April 27, 2004

Wal-Mart and the Death of the Labor Movement

By Richard Baehr

For many years, civil rights advocates have complained that major commercial chains— supermarkets and department stores, avoided locating stores in inner city neighborhoods.  Now Wal—Mart has decided to enter these neighborhoods. But the welcome mat has not been thrown out for them. 

 

Residents of inner city neighborhoods often have to travel downtown today for department store shopping.  In many older cities in the East and Midwest, some downtown department stores have closed, as city and shopper populations declined, following decades of suburban flight.  Without area supermarkets, inner city residents have relied on smaller neighborhood grocery stores, where most items sell at substantially higher prices than in supermarkets. So Wal—Mart would seem to fill the 'shopping gap' for inner city residents.

 

In most of America—region>, shopping means Wal—Mart. America—region>'s largest employer (other than the federal government) is now found in every state, and surrounds or is in every major city. The company has become the discount store that sells almost everything.  It has even become the nation's leading grocer. 

 

But Wal—Mart's domestic growth prospects are beginning to slow. Opening new suburban stores almost inevitably cannibalizes some sales at existing suburban stores.  Wal—Mart began by serving smaller communities, and these stores have in some cases saturated their available market (one Wal—Mart superstore, located near my summer home in a town of 15,000 in Maine, has annual sales of well over $100 million, a pretty high share of all the disposable income that area residents spend in stores).

 

Big growth opportunities remain overseas —— in Europe and Asia, where no other chain has achieved the organization and efficiency of Wal—Mart. So Wal—Mart has decided to enter the inner city, the last major American market that it has not tapped.

 

As reported in recent articles in the National Review  and City Journal, the company has received a cold shoulder in some of these new potential sites.  In the Los
Angeles area, a coalition of environmentalists, unions and civil rights groups convinced area residents to bar Wal—Mart.

 

In Chicago, Wal—Mart has decided to locate two new stores in heavily African American areas of the city: the South Side, and the West Side.  Here, too, they have faced opposition.  The opponents are principally Jesse Jackson, and his Rainbow Coalition, and a few major unions. 

 

Jesse Jackson is a dependable opponent of anybody who has not yet paid him off.  Jackson is America—region>'s most successful racial shakedown artist.

 

The unions hate Wal—Mart because it has successfully maintained itself as a non—union company. The unions have been unsuccessful in getting Wal—Mart employees to agree to join unions.  So, instead they criticize Wal—Mart for having lower—paid workers than the unionized work forces of some other companies (particularly certain major supermarket chains).   In some cases, this may be true. But Wal—Mart employees also have health benefits, retirement plans, and stock—purchase plans, and the job stability and promotion opportunities of working for a growth firm.  And its employees are far better paid than the employees of the local bodegas, conveniences stores, and small retail shops they sometimes drive out of business after they open.  Most important, Wal—Mart brings great convenience for shoppers, and much lower prices than they are used to seeing.

 

 In Chicago, neighborhood leaders, particularly African American ministers, have struck back at these Wal—Mart opponents, who claim they represent area residents and workers.  The ministers say their people want Wal—Mart. 

 

Those who complain that the Bush tax cuts didn't reach the poor should presumably welcome the Wal—Mart 'cost cuts' when they come to urban areas, since they enable residents to significantly lower their total bill for food, household items, furniture, electronics, and clothing.  And then there are the new jobs. Wal—Mart creates many more jobs than it eliminates in the stores that might close.  Store construction creates jobs too. Many of the jobs are filled by area residents, in neighborhoods that often have double the national unemployment rate.

 

In Chicago, the ministers helped convince the local aldermen to support Wal—Mart. And now the unions and Jesse Jackson are in retreat. Mayor Daley and many aldermen on the City Council waited to see how the politicians from the affected communities would react, before weighing in themselves. When the local aldermen indicated they wanted Wal—Mart in their communities, much of the opposition disappeared.   Now the opponents say they are okay with the stores, so long as they are not superstores selling food. That position will not fly either, I believe. What is achieved by only providing discounts for a portion of what the store could potentially sell? Food makes up the largest share of all disposable income spending for inner city residents.

