance of profitability and responsibility in order to improve their reputation.
During the process of writing this report, we found that there was much more information to be discussed about Wal-Mart’s unethical business practice than what was reported. We also wanted to point out that although all companies do everything possible to lower their costs and maintain high production rates, Wal-Mart has crossed the line over the years by managing their profits in unethical ways compared to other large corporations who have been ethically and successfully managing their business practices. Information that can be found on Wal-Mart is changing everyday and it was sometimes difficult to keep up.
Wal-Mart has been recognized as the leader in its industry and the largest company in the nation. With its powerful profit making abilities, Wal-Mart has grown from a local corner store to the money making “monster” it is today. The company has damaged its reputation over the years due to unethical choices made by its top executives. As a result, its anti-union stance has been singled out on issues concerning benefits, wages, and overall business practices.
When reviewing Wal-Mart’s financial statements, one would be overwhelmed to see such high performances; but when you are a Wal-Mart employee, it is no surprise why that is true. Employees have been denied opportunities of advancement
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Wal-Mart has become so big in its industry, that it has lowered the wages through out the country and has influenced economic change. Since most of Wal-Mart’s employees live below the poverty line, it is difficult for them to afford health insurance when deductions out of their paychecks are sometimes as high as 33%. A Wal-Mart employee who obtains health insurance would have a very difficult time raising a family with this kind of premium. Wal-Mart employees are unable to receive healthcare benefits because the cost is too high and their wages are low.
As a result, employees face a difficult time deciding whether to sacrifice such a large portion of their pay to obtain health insurance; in most cases Wal-Mart employees persist without health coverage. Deductions for health insurance are higher for Wal-Mart employees than other national retail employees. A Wal-Mart employee pays about 25% more for health insurance than the average retail worker. Wal-Mart has also been opposed by its female employees, who make up two-thirds of its workforce.
Women have been discriminated in wage and have been denied any advancement to upper managerial positions – dominated my men. Men make approximately 5%-15% more than women and have a higher chance of advancing to a better position. Dukes vs. Wal-Mart, filed in 2001, was the largest lawsuit against a private employer in the nation and represented 1. 6 million female employees who were discriminated based on their sex. From lawsuits to employee complaints, Wal-Mart has been faced with a great deal of difficulties that have developed through their own unethical business practices.
Although every company’s goal is to lower costs and produce large numbers, Wal-Mart has made sky-rocketing profits by unethically hurting its employees and cutting down their wages. Many question why Wal-Mart, the richest retailer in the world, chooses not to provide adequate wages or health benefits for its employees. If Wal-Mart were to reform its health benefits program, raise their product prices by as little as a penny, and create a bias free working environment for women, Wal-Mart would be in better terms with its employees and improve the reputation it sacrificed from the start.
“SAVE MONEY, LIVE BETTER”,
NOT ON WAL-MART WAGES
Wal-Mart, the large international discount chain was founded by Sam Walton. On May 5, 1950, Walton purchased a store in Bentonville, Arkansas, and opened Walton’s 5 & 10. Little did the small town residents know that they would later become the headquarters for the world’s largest retailer store in the U. S. Through his savvy, and sometimes unusual, business practices, he and his associates led the company forward for thirty years.
As Wal-Mart grew into a global corporation it is today, it has dealt with a great deal of criticism by outsiders. Wal-Mart’s ethical citizenship has been questioned numerous times and researched by many. There have been many doubts about Wal-Mart’s business integrity and questions whether their practices are ethical or not. Wal-Mart has faced, and is still facing, a significant amount of controversy over several different issues.
Wal-Mart has been caught bribing its employees, discriminating against women, denying its employees of training or promotions, paying low wages, and providing high deductibles for health insurance. Wal-Mart is now paying the consequences and need to become socially responsible in order to maintain a better reputation with society. Although consumers are reeled in with the low prices Wal-Mart has to offer, others feel their ethical beliefs are more important than saving a quick buck.
Statement of Purpose The purpose of this report is to examine Wal-Mart’s unethical business practices with a focus on employee wages and high health care deductibles. The report will question Wal-Mart’s aptitude to sell products cheaper than any of its leading competitors and yet maintain making a substantial amount of profit. The report will analyze the unethical practices that have developed through Wal-Mart’s history as a result of focusing on high productivity and profit making strategies.
The report will describe Wal-Mart’s unethical business practices that affect its employees. It will examine Wal-Mart’s unethical behavior in conducting business with an overall focus on employee wages.
Time constraints have limited the extent of the research. There is a vast amount of information regarding this issue and we are unable to report it all. In addition, no funds are available to conduct primary research.
Methods of Research
The method of research for this paper was secondary research through databases, internet websites, and books. The research databases of California State University, Los Angeles, will be used to locate articles in current and past publication. The databases used are Lexis/Nexis and Business Source Premiere. Also libraries, such as the John F. Kennedy Memorial Library at California State University, Los Angeles and Los Angeles Public Library in Porter Ranch, California.
