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As Walmart Goes, so Goes the Nation

Impact of unemployment, stagnant wages

Yesterday, there was no Provolone cheese in the dairy section at my local Wal-Mart. In fact, many of the sections where sliced cheese is normally present in abundance were completely bare.

So I ate my ham sandwich sans cheese.

I thought of this today when I read news reports indicating this is proving to be a bad year for Walmart, the world’s leading retailer.

Bloomberg this week reported the contents of a Sept. 17 internal e-mail between a Walmart ordering manager and a supplier that stated inventory at Walmart stores has outpaced sales growth, and that the retailer missed out on some sales because it didn’t have enough employees to keep shelves stocked.

Wal-Mart’s workforce has fallen by 120,000 since 2008, despite adding several hundred locations. The company’s same-store sales have dropped for two straight quarters.

All of which raises some questions in my mind.

What happens when a company doesn’t hire a sufficient number of employees, treats them poorly and pays them so little that turnover is astronomical?  Hmm … The shelves aren’t stocked even though the product sits behind a door in the store’s inventory. Shoppers don’t make purchases they would otherwise make.  The store loses money.

(This week Wal-Mart said it was adding 35,000 permanent workers and increasing the hours of an additional 35,000, as well as hiring 55,000 seasonal workers.)

And what happens when our society is upside down – when most of our nation’s profits bypass the middle class and go directly to the richest people in the country.  Hmmm … If the middle class doesn’t have the money to buy Walmart’s products, who will? How much Provolone cheese can Bill Gates, Warren Buffet, the Koch brothers and the Walton family eat? (Yes, the Walton family is on Forbes list of the richest people in America.)

Wal-Mart told CNBC that Bloomberg’s story was “misleading” and Wal-Mart spokesman David Tovar told CNBC that the company has hundreds of inventory categories that are being constantly managed based on consumer demand.

Still, Walmart shares fell 1.5 percent last week.

Some of Walmart’s plight is believed to reflect a more general malaise in the retail sector.  Back-to-school sales were disappointing and some analysts forecast that the Christmas spending season will be the weakest since 2009.

The Christian Science Monitor interviewed Howard Davidowitz, a retail consultant based in New York, who notes that Walmart represents about 11 percent of total U.S. retail sales.

“If you look at this economy, it’s a train wreck for [the bottom] 80 percent of the American people, and Walmart sells to that 80 percent,” said Davidowitz. And “77 percent of the new jobs created this year were part-time jobs. We have the lowest full-time labor participation rate in 35 years. Consumers’ incomes are not growing. One of six Americans are in poverty, and another one in six are an inch away from poverty.”

Walmart’s problems may seem trivial today, when our government is literally closed for business. However, one suspects the two matters are related

 

Walmart Dodges Bullet on Sex Discrimination

Scale of JusticeWal-Mart may have dodged the bullet for alleged systemic sex discrimination dating back at least a decade.

Last week a federal judge in San Francisco denied class certification in a statewide class action lawsuit filed by five female Wal-Mart employees in California on behalf of 150,000 past and present female workers in that state who  allegedly were denied equal treatment in pay and promotions.

This is the second defeat for plaintiffs seeking to file class action lawsuits against Wal-Mart on a state or regional basis. Wal-Mart won dismissal of a lawsuit in October that sought to represent female Wal-Mart workers in Texas.

 The U.S. Supreme Court last year rejected a 12-year-old class action lawsuit filed by six female employees of Wal-Mart on behalf of  1.6 million past and present female workers around the country. 

What’s left for the plaintiffs?

Class action lawsuits often are the only realistic way of addressing systematic discrimination by corporations because of  the high cost of litigation, the defendant’s “deep pockets,”  and the relatively paltry amount of damages typically available in individual cases.

Underwhelmed

Senior U.S. District Judge Charles R. Breyer ruled the California lawsuit failed to meet the  U.S. Supreme Court’s criteria for a collective legal action, including evidence of a company policy or decisions by higher-ups that affect all workers in the class. He the statistics “still do not reflect significant proof of a general policy of discrimination.”

