By Jake Rossen
By Jesse Marx
By Michelle LeBow
By Alleen Brown
By Maggie LaMaack
By CP Staff
By Jesse Marx
Shortly after 7:30 a.m. on a brutally cold January morning, the parking lot of the Inver Grove HFeights Wal-Mart is packed with vehicles. Inside the store, several hundred people are gathered beneath the fluorescent lights and red, white, and blue balloons. The shelves are freshly stocked with $2 boxes of Chips Ahoy cookies and $2.77 12-packs of Angel Soft toilet paper.
Veterans of Foreign Wars, Post 295, of South St. Paul, has just presented the country's colors. Now store manager John Hamm steps up to the microphone and begins ticking off a list of local organizations that have received donations from the Bentonville, Arkansas-based retailing behemoth in celebration of the store's opening: the Simley Theater Guild, the Eagan Heights Figure Skating Club, local police and fire departments, the Inver Grove Heights School District. The contributions total $24,000--or roughly the amount Wal-Mart takes in every three seconds.
After Inver Grove Heights Mayor George Tourville declares it a "great day," the Simley High School dance team takes the floor. A dozen or so girls in black tights and glittery tops perform a high-stepping routine to some Mellencampesque rock music.
Then it's time for the ritual that culminates the opening of every Wal-Mart store around the world: the Wal-Mart cheer. Led by Hamm, several hundred enthusiastic adults shout out a call-and-response salute to the mighty retailer:
Give me a W! W!
Give me an A! A!
Give me an L! L!
Give me a Squiggly! Squiggly!
Give me an M! M!
Give me an A! A!
Give me an R! R!
Give me a T! T!
What's that spell?
Whose Wal-Mart is it?
Who's number one?
The Customer! Always!
And with that, Wal-Mart has established another outpost in its retailing empire. There are roughly 3,500 Wal-Mart stores across the country--more than twice as many as those of its closest competitor, Target Corporation--with new stores launching at a rate of nearly one per day. The Inver Grove Heights opening marks the company's 59th outlet in Minnesota. But until recently, the glories of $3 gallon jars of pickles and Ol' Roy dog food (named after Wal-Mart founder Sam Walton's English setter) have only been available in outer-ring suburbs and rural Minnesota.
Now Wal-Mart is set to conquer the Twin Cities. New stores are slated for Woodbury and West St. Paul. There's talk of a Wal-Mart anchoring the redevelopment of Apache Plaza in St. Anthony, and Oakdale has been courting the retailer. In May Wal-Mart is supposed to take over the former Kmart location in St. Paul's Midway Shopping Center, marking its first foray inside the I-494 corridor.
The reason for the company's rapid urban expansion is simple: It's the last segment of the retail market left to conquer. "That's a new frontier for all of these big retail companies," says Stacy Mitchell, a researcher at the Institute for Local Self-Reliance who has studied Wal-Mart extensively. "They've saturated the suburbs and small towns. This is where they have to grow."
Wal-Mart is, by far, the largest corporation in the world, with sales last year of $244.5 billion--or more than five times those of Target. It employs 1.3 million people and is the largest employer in almost half the states in the country. The company easily sells more detergent, dog food, toothpaste, shampoo, deodorant, and diapers than any other retailer and operates the largest fleet of trucks in the country. In fact, according to Fortune magazine, Wal-Mart is now responsible for 2.3 percent of the country's gross national product, a figure approaching the dominance of U.S. Steel during World War I and General Motors in the 1950s.
The growth of Wal-Mart has long been mythologized as some kind of modern-day corporate Horatio Alger story, with its folksy founder transforming a humble Arkansas retail operation into a multi-billion-dollar cultural phenomenon. In the last few years, however, the facade--symbolized by the company's ubiquitous yellow smiley face icon--has begun to crack. Stories of Wal-Mart's dreadful treatment of its employees and ruthless business practices have become too ubiquitous to ignore. The company's relentless emphasis on cheap prices is driving manufacturers to open plants overseas and causing competing retailers to cut employee wages and benefits.