The major findings of this study indicate that Wal-Mart being the world’s largest and richest retail chain is setting the standard on wages for retail workers and beyond. Because Wal-Mart has become so big, it has dragged down wages throughout the country. Wal-Mart has become what it is today by selling products at low prices and paying their “associates” even lower wages. Unhappy Wal-Mart workers complain as much about being over-worked as underpaid. Wal-Mart has its own stated policies at its employees’ expense. Wal-Mart pays it’s “associates” below basic living wage standards and even below poverty lines.
Overworked and Underpaid Employees
H. Lee Scott Jr. is the chief executive of the powerful corporation we call Wal-Mart. According to Mr. Scott, by selling vast quantities of goods at its trademark “Every Day Low Prices,” Wal-Mart has single-handedly raised America’s standard of living, saving consumers about $100 billion a year (Bianco 2). They feel that selling vast quantities of low price merchandise gives them the right to act as if they represent the American people. Scott states, “Wal-Mart also provides good jobs for hundreds of thousands of equally deserving employees, offers even part-time workers generous health insurance and other benefits” (Bianco 2).
He accuses greedy labor unions, inefficient supermarket chains, and other Wal-Mart opponents of distorting “the facts” to suit their own purposes. Wal-Mart insists on describing themselves as “pro-associate, not anti-union,” but is quick to suppress any and all attempts to have unions organize in its stores. In his book The Bully of Bentonville, Anthony Bianco describes how Wal-Mart has affected wages beyond their own company: Because Wal-Mart is so big, it has dragged down wages throughout the country.
Economists at the University of California at Berkeley found that Wal-Mart’s expansion during the 1990s cut the income of America’s retail employees by 1. 3 percent-or by $4. 7 billion in 2000 alone. What is more, the depressing effect of Wal-Mart’s expansion on payrolls extended well beyond retailing. According to a 2005 analysis by economists at the Public Policy Institute of California, take-home pay per person fell by 5 percent across the board following Wal-Mart’s entry into a country.
The evidence “strongly suggest(s) that Wal-Mart stores lead to wage declines, shifts to lower-paying jobs (or less skilled workers), or increased use of part-time workers. (4) Today, Wal-Mart is surrounded by controversy, but the greatest is from within. Unhappy employees are quitting and dozens of class-action lawsuits are pending against the company. Managers have been known to force employees to work extra hours without pay; either by eliminating breaks or by having them clock out and keep working “off the clock”. This is Wal-Mart’s way of saving on costs at the price of its employees. Store managers earn bonuses based on earnings.
Since the corporation dictates the inventory and operating expenses, managers’ only control is labor costs. Joyce Moody, a former manager in Alabama and Mississippi, told the New York Times that Wal-Mart “threatened to write up managers if they didn’t bring the payroll in low enough”. Depositions in wage and hour lawsuits reveal that company headquarters leaned on management to keep their labor costs at 8 percent of sales or less, and managers in turn leaned on assistant managers to work their employee’s off-the-clock or simply delete time from employee time sheet (ufcw.org).
In the late 1990’s Wal-Mart’s annual turnover rate was a remarkably high 70 percent, 40 percent higher than in previous years (Slater 120). Wal-Mart does not see this as being a problem. The constant turnover reduces employees eligible for raises, promotions, benefits, and holds the average wage down. Just another way to keep payroll costs at a minimum.
Wal-Mart employs 1. 3 million workers in just the U. S. and operates more than 3,400 stores throughout the United States. A full time employee working 28- 40 hours a week at Wal-Mart is paid on an average of $250 a week. Besides having low wages, those workers who are interested or eligible in obtaining health insurance for themselves or for their family pay high premiums and frequently don’t get the coverage they expect. The majority of Wal-Mart employees live below the poverty line and after making deductions in taxes and insurance coverage, a Wal-Mart employee’s salary is not enough to provide them a standard way of living.
“The 2003 poverty guideline for a family of four is $18,400, $4,256 more than the $14,144 in earnings a full-time Wal-Mart worker earns at $8 per hour… A household of four with a gross income of $23,920 or less could be eligible for food stamps -$9,776 more than a full-time, $8-an-hour Wal-Mart worker would earn in a year. ” (www. aflcio. org) These numbers are even worst for part time workers. Today, one-third of Wal-Mart’s employees are part-time workers. They are limited to less than 34 hours of work per week and are not eligible for benefits and must wait 1 year before they can enroll.
Sex Discrimination in the Work Place
In addition to Wal-Mart’s low wages, its female workers are more disadvantaged and discriminated against in wage than its male workers. More than two thirds of Wal-Mart’s hourly employees are women and make up most of the lower wage positions which include: working the cash registers, stocking shelves and working the sales floor. Although men take responsibilities in these positions as well, the majority of men who work at Wal-Mart have positions as Management Associates or much higher ranked positions. Seventy-two percent of Wal-Mart employees are female and less than one-third of those women have management positions in the company.
With that in mind, the average male employee was paid about $5,000 more in 2001 per year than the average female full-time employee. As Wal-Mart’s own workforce data reveals, women in every major job category at Wal-Mart have been paid less than men with the same seniority, in every year since 1997 even though the female employees on average have higher performance ratings and less turnover than men. (http://www. walmartclass. com).
