Is Wall-Mart Good or Bad for Economy - Essay Example

HERE YOUR HERE YOUR HERE HERE Is Wal-Mart Good or Bad for the Economy? For the average citizen, Wal-Mart’s everyday low price business model provides considerable varieties of retail bargains. The company’s buying power is one of the largest in the world, giving the retailer the opportunity to provide products at much lower prices than other competitors in the retail marketplace. However, does Wal-Mart’s low pricing model and the company’s international presence actually harm the economy? Evidence suggests that the business creates more damage to the economy than good, making Wal-Mart a negative contributor to the economic landscape. Wal-Mart consistently pays low wages to its workers and has been the victim of a great deal of negative media regarding the firm’s unfair labor policies and pay-for-performance schemes. For instance, the average annual salary for the Wal-Mart cashier is only $11,948 per year on an average 29 hour work week (Wakeupwalmart.com, 1). The sales associate earns slightly more with an annual salary of only $13,861, which is below the national poverty line. One might consider employee wages to be an issue outside of the economy, however when employees are paid such small earnings, they are unable to buy the goods and services which feed the national economy. When Wal-Mart allows their employees to maintain yearly wages which are below the poverty line, the inability to buy puts financial stress on other retailers (outside of Wal-Mart), contributing negatively to the local economy. The Walton Family, majority ownership of Wal-Mart, are worth over $100 billion today (Walmartwatch.com, 1). However, despite this wealth, the fact that a singular family maintains such high influence in the stock of the company, this is a negative impact on the economy. When stock is offered to the investor, shares are diluted which gives the average investor the option to buy stock as a long-term investment. Because Wal-Mart does not need to raise capital often, the company does not regularly issue new stock outstanding. This creates a potential negative effect on the economy as independent investors would not be able to maintain any voice or control over the company due to the fact that the Walton family maintains controlling interest. Unlike other companies where the shareholder has a voice in business activities, independent investors would be unable to influence forward business activities within Wal-Mart, essentially allowing the company to use its enormous wealth to undermine the activities of local businesspersons and community citizens. Additionally, if Wal-Mart allows its employees to maintain wages below the poverty line, this also can put stress on local human services programs. When employees begin applying for food assistance or other governmental benefits, this strains the available resources to help others, preventing certain people from receiving assistance. If home mortgage payments cannot be made, the reality of foreclosure or repossession becomes evident, straining the real estate market and the financial industry as well which will be forced to write off bad mortgages due to foreclosure. Wal-Mart’s total yearly sales makes up the majority of all retail sales in the United States (Dolbow & Janoff, 2). When other retailers across the country are struggling to achieve high sales volumes, Wal-Mart appears to dominate in terms of higher sales volumes. When this occurs, Wal-Mart begins to erode the success of smaller retailers, namely the aptly-named mom-and-pop store, essentially driving them out of business. This creates a situation where local economies do not experience diversity of retail and does not allow small business owners to become successful. A local community which relies on tax revenues from a variety of businesses would be in terrible condition when the only tax-related income comes from a single store: Wal-Mart. In Iowa, Wal-Mart is considered responsible for the failure of 555 grocery outlets, 298 hardware stores, 293 building suppliers, 161 variety shops, 158 women’s stores, and 116 pharmacies (Sobel & Dean, 4). This represents a total volume of stores closed at 1,581 in Iowa alone. Multiply this by the amount of Wal-Mart stores across the nation and this represents the closure of thousands upon thousands of businesses simply with Wal-Mart being built in the local region. Wal-Mart also does not appear to maintain good relationships with diverse cultures. Wal-Mart has been accused of discriminating against Native American groups and building stores on what this group considers to be sacred land (Walmartwatch.com, 1). Wal-Mart decided to build a store in San Juan, only a mile away from an Aztec community which had been preserved for hundreds of years. At the same time, dense fields of alfalfa and corn were destroyed in this region to make way for the new Wal-Mart (Walmartwatch.com). For the many farmers who rely on crops in this region to make an ample living, Wal-Mart destroyed their opportunity to use agriculture to sustain their families and communities, thus making Wal-Mart able to harm local economies in yet another fashion simply through its construction. Across the globe, Wal-Mart is routinely fined for unfair and unjust labor relationships. In China, many workers are forced to assemble components for Wal-Mart products in less-than-hospitable factory environments. However, despite working conditions, Wal-Mart provides these workers with minimal wages, impacting the Chinese economy similarly to that of the United States when workers are underpaid. In fact, in many foreign countries, Wal-Mart has refused to negotiate labor contracts and labor agreements, providing foreign workers with a minimal pay and incentive package (Walmartwatch.com, 2). This creates a scenario where the power of Wal-Mart is even greater than foreign legislators and worker advocates, essentially providing little of value to the local economy in terms of providing a quality lifestyle for the firm’s workers. Finally, unlike large companies such as General Motors, Wal-Mart’s labor pool does not consist of full-time workers with quality healthcare. Instead, Wal-Mart provides, as previously identified, inferior wages and minimal health benefits (if at all). The labor market for Wal-Mart stores generally consists of teenagers, women, or retired citizens looking for a supplemental income (Barone, 28). In this scenario, the part-time workers is unable to receive quality health benefits, impacting the health care economy of the local community. When people are unable to pay for medical care, hospitals are forced to raise prices for products and services in order to remain profitable. If Wal-Mart allows its employees to fall through the proverbial cracks of healthcare, the impact to the economy is negative when health care costs rise for the local community. All of this simply because Wal-Mart attempts to avoid benefits payouts by keeping people at part-time status. It is clear that Wal-Mart maintains the ability to impact the economy in a negative fashion in far greater proportion than any good the company might provide. The business is able to provide great products at a very low price which benefits the shopper, however the shopper should consider that with each purchase they are contributing to Wal-Mart’s wealth and inability (or refusal) to pay quality wages to its workforce. With each bag of peanuts or jar of pickles purchased at Wal-Mart, the shopper is contributing to a break-down of the local economy and should, perhaps, shop more at the local mom-and-pop establishment to prevent total economic decay. For until Wal-Mart changes its policies, there will clearly be negative economic impacts which outweigh any benefits the firm might provide. Bibliography Barone, Michael. “The Wal-Mart Model”. U.S. News & World Report. Washington. Vol. 140, Iss. 1, 2006. Dolbow, S. and B. Janoff. “Wal-Mart Triggers Chain Reaction”. Brandweek. New York. Vol. 42, Iss. 23, 2001. Sobel, R.S. and A. Dean. “Has Wal-Mart Buried Mom and Pop?: The Impact of Wal-Mart on Self-Employment and Small Establishments in the United States”. Western Economic Association International. Retrieved 25 Nov 2008 Wakeupwalmart.com. “The Real Facts About Wal-Mart”. 2005. Retrieved 25 Nov 2008 Walmartwatch.com. “Low Wages, Always”. 2008. Retrieved 25 Nov 2008 Walmartwatch.com. “Sacred Lands: Wal-Mart’s Relationship with Native Americans”. 2007 Retrieved 25 Nov 2008 Walmartwatch.com. “Wal-Mart’s Global Labor Violations”. 2007. Retrieved 25 Nov 2008 Read More