Judge Breyer concluded the following evidence from the plaintiff’s is “underwhelming”:

  • About three-quarters of the stores paid women, on average, the same hourly rates as men. (Note: of course, this means that a quarter of Wal-Mart stores pay women, on average, a lower hourly rate than men. PGB)
  • Eighty-six female Wal-Mart employees in California described personal experiences of discrimination  – that represents only one woman for every 1,745 members of the proposed statewide class. (It’s unclear what number would be sufficient  for class action status- PGB)
  • The plaintiff’s produced evidence that Wal-Mart’s then-chief executive, Thomas Coughlin, in a 2004 meeting attended by district managers who approve pay and promotional decisions, said the key to success in choosing leaders was “a single focus to get the job done,” and that “men are better at focus.”
  • The plaintiffs said they had evidence of disparities throughout California and biased statements by top managers.

The U.S. Supreme Court ruled unanimously in June 2011 that the original lawsuit against Wal-Mart in 2001 failed to show any company-wide policy or attitude of discrimination  and said there were too many women in too many jobs at Wal-Mart to wrap into one lawsuit. The high court overturned lower court decisions that allowed nationwide class-action status.

Judge Breyer said the California lawsuit “is essentially a scaled-down version of the (nationwide) case with new labels on old arguments.” He said the plaintiffs challenged “the discretionary decisions of hundreds of decision-makers,” which, according to the U.S. Supreme Court, cannot be the basis of a class-action suit.  

Breyer said the remarks attributed to former Wal-Mart CEO Coughlin may have come from an outside consultant and were made after the period covered by the lawsuit.

Breyer, 72, was appointed to the federal bench in 1997 by then-President Bill Clinton.  His brother is U.S. Supreme Court  Justice Stephen Breyer.

Dodged a Bullet?

At one point, Wal-Mart, the nation’s leading retailer, was concerned about potentially serious liability for alleged sex discrimination.

In  2010, the New York Times published an article on a 1995 memorandum issued by Wal-Mart’s then counsel, Akin Gump Strauss Hauer & Feld,  that reported widespread gender disparities in pay and promotion at Wal-Mart and Sam’s Club stores.

The NYT reported the memo said that “women employed by Wal-Mart earned less than men in numerous job categories, with men in salaried jobs earning 19 percent more than women..”

By one measure, the memo states “. . . men were five and a half times as likely as women to be promoted into salaried, management positions.” Furthermore, in 1993, men employed by Wal-Mart as department managers were paid an hourly rate 5.8 percent higher than women in those positions. 

The Memo estimated that Wal-Mart’s potential legal exposure in a class-action sex discrimination suit was $185 million to $740 million for 1993 alone.

The  overall disparities in job assignments, the memo states, were “statistically significant and sufficient to warrant a finding of discrimination unless the company can demonstrate at trial that the statistical disparities are caused by legitimate, nondiscriminatory factors.”

At this point it appears that Wal-Mart has dodged that bullet.

Wal-Mart was “pleased” by California Judge Breyer’s ruling and said it has a had a  “strong policy” against discrimination in place for many years.

Taxpayers’ Xmas Present to Walmart?

WalmartWho pays when an employer does not offer health care or pension benefits to its employees, opting instead to pocket its profits?

Taxpayers.

 The Huffington Post has obtained a copy of Walmart’s health care policy, which shows that the, the nation’s largest private employer will begin to deny insurance to new employees who work fewer than 30 hours a week. The company can also choose to eliminate health coverage for current workers whose hours dip below the 30 hour threshold.

“This is another example of a tremendous government subsidy to Walmart via its workers,” says Nelson Lichtenstein, the director of the Center for the Study of Work, Labor and Democracy at UC Santa Barbara.

 In anticipation of the Affordable Care Act, experts say that Walmart  is effectively shifting the costs of paying for its employees onto the federal government.  The Act extends Medicaid to low- income citizens and many if not most Walmart employees working fewer than 30 hours per week would drop below the poverty limits for inclusion in the expanded program. Merry Xmas Walmart!

