|More Than Wal-Mart by Robert Kuttner
Published by the Boston Globe
August 19, 2006
ITS WAGES AND HEALTH benefits are so dismal that in
several states Wal-Mart displaces worker healthcare
costs onto tax-supported Medicaid for the poor.
Wal-Mart batters down wages not just in the United
States, but in Third World countries, where it plays
foreign suppliers against one another to demand the
lowest possible wholesale price (and wage).
The New York Times reported recently that Democratic
politicians from Senator Joseph Lieberman to his
winning opponent in the Connecticut primary, Ned
Lamont, are making Wal-Mart their nemesis. This focus
is certainly helpful in spotlighting one mega-employer
that is symbol and substance of an America where the
middle-class dream is vanishing, but the problems go
far beyond Wal-Mart.
The America of a generation ago had multiple
institutions for enabling worker incomes to rise with
their rising productivity. More industries were
regulated. The federal minimum wage was equal to about
half the average wage; today, it is below one - third.
The federal government actually enforced workers' right
to organize a union. Nearly half of US workers were
covered by decent, federally guaranteed pensions,
instead of funny-money worker-savings plans. Wall
Street was more tightly regulated, and corporate
executives were not able to grab such an outlandish
share of the total pie. Taxation was progressive, and
ordinary workers paid much lower rates. We did not
trade with countries that had something close to slave
labor, like the Chinese factory system.
Since the mid-1970s, under three Republican presidents
and too- often-feeble Democratic ones, this social
compact was blown up. Since the early 1970s, real
incomes for the top 1 percent have doubled, while
earnings for most Americans have stagnated.
Middle-class Americans have stayed even only thanks to
a second wage-earner -- an average increase of more
than 500 annual work hours per household. This is a
disguised loss in living standards, cutting into
leisure and parenting time, and incurring child-care
and transportation costs.
Politicians may legislate special laws, requiring
higher minimum wages for mega-stores (as Chicago has
done) or requiring them to contribute to health
coverage (as Maryland has attempted), but until our
political system addresses the larger problems, even
reforming Wal-Mart is a drop in the bucket.
The system is now essentially rigged so that workers'
productivity can rise, but workers' incomes can't. A
study prepared last month for Democrats on the House
Financial Services Committee and released by
Representative Barney Frank of Newton showed that since
2002 annual productivity growth has averaged more than
3 percent, while real wage increases have been under
half of 1 percent. Corporate profits, meanwhile, have
risen from 8.5 percent to 14.4 percent of national
Whenever wages show signs of rising with productivity,
the Federal Reserve whacks them back down. It shows no
such concern about corporate profits being excessive.
Until this month, when the Federal Reserve announced a
``pause" in rate hikes, our central bank had hiked
interest rates 17 times since June 2004, citing fears
of inflation, mainly in rising labor costs. But note
the sleight of hand. If workers' wages are lagging well
behind workers' increased productivity, then rising
wages are not a source of inflation. The rising ``total
labor costs" include pensions and health insurance.
Doesn't that benefit workers? In fact, the increase in
recent employer contributions to pension plans is
mainly to make up for the corporate looting of plans
during the 1990s.
In the stock market euphoria of that decade,
corporations used outlandish assumptions about future
stock market returns to reduce annual contributions
they were supposed to make to pension funds. The
replenishing of fund shortfalls in recent years is not
a source of true worker compensation -- and it can
hardly be burdensome given the huge increase in net
The hike in employer health insurance costs, likewise,
is not a true benefit for workers. It reflects a health
system out of control, and excessive charges and
profits by health maintenance organizations and drug
companies. Actual health insurance benefits to workers
are being cut back, and not just by Wal-Mart.
Corporations generally are hiking the employee share of
premiums, and plans are increasing deductibles and
I hope Wal-Mart does become a poster child for all
that's out of whack with the US economy. But we need to
go after a great deal more than Wal-Mart if politicians
are serious about restoring the dream of an America
where people who work hard and play by the rules can
aspire to be middle class.
Robert Kuttner is co-editor of The American Prospect.
His column appears regularly in the Globe.
Copyright 2006 Boston Globe