A case in point is Target Corporation. Starting this month, Target employees who work less than 20 hours per week are no longer eligible for paid vacation and health care coverage. The Minnesota-based retailer has also joined Wal-Mart in relentlessly pressuring manufacturers to lower costs: A recent UBS survey found that Target has successfully narrowed the pricing gap so that its prices are now just 4 percent higher than those of its gargantuan rival.
Another illustration of Wal-Mart's impact on other retailers is the protracted labor dispute that recently ended in southern California. From last October to February, some 60,000 supermarket employees were either on strike or locked out of their jobs. The companies successfully demanded concessions on wages and benefits in order to better compete with Wal-Mart. The fallout from that strike could have profound ramifications for workers in the Twin Cities and across the country. "If they can do it to us here, then Katie, bar the door," says Michael Straeter, president of United Food and Commercial Workers, Local 1442, one of the affected unions.
In February 2000, the meat-cutting department at a Wal-Mart Supercenter in Jacksonville, Texas, voted to join the UFCW. It marked the first time since the company was founded in 1962 that employees had opted for collective bargaining. The response from Wal-Mart was extraordinary. Rather than bargain with the employees, the company chose to eliminate all meat-cutting departments nationwide. In addition, four of the workers who'd voted to join the union were fired. Since then Wal-Mart has only sold pre-packaged meat.
The company's animosity toward organized labor is practically pathological. New hires are shown a video laying out the evils of collective bargaining and the company operates a 24-hour "union hotline" for managers to call if they detect union activity. At the first whiff of organizing, a team from corporate headquarters is dispatched to quell the uprising. Bernie Hesse, an organizer with UFCW Local 789 in South St. Paul, says that the fear of unions is so pervasive among employees that when he attempts to engage them in conversation their response is to simply stare at the floor. "That's a culture I've never seen before," Hesse notes.
Of course, Wal-Mart is far from alone in being virulently anti-union. In recent years, it's become a standard business practice to thwart organizing efforts by any means necessary, particularly at large retailers such as Target and Home Depot. But as the episode in Jacksonville shows, the characteristic that separates Wal-Mart from other companies is its willingness to employ incredible, drastic measures in order to ensure that labor costs remain as low as possible.
There are currently lawsuits pending in 25 states, including Minnesota, charging that Wal-Mart systematically deprived employees of overtime pay. In the first case to go to trial, in December 2002, a federal jury in Portland, Oregon, unanimously ruled that Wal-Mart was guilty of withholding overtime pay at its 18 stores in the state. A judge is currently deciding how much the company should pay in penalties. Other class-action lawsuits have not been as successful: In January a Florida judge dismissed a similar claim.
The Minnesota case was filed in Dakota County District Court in 2001 by four former Wal-Mart employees. They allege that the company engaged in "a scheme of wage abuse and fraud" and that employees were routinely required to work off the clock and denied breaks. "The managers are under these strict rules not to allow overtime," says Jonathan Parritz, the attorney representing the plaintiffs. "That forces these managers into these practices of basically [taking] time from the employees." On November 3, Judge Thomas Lacy issued an order certifying the class and allowing the lawsuit to proceed. It could potentially affect some 65,000 people who have worked at Minnesota Wal-Marts since 1998.
Failing to pay workers the wages they're due is not the only nefarious practice that Wal-Mart has been accused of in recent years. There have been dozens of complaints of sexual discrimination lodged against the company. According to figures Wal-Mart provided to the Equal Employment Opportunity Commission, 72 percent of the company's employees are female, but two-thirds of management positions are held by men. In addition, female employees make, on average, 34 cents less an hour than their male counterparts in identical positions. In December 2002, the company agreed to pay $220,000 to a Phoenix woman who'd been turned down for a job because she was pregnant. Last September, Wal-Mart settled another lawsuit by shelling out $150,000 to a Dallas employee who allged she was punished after complaining of sexual harassment by a bakery manager.