Dukes vs. Wal-Mart is said to be the largest and most famous gender discrimination lawsuit against a private employer and is the largest class-action suit in U. S. history, representing 1.6 million current and former female employees. Betty Dukes was the leading plaintiff in the case and sued Wal-Mart for sex discrimination; she was a fifty-four year old African-American woman who worked as a greeter for Wal-Mart.
Factors such as seniority and performance were Wal-Mart’s main excuses and reasons that women earned from 5% to 15% less than men. It is disappointing to see that even the cashier positions, that are dominated by women, have men earning more than women. Wal-Mart not only overworks, under pays and discriminates against women, but it also provides neither childcare for workers or affordable family health benefits.
Unaffordable Healthcare Deductibles
Wal-Mart employees are incapable of receiving healthcare benefits available for them because of its high cost and their low wages. Since most of Wal-Mart’s employees are unable to afford these health benefits, most of these individuals either turn to government aided insurance such as Medicaid, depend on their spouse’s plans, or expect to see a doctor in rare and emergency cases with no insurance. It is argued that uncovered Wal-Mart employees are not signing up for medical insurance and benefits because most of them exceed the income ceiling and are not eligible.
Wal-Mart provides insurance for over 900,000 employees that are with and with out dependants. Employee premiums range between $143. 54 to $249. 71 per month for family coverage and $33. 04 to $72. 04 per month for single coverage. The National Average of workers covered by employer health insurance is 67 percent, and only 47 percent of Wal-Mart’s employees are covered by the company’s health care plan. That is a huge gap when considering that each percent represents thousands of people.
Most Wal-Mart employees have a difficult time deciding whether to attain health insurance or stay uninsured for the sake of saving money. ‘Cynthia Murray, who has worked at a Wal-Mart store in Laurel, Md. , for six years, suffers from asthma, but goes to see a doctor only when she suffers a bad attack. Murray is 50 years old, makes $9. 47 an hour, and says that the Wal-Mart plan that costs $23 a month has a $1,000 deductible, which makes it too expensive for her to use. Another plan subtracts $100 from her paycheck every two weeks.
“I don’t think anybody working at Wal-Mart has that kind of money,” says Murray. “All I’m asking from Wal-Mart is a fair share. ”’ (Gogoi). Many Americans question why Wal-Mart, one of the richest companies in the United States, can’t offer affordable health insurance and pay a living wage. Comparing Wal-Mart’s employee health benefits and wages to Costco’s employee health benefits and wages, one will notice that Costco not only pays its employees higher than Wal-Mart but their deductions are far less. “The average wage at Costco is $17 an hour…. a full-time worker at Wal-Mart makes $7.50 an hour on average.
Costco workers pay just 8% of their health premiums, whereas Wal-Mart workers pay 33% of theirs. Ninety-one percent of Costco’s employees are covered by retirement plans, with the company contributing an annual average of $1,330 per employee” (Cascio). Based on these facts, it is easy to say that Wal-Mart employees are giving up a large portion of their paychecks to obtain health care. Wal-Mart employees who do have health insurance and receive coverage are paying more in premiums but receive less for their money; in large corporations this has become a trend.
New laws have been passed intended to force large corporations to control employee wages and reduce insurance deductibles. From law suits to employee complaints, Wal-Mart has recently thought of ways to reduce the cost of health benefits. The new plan would charge monthly premiums ranging from $25. 00 for individuals to $65. 00 for a family, making that 45-65% less than what employees contributed in the company’s existing plan. But it is not enough to reform the reputation Wal-Mart has lost or the vulnerable employees they let down.
High productivity and lowering costs is one of the top and most important objectives in business. Wal-Mart being the World’s largest retailer can afford to pay their “associates” more than what the minimum wage offers. They are in fact, the richest retailer in the world and yet neglect to provide their employees affordable health care with a livable wage. Even if Wal-Mart was to pass 100 percent of the wage increase on to consumers, the average impact on a Wal-Mart shopper would be quite small.
Wal-Mart’s choice of action toward employee wages, health benefits, and bias work environment have not only brought an enormous shadow over its employees’ lives but also over its own big business reputation. The injustice decisions made through out the history of Wal-Mart has changed many lives and has forever changed the American economy. In the business world, there is big, and then there is Wal-Mart. Recommendations Based on the conclusions presented above, the following actions are recommended:
1. Retaining “associates” already on staff would be more cost affective then high employee turnover.
2. Train employees. Give the opportunity to advance and have freedom to associate and organize.
3. Our analysis reveals that establishing a higher minimum wage for large retailers like Wal-Mart would have a significant impact on workers living in poverty or near-poverty.
4. In order to increase employee satisfaction, reforming the cost of health insurance would help keep Wal-Mart in good terms with their employees.
5. If Wal-Mart was to raise their prices by as little as a penny to the dollar it would afford them to pay the higher wages. Higher wages provide the employees opportunity to afford health coverage.
6. Implementing fair employment and labor practices. In other words, “Obey the Law”.
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Essay about Wal-Mart: The High Cost of Low Prices
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