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Tag Archives: Wal Mart

Reading in the Philadelphia Inquirer today a quote by a hiring manager from Wal-Mart caught my eye.  What struck me about this was that the brief piece noted that he worked at a “hiring center”.  That sounds interesting, because one might normally expect hiring to occur at the store level, not at a separate, specially designated center.  A quick google search unearthed an article noting that WMT had recently opened a hiring center, in Woodbury, NJ to help find 550 workers for a new facility in Deptford, NJ.  According to the New Jersey CAFR,  back in 2006 (as former state budget analyst, trust me, the wheels of government grind slowly and its hard to get very up to date information) WMT was the 6th largest employer in NJ after Shop Rite, Verizon, UPS, Harrah’s and J&J.  So here we have one of NJ’s largest employers actually expanding operations to hire new workers in the ninth most populous state next door to the nation’s sixth largest city.

Naturally, the people mentioned in the article appear to be looking for sympathy, but again, we see who WMT helps to employ.  One of the interviewees is a former real estate salesman.  Even money would bet that this gentlemen came to the real estate game during the recent bubble lured by the promise of quick riches with low barriers to entry (rumour has it that a typical real estate exam requires a pulse and little else).  None of this is made explicit in the article, but one can’t help but wonder. It seems as though WMT tends to catch individuals who have made mistakes in the past, whether that may be banking on a ethereal industry like real estate or having several children out of wed-lock that makes it difficult to find permanent work.  The members of one family of three interviewed have been unable to find work since October 2007. These individuals are normally supported by the social safety net.  However, in some instance, this breaks down.  In the case of the real estate agent, health benefits for him and his wife run to $1,300.  In other G7 nations, that is provided by the state.  Here, it will be provided by WMT, either directly or through a salary that helps to fund that cost.

So, while we don’t have a government safety net that provides employment or benefits to the family of three or health benefits for the Mr. and Mrs. Real Estate Agent, we have WMT.  More interestingly, WMT’s revenue stream this day appears more robust than that of the US or local municipalities!

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I have always believed that WMT has taken too much stick in the press about its human resources practices and its impact on “mom and pop” businesses.   Let us dispose of the latter first.  The bottom line is that WMT customers need not shop at WMT and are free to patronize small businesses.  In my opinion, WMT does away with a subsidy to small businesses.  Consumers have a choice: they can retain more of their disposable income by shopping at WMT or they can give some of it to smaller businesses.  As a former banker to post soviet enterprises, I personally saw many inefficient enterprises receive subsidies from the government.  If we agree that smaller businesses are less efficient than WMT in purchasing, pricing, inventory management etc., then we might also agree that patrons of small business effectively subsidize these less efficient operators in a way similar to the government subsidies I observed in the former Soviet Union.  So WMT effectively ended this enforced subsidy, tax even, off inefficient businesses.

But at the same time, WMT provides its own subsidy to workers in the form of employment.  I watched Wal -Mart: The High Cost of Low Prices and was struck by two common themes.  The first theme was one of complaint: that WMT does not provide benefits, pays too little, has questionable hiring and retention practices.  The second theme was one of desperation exhibited by those workers.  Interviewees had exhausted elements of the public social safety net and lacked skills to find better work.  I was struck by the consistency of these themes.  I don’t remember the exact plights, but generally the worker interviewed was female, poorly educated and the single mother of at least two children. Furthermore, these workers had exhausted the various exhaustable state and federal social programs and were forced to seek employment, landing on WMT as the only viable alternative.  These two themes converged to trace a profile of WMT as an extra-governmental social safety net.  These people were rather desperate and there opportunity set appeared to be limited to WMT and homelessness.   When we consider that WMT is often the largest private employer in many states, the extent of the social safety net it provides becomes clearer.

Casting WMT as a public good can be tricky, but as described above, not entirely ludicrous.  The argument strengthens when we think about how WMT’s aggressive supply chain practices emphasize consistently low prices.  We may conclude that the retailer may have helped play a role in containing core CPI.  Scholars have studied this topic and I believe concluded that inflation has benefitted from a WMT effect.

But the case for WMT as a public good grows as we consider its green initiatives.  In fact, these initiatives may even help to rehabilitate WMT.  First, WMT has aggressively pursued sustainability in packaging through its supply chain.  It even hired a person dedicated solely to this effort (Amy Zettlemoyer, although she hyphenated her name when she got married), which includes scoring suppliers based on the sustainability of their product packaging and delivery.  Now, WMT is populating the rooftops of its huge footprint stores and DCs with solar panels to help generate its own electricity. 

So as WMT once was hailed as an exemplary retailer, before being questionably pilloried for its HR practices, it stands to once again regain stature as a leading green retailer.

But that’s just one credit analyst’s opinion.