Those payouts pale in comparison to what could be in store for Wal-Mart, however. In 2001, a class-action, sexual-discrimination lawsuit was filed in the U.S. District Court in northern California by six female employees. If the class is certified, it could become the largest such suit ever, potentially affecting 2.5 million women who have worked for the company.
But perhaps nothing has damaged Wal-Mart's wholesome, all-American reputation like the revelation that it relies on scores of illegal immigrants to clean its stores. In October, federal agents raided 60 Wal-Mart stores in 21 states and picked up more than 250 illegal immigrants. This followed similar raids in 1998 and 2001 that netted a total of 102 illegal workers. The employees had been hired by outside companies that the retailer contracts with for cleaning services. Following the October arrests, workers complained that they were denied overtime pay, rarely allowed time off, and paid as little as $2 a day. Nine of the former cleaners have filed a racketeering lawsuit against Wal-Mart in New Jersey State Court charging that their civil rights were violated. Wal-Mart has repeatedly insisted that it had no idea illegal immigrants were being employed to clean its stores.
Stacy Mitchell argues that this explanation doesn't make sense, considering Wal-Mart's reputation for exacting control, right down to setting individual store temperatures. "They can tell you how many tubes of Crest toothpaste were sold at store number 851 yesterday and yet they claim they had no idea that their contractors were using illegal immigrants and mistreating them?" Mitchell asks.
Wal-Mart's most profound impact on the labor market, however, has nothing to do with how the company treats its own workers. Because the retailer wields such tremendous buying power and controls such a large share of the market for so many products, it exerts incredible influence over suppliers. Companies need to do business with Wal-Mart in order to survive. Therefore they have little choice but to accede to the retailer's demands for lower and lower prices. In turn, pressures like these lead manufacturers to look for cheaper labor overseas, often under wretched working conditions. A recent story in the Washington Post detailed how workers at Chinese manufacturing plants that supply Wal-Mart are paid as little as $75 a month and sometimes work upward of 80 hours per week. Allegations of child labor abuses are rampant.
"They force their suppliers down to the lowest penny, and to make any money off of it they have to outsource it to China or wherever," says Ken Stone, a retired professor of economics at Iowa State University who has researched Wal-Mart. It's estimated that 80 percent of the company's products are now manufactured in China, accounting for one-eighth of the U.S.'s trade with the country. In the last three years, the U.S. has lost more than 2.8 million manufacturing jobs.
In the end, Wal-Mart's much ballyhooed low prices exact a heavy toll. "The reality is that we can ill afford the bargains that are at Wal-Mart," says Mitchell. "There is a tremendous price we pay for every penny we spend at Wal-Mart."
On October 11, some 60,000 unionized grocery workers at 852 stores in southern California went on strike or were locked out of their jobs. The dispute involved supermarkets owned by three companies--Safeway, Kroger, and Albertsons-- that currently dominate the market in that region of the country. After a more than four-month work stoppage, employees reluctantly agreed to a new three-year contract at the end of February.
It was the largest and longest strike in the history of the UFCW, the primary union that represents grocery workers nationwide. The stoppage is estimated to have cost the stores more than $1 billion in lost sales, but the companies remained resolute in their demands that employees accept lower wages and diminished benefits. "This was an employer-initiated event," says Ruth Milkman, director of the University of California Institute for Labor and Employment. "The union never wanted this strike. They weren't well prepared for it."
The contract that workers finally agreed to grants significant concessions to the grocery companies. Existing employees will receive no raises over the life of the contract and could have to pay for health insurance after two years. Most significantly, the settlement allows for the introduction of a two-tier labor system whereby new hires will receive significantly lower pay and benefits than current workers. Milkman points out that it won't take long for the lower-tier jobs to dominate the workforce. "Given that there's so much turnover in this kind of industry, in a decade that will be everybody, pretty much," she says. "The big picture is very bleak in terms of what it means for the long term."
