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Saturday, November 05, 2005

News Flash!

Grocery Workers Aren't Retail Workers?

Reading through the stories written about yesterday's Walmart conference, I was taken by one particular quote from the Chicago Tribune.

Among Crane's criticisms of the Wal-Mart-commissioned study was that the company seemed to lump all workers together instead of focusing on grocery workers, since 60 percent of all Wal-Mart's are now supercenters, which sell groceries. "They are treating groceries like any other retail sector," he said.

Now, I'm no rocket scientist (but I'm related to one) but what should we be treating groceries like? The dictionary defines retail as Of, relating to, or engaged in the sale of goods or commodities at retail. Isn't that what grocery workers do? Why should selling a head of lettuce pay more than selling a box of tampons?

The truth is grocery workers were for years treated different. They belonged to a union that kept wages, and your food prices, high. Walmart is changing that, and it's driving the unions nuts. (Disclaimer, I save about $25/wk on groceries at Walmart over local grocery stores)

I was disappointed because it seems from reading two papers takes on this that Walmart was looked at on an overall economic basis, and there wasn't any comparison done with other large retailers like Kmart, Kohls, and Target, to see how they compare to Walmart in terms of wages, etc. That would have been some interesting information to have.

Newsweek also has an article on this available here.


Blogger Kathy said...

The NY Times ran an article comparing Costco to Wal-Mart (“How Costco Became the Anti-Wal-Mart,” July 17, 2005). Here are some highlights from that article:

Costco’s average pay is $17 per hour, 42% higher than Sam’s Club owned by the Walton family).

Costco’s employees pay about 8 percent toward their health insurance vs. the retail average of 25%.

Costco has extremely low turnover rates and theft by employees.

Costco’s customers, who are more affluent than other warehouse store shoppers, remain loyal because they like the fact that low prices DO NOT come at workers’ expense.

Costco’s stock price rose more than 10 percent in the last 12 months. Wal-Mart’s fell 5 percent. Costco shares sell for almost 23 times expected earnings while at Wal-Mart the multiple is about 19. (This info was based on facts at the time the article was written.)

Jim Sinegal’s (CEO) salary is just $350,000 per year and he received a $200,000 bonus last year. That puts him at less than 10 percent of many other CEO’s even though the company ranks 29th in revenue among all American companies. Mr. Sinegal believes it is wrong for an individual to make 200 or 300 times more than the average person working on the floor.

Costco contributes generously to its workers’ 401K plans, starting at 3 percent of salary the second year and eventually rising to 9 percent after 25 years. The company’s dental insurance covers most expenses and part-time workers are eligible for health insurance after 6 months on the job. Less than half of Wal-Mart’s employees have health insurance compared to 85 percent at Costco.

Finally, the Teamsters union represents 14,000 of Costco’s 113,000 employees. The union said the company gave them the best contract of any retailer in the country. Compare that to Wal-Mart who shut down a store in Canada when the employees voted to unionize.

The one group of people unhappy with Costco are Wall Street analysts who feel the company is OVERLY GENEROUS to its workers.

Hope this helped give you a better picture.

11:25 AM  
Blogger Crazy Politico said...

Thanks for participating.

Just think how much more "social good" Costco could do if they payed only $15/hour, they could hire 1/7th more employees for the same wages, and they'd still be making a more than decent wage for retail.

As you noted, Costco's shoppers are more affluent, a nice way of saying they make more money than the average Sam's shopper, which means they can afford the difference in price that Costco's employment policies bring. Which is fine.

If Walmart raised its wages to Costco's level, they would obviously have to raise prices to cover the cost. Where would those less affluent shoppers go then?

And on a personal note, as a more affluent shopper, I still chose Sam's over Costco regularly because even though it costs me a couple bucks in gas to go to Sams, I get to keep about 10% more in my pocket on each trip.

And finally, if Sams/Walmart were to raise wages and benefits, and prices, how long do you think it would take Kmart or Target, who pay less than Walmart and offer less benefits (and a longer wait for them) to fill the void.

Remember, Walmart didn't get where they are by having high prices, or better quality than Kmart. They undercut them on price, have about the same quality. The roles would reverse, if Walmart jumped their prices.

4:03 PM  

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