Last week’s vote by the D.C. Council was just the latest round in the ongoing battle over whether Wal-Mart can open stores in the nation’s largest Northeastern and West Coast cities. The chain has encountered fierce resistance as it has sought to move into New York, Los Angeles, Chicago, Boston, San Francisco and now the nation’s capital. Elected officials in those cities have feared that America’s largest low-wage employer would compel long-established local retailers — most particularly, unionized supermarkets — to lower their wages.
A study by the Center for Labor Research and Education at the Berkeley campus of the University of California found that the opening of just one Wal-Mart store in a county where there previously had been none lowered the wages of general merchandise employees in that county by 1 percent, and grocery employees by 1.5 percent. The counties surveyed did not include those that encompassed the largest East and West Coast cities, where the gap between Wal-Mart’s wages and those of other supermarkets is greatest. But just the possibility that Wal-Mart might receive the go-ahead to open stores in Los Angeles in 2004 compelled that city’s supermarket employee union to accept a management demand to establish a markedly lower pay scale for new hires. When subsequent public opposition to Wal-Mart’s entry kept the chain largely out of L.A., the lower pay scale was eliminated the next time the union’s contract was renegotiated.
With Wal-Mart repeatedly failing to gain entry into the nation’s largest and most lucrative consumer markets, its investors might wonder why the company insists on maintaining its one-size-fits-all pay scale. Sam Walton founded and built the business in the rural South, where both the cost of living and the average pay levels were the lowest in the nation. However, it has not significantly adjusted its pay levels to accommodate the higher costs of living that workers in the nation’s priciest cities must bear. Twelve bucks an hour goes a lot farther in Bentonville than it does in Brooklyn. The executives at Costco, Wal-Mart’s closest competitor, know how to run a profitable discount chain that pays workers well: Its average hourly wage is just over $19. That’s why there are Costco outlets in the cities where Wal-Mart is still on the outside looking in.
By one measure, Wal-Mart’s insistence on bringing Southern wages north contradicts the spirit of Southern regionalism on which many of America’s (and now, the world’s) largest companies have come to rely. Knowing that both the cost of living and wage scales are lower in the South, and that Southern states’ right-to-work laws effectively blocked workers’ efforts to form unions, Northern manufacturers began opening plants there decades ago.
Wal-Mart’s goal is to erase that North-South difference by making every place the South. It commands such a large share of the nation’s retail sector that it has compelled its suppliers to lower their own pay scales all along its supply chain to provide lower-cost products.