The not-so-secret X-factor in the strike was Wal-Mart. Southern California--most notably the urban centers of Los Angeles and San Diego--is an untapped market for the retailer. Naturally, Wal-Mart intends to change that. The company plans to open 40 Supercenters, equipped with full-service grocery stores, in the coming years. With this threat to sales looming, Safeway, Albertsons, and Kroger demanded major concessions from their employees in order to cut costs. "They kept the Supercenters out up until this time," notes Iowa State economist Stone. "Now it's a given fact that Wal-Mart is coming in. The grocery stores can see the writing on the wall, as can the unions."
Outside southern California, the strike generated little publicity, but it could have major implications for workers across the country, particularly supermarket employees. Grocery clerks have long been practically the only retail employees that get paid something resembling a living wage. The average grocery worker involved in the southern California strike--at least for the foreseeable future--makes $13 an hour and receives free health insurance. By contrast, the median hourly wage for retail sales jobs nationwide in 2002, the most recent year for which data is available, was $8.51, according to the Bureau of Labor Statistics.
The stakes become even higher when you consider that retail is one of the only areas where job growth is occurring: According to the BLS, 596,000 such jobs will be created by 2012, a projected increase bested only by growth in nursing and college instruction. As manufacturers continue to migrate overseas, in part because of the buying power of Wal-Mart, retail is increasingly one of very few options available to workers who don't have college degrees. "We look at the future of retail basically being the future of the American middle class," says Chris Conry, an organizer with UFCW, Local 789, in South St. Paul.
Twin Cities grocery workers have so far avoided a fate similar to that of their counterparts in California. UFCW, Local 653, which represents about 14,000 workers in the west metro area of the Twin Cities, recently negotiated a new three-year contract for its workers. The companies agreed to continue paying employee health insurance costs and promised that workers who have been on the job for at least five years will receive regular raises of 80 cents per hour over the life of the contract. Part-time workers didn't fare as well: They no longer will receive automatic annual raises.
Next year the three-year contract for members of Local 789, which covers St. Paul and the surrounding suburbs, will expire. Local 789 president Don Seaquist says that Twin Cities grocery workers are in a stronger position than their counterparts in southern California because the local market isn't dominated by huge chains like Albertsons and Safeway that can weather a protracted labor dispute without suffering serious economic consequences. But he worries that as unionized supermarkets continue to lose market share it will eventually lead to an erosion of employee wages and benefits. "It's not just Wal-Mart," he notes. "It's everybody that's selling groceries, from SuperTarget to Wal-Mart to Aldi's to the SuperAmericas that sell bread and milk. Wal-Mart's just the biggest guy."
The southern California labor dispute has financially crippled the UFCW. The union spent hundreds of millions of dollars to support its California workers and some local unions were forced to mortgage their offices in order to raise cash. "Their treasury is gone," notes Milkman. "They had built a war chest but it's gone."
The California strike could prove to be a watershed moment for grocery workers. Just as the failure of the Hormel strike in Austin, Minnesota, in the mid-'80s symbolized the demise of the once-powerful meatpacking unions, the southern California work stoppage may be remembered years from now as portending the end of decent retail jobs. "Employers in the unionized private sector are definitely paying attention," says Milkman, noting that less than 10 percent of non-government employees are now organized. "Companies are clearly going to use this as a template for demands elsewhere."
On the day of the Wal-Mart opening in Inver Grove Heights, as hundreds of shoppers line up inside to get autographs from Minnesota Wild center Sergei Zholtok, UFCW Local 789 is staging a protest. It's a bone-rattling cold afternoon, with the wind chill dipping to minus 25 degrees, and just six people have shown up. They stand at the intersection of Cahill Avenue and Concord Boulevard, in the shadow of Wal-Mart, with signs that read "Welcome to Low Wages" and "What Cost to Neighborhoods?" Most cars passing by simply ignore them. A few honk. One guy in a pickup pulls over and chides them for criticizing Wal-Mart.