 

As in many other cases, in opposing Wal—Mart, the unions are fighting the greater good because it conflicts with their increasingly narrow—minded, self—interested cause.  There was a time, not that long ago, when unions had a far different role in society.  Their membership strength was in the industrial unions, and while their leaders fought for workers rights, they also were tough supporters of America—region> in the Cold War.  Most union members, then as now, were members of the Democratic Party. But in the pre—McGovern era of the Democratic Party, the unions and their leaders (like George Meany) were cold warriors, like their political friends, Henry Jackson, and Hubert Humphrey.

 

Today, organized labor is just over 10% of the national work force. This percentage declines every year. Union members today are increasingly members of service and municipal unions, and industrial membership has dropped with the falloff in manufacturing jobs.  A strong argument can be made that the policies of unions contributed to the falloff in manufacturing jobs in the country. When you demand higher wages, higher benefits, no layoffs or outsourcing, and corporate payment for 100% of health insurance costs, eventually, companies will become uncompetitive and fail. It is not by accident that the Japanese auto—makers have located their factories mostly in non—union small towns along the I—75 corridor through the Middle West and South. Their workforces have expanded as unionized Detroit auto—maker workforces have dropped by half.

 

But the death knell for the unions probably occurred with the accession of John Sweeney as head of the AFL—CIO. Sweeney is a hard—line leftist. He sees victories for his members through helping the Democrats win control of Congress, not through collective bargaining victories or membership growth. The AFL—CIO has never had less success organizing than in the Sweeney years.

 

Sweeney appears unable to see how unions can work with management (a view he seems to share with Ralph Nader). His union has become an arm of the national Democratic Party, at a time when the party has shifted to the left. So Sweeny has marginalized the labor movement, which was already in decline when he took over. He has made it an ally of Jesse Jackson, feminists, civil rights groups, moveon.org, anti—war groups, and trial lawyers (the unions are a key part of the never—ending asbestos litigation mess) —— in other words, just another special interest group on the left.

 

The AFL—CIO now spends much more on campaigns than it once did, and devotes much more employee volunteer time to elections. But so far the effort has not led to any noticeable electoral success, just as the union's organization efforts have consistently failed. In the Democratic primary race this year, the two candidates with the big union endorsements, Dick Gephardt and Howard Dean,  fared poorly in the Iowa caucuses, when their vaunted union organizational strength proved pretty frail in turning out voters.

 

This year may be a particularly large disappointment for Sweeney and his minions. The industrial unions and the Teamsters are not reliably left on many social issues —— think gun control, abortion, gay rights. Early polls by the AFL—CIO have found some distinct coolness among members to John Kerry, a man of considerable wealth via matrimonial means, with little ability to speak to working people with any sincerity or empathy.  Many union members also do not have a lot of reserves of sympathy for a candidate who thinks American soldiers were war criminals in Viet Nam—region> and tossed his and/or other soldiers' medals over a fence

 

The Wal—Mart controversy in Chicago is revealing. Since Wal—Mart jobs will not be union jobs, the unions are opposed to creating these jobs.  They have little concern for what Wal—Mart might mean to the communities where the company locates. Wal—Mart is a company, so it must be bad. It is also a non—union company, so that makes it particularly bad. 

 

The left likes to accuse President Bush and his supporters of stark black and white thinking, and unrealistically simplistic views of the world and political issues. Union views of Wal—Mart are about as nuanced as Ralph Nader's views on corporate America—region>.

 

Wal—Mart did not reach $250 billion in sales by antagonizing its customers.  They are doing something right.  If the unions (and the rest of the left) want to make Wal—Mart their cause celebre, they might want to consider for a minute why Wal—Mart is growing, and unions are shrinking.