Meanwhile, Walmart Stores reported a 9% increase in third-quarter net income last month as the world’s largest retailer continues to bring back shoppers by emphasizing it has the lowest prices.

 The Associated Press reports that revenue for Walmart’s U.S. business, which accounts for about 60% of the company’s total business, rose 3.6% to $66.1 billion, while revenue at Wal-Mart’s Sam’s Club rose 4.7% to $13.9 billion. Revenue at its international division, which accounts for about a quarter of Walmart’s total revenue, rose 4.7%.

 Wal-Mart accounts for nearly 10% of nonautomotive retail spending in the U.S.

Walmart has reportedly instructed its public relations staff to stop communicating or responding to inquiries from The Huffington Post.

 

What about Walmart?

Note: Gillane was sentenced to 96 years in prison on 12/14/11.

A jury this week found John Gillane, 46, the Walmart employee who shot and wounded three of his supervisors last year, guilty of seven felony counts, including two counts of attempted murder with a deadly weapon.

But what about Walmart? Does this incident say anything about the employment practices of America’s largest retail chain? Or was it just a fluke involving an unstable employee?

A nine-year Wal-Mart employee, Gillane told police that Walmart was opening a new store that was causing a cut-back in employee hours and his medical insurance costs had increased. He said he believed one of the supervisors he shot, Eric Hill, gave him a bad evaluation and thought it wasn’t fair because Hill didn’t know him well.

According to the Reno Gazette Journal, Gillane told police he was tired of being mistreated and wanted to “get even and embarrass Walmart.”

Interestingly, after the October 29, 2010 shooting, the victims reportedly said Gillane was well liked, had no work issues, and they were unaware that he disliked them.  The three have recovered from their physical injuries but testified they still feel pain and emotional distress from the incident.

In a taped interview with police, Gillane said he decided the night before that he was going to confront the managers. “Was I disgruntled? —- yeah, I was disgruntled. I was going to take on Goliath,” he said.

He went to Walmart at 7:15 a.m. with two guns and purchased a box of ammo. He hid in a bathroom stall and loaded a gun and waited.

Gillane said he went to the office of manager Richard Sanders, passing several employees whom he did not shoot. He said he displayed the gun and told  Sanders to call the other managers into Sander’s office. He planned to tell them to call  the corporate level at Walmart Stores Inc.  so he could “go over all this stuff, how they’re crapping on us. I knew I was going to get fired. Then everything went wrong.”

Gillane said he panicked when Sanders bolted.

Prosecutors portrayed Gillane as a ticking time bomb who was frustrated with life and intended to kill the supervisors and go out in a “blaze of glory.”

Clearly, Gillane’s problems were much larger than the superstore. He was broke, had recently been evicted, and was upset that two wives had left him for other women, and he rarely got to see his 5-year-old daughter. Gillane had threatened to commit suicide two weeks prior to the incident.

Gillane was also convicted of three counts of battery with a deadly weapon causing substantial bodily harm, assault with a deadly weapon and carrying a concealed weapon.  After deliberating more than seven hours, jurors failed to reach a decision on whether he intended to kill the first manager he shot, Sanders, whom he reportedly hated the most.

There is a long history in the United States of disgruntled employees taking up arms and shooting supervisors and co-workers.  A series of shootings by postal employees in the 1980s led to the term, “Going postal.”

In a 2000 report, a commission empaneled to investigate violence at the post office recommended that  USPS management, unions, and management associations overhaul the dispute resolution processes, which was a significant source of frustration and tension for employees and managers, and boost pay for non-management personnel.

Wal-Mart employs about one percent of the U.S. population and earns profits of more than $15 billion a year. The New York Times has reported that starting in 2012 all future part-time Wal-Mart employees who work less than 24 hours a week on average will no longer qualify for health insurance plans, and Wal-Mart is cutting its contributions to employees’ health savings accounts by 50 percent. Premiums for Wal-Mart employees are expected to increase from 17 to 61 percent.

A few years ago, Walmart expanded coverage for employees and their families after facing criticism that many of its 1.4 million U.S. workers could not afford or did not qualify for coverage — rendering  them eligible for Medicaid.