Local 789 is waging a lonely battle. It is attempting to educate the public about Wal-Mart's pernicious impact before the company can swallow all of its members' jobs. Since November, in anticipation of the opening of the Midway store, the union has been organizing meetings of concerned citizens and door-knocking in the neighborhood. Besides concern that Wal-Mart will kill off the crop of small, ethnic retailers that has popped up along nearby University Avenue, union members are particularly distressed because both a Cub and a Rainbow outlet operate in the same shopping complex where the new store will open. The fledgling group has put together a sort of Wal-Mart manifesto, calling on the retailer to regularly meet with Midway residents, hire a majority of its employees from the surrounding neighborhood, and pay wages of no less than $9.50 an hour, among other things. The goal is to convince politicians, area businesses, and residents to endorse these principles and then pressure Wal-Mart to embrace them.
Local 789 has no illusions that Wal-Mart will actually agree to such demands, but it hopes to gather enough support to get the company's attention and perhaps spur some organizing activity. "At the end of the day we don't see Wal-Mart as exclusively a union issue," says Chris Conry, who is leading the campaign. "Wal-Mart has an impact on everybody."
Conry and others argue that Wal-Mart will decimate smaller businesses along the University Avenue corridor, destroy living-wage jobs, and ultimately lead to higher prices for everyone. There is some evidence to back up this assertion. Iowa State's Ken Stone recently completed a study of the economic impact of Wal-Mart Supercenters on existing businesses in Mississippi, where the retailer has long been a dominant presence. Analyzing sales tax data, he and two other researchers determined that sales at existing grocery stores fell by 19 percent in the five years after a Wal-Mart Supercenter opened, while business at general-merchandise stores dropped by 12 percent during that same time period. "When Wal-Mart comes in and plants a Supercenter and it does $70 million a year, it doesn't come out of thin air," Stone notes. "It comes out of somebody else's cash register."
The city of St. Paul has little power to influence the company's business practices. Because Wal-Mart is not seeking any subsidies for the store, it's mostly free to operate as it pleases. "They won't put their hand out because they know that it comes with strings attached," notes Seventh Ward City Council member Kathy Lantry. In July, three council members, including Lantry, sent Wal-Mart a letter asking the company not to sell guns at the Midway store, to equip its shopping carts with technology that will prevent them from leaving the parking lot, and to pay a living wage. Wal-Mart acceded to the first two requests and ignored the last.
Some anti-Wal-Mart activists have taken matters into their own hands. In mid-February, the shell of the Midway store was vandalized. According to the St. Paul Police Department, somebody entered the building by kicking in a window. Then they proceeded to throw paint all over the walls and sabotage tools and equipment. According to the St. Paul Police Department, more than $10,000 worth of damage was done. "Right now the case has no major leads," says Commander Mike Morehead.
An e-mail message sent to City Pages and other local media outlets on February 20 claimed that the destruction was politically motivated. "This action was necessary in the face of Wall-mart's (sic) extreme oppression of its workers and total disregard for community," the note read. "Wal-mart is a key player in corporate dominance of people worldwide. Wal-mart is not welcome in our community; Wal-mart is not welcome anywhere. We will not stop these actions."
Although Local 789 doesn't endorse such measures, it shares the saboteurs' fear of the retailing behemoth. Wal-Mart does not presently have any Supercenters in the metro area, and therefore no full-service grocery stores, but UFCW members believe that at some point in the not-too-distant future the retailer will become a direct competitor. "Wal-Marts are all over the nation, like cockroaches," says Dessalines Jackson, a nine-year employee of Rainbow's Midway store. "It's just a matter of time before they expand into groceries."
Daniel Swanson, who works in the produce department at Cub Foods in the Midway, says that he refuses to shop at Wal-Mart, but that many of his colleagues patronize the company. "I hear people in the break room say, 'I went to Wal-Mart and I got a great deal on tires,' and all this other crap," scoffs Swanson. "I tell them, 'Hey, you're feeding the coffers of the people who are eventually going to take our jobs.' They're monsters."