The Hidden Cost of Everyday Low Prices

As consumers, we reap the benefits of globalisation. We enjoy ever-expanding product lines at ever-shrinking prices. Preoccupied with this penchant for low prices, we often accept the claim that globalisation delivers growth and prosperity to countries around the world without question. However, this blithe acceptance of global capitalism obscures some of the shocking realities faced by workers worldwide, which have arisen as a result of the processes of global restructuring that have been taking place since the 1970s. These developments, rooted in neoliberal principles which aim to achieve the conditions for the mobility and free operation of capital, are presenting significant new challenges for workers across the globe. In this guest post, Louise Elliot assesses in more detail the implications for workers in the Global North and South in an analysis of the operations by the large international retail giant Wal-Mart.

Globalisation and the increasing power of transnational corporations

Production has become increasingly transnationalised since the 1970s. As a result of an abundance of low-wage labour open to international investment from transnational corporations (TNCs), networks of low-cost suppliers have emerged in East Asia, allowing the production of manufactured goods to be organised across traditional state boundaries. These structures, known as global commodity chains (GCC), are facilitated and controlled by TNCs. They form the basis for global capitalism and play an increasingly important role in the global economy.

This newfound power of TNCs has granted them greater control of their workforce, which has led to the emergence of exploitative methods of labour control. Large retailers such as Nike were heavily criticised throughout the 1990s for their use of sweatshop labour in China and Vietnam. However, the plight of workers in developed countries has received relatively little attention. More recently, there is mounting evidence to suggest that the exploitation of workers by TNCs reaches beyond the sweatshops of East Asia. Therefore, in this post I aim to cast light on the experiences of workers in both the Global North and South, suggesting that there are parallels to be drawn between these two diverse sets of workers. Wal-Mart, as the world's biggest business by revenue and the 'poster child of neoliberal globalisation', will be the primary focus. 

Wal-Mart in the Global North: The United States.

Beginning as a small-town store in Arkansas in 1962, Wal-Mart now sells more than the next three biggest global retailers combined. With an unrivalled market presence, over 90% of Americans live within 15 miles of a Wal-Mart store. The secret to its unparalleled success lies in its 'everyday low prices' model; indeed, it offers prices on average 14% lower than its direct competitors. Yet shoppers are only just beginning to realise that the $12 price tag on a pair of jeans has dire consequences for the 1.4 million Americans working for the company. One of these repercussions is low wages; the average employee, earning $8 per hour, receives 31% less than other grocery and retail chain workers.

Photo by Mike Kalasnik

Given that for two-thirds of Americans, Wal-Mart is the largest single employer in the state they live in, many Wal-Mart 'associates' have little choice other than to settle for substandard salaries. Anecdotal evidence from former employees also reveals grievances regarding working hours and social coverage. While off-the-clock work is not officially endorsed by the company, the unrelenting focus on cost-cutting means that unpaid overtime is commonplace - several employees suggested they were asked to continue working after their shifts had finished, with the implication that they would be dismissed if they refused to comply. Wal-Mart claims that this is an "infrequent and isolated problem", yet in the year 2000 alone, 38 lawsuits across 30 states were filed against the corporation regarding uncompensated working hours.

Wal-Mart also fails to provide adequate in-work benefits, such as healthcare. Workers who do receive medical assistance face huge premiums of up to 20% of their annual income; other part-time employees are excluded from the programme altogether. In fact, the company has been criticised for deliberately denying full-time status to many workers in order to reduce its labour costs. Consequently, many Wal-Mart employees are dependent on public programmes - in effect, Wal-Mart has displaced many of its labour costs onto the taxpayer, a bill totalling $1,557,000,000 every year.

Photo by Brave New Films

Most shockingly, any attempts by employees to organise against this exploitation are quashed immediately by the company. Wal-Mart's preventative anti-union efforts include propaganda material used in staff training, a 24/7 anti-union hotline, and a $7,000,000 rapid response team. Even in cases where workers have been successful in securing a union election, Wal-Mart has taken sweeping and extreme action in response. In Jacksonville, Texas, Wal-Mart responded to a vote by butchers to join the United Food and Commercial Workers union by eliminating meat-cutting operations from 180 stores in favour of pre-packaged meat. It is evident that Wal-Mart, rather cunningly, creates and reproduces the conditions necessary for 'everyday low prices', by increasing the number of American consumers who simply cannot afford to shop elsewhere. 

Photo by OURWalmart

Wal-Mart in the Global South: China.

Wal-Mart entered the Chinese market in 1996, opening its first retail outlet in Shenzhen, one of the main designated export-processing zones in China. This global expansion has had a significant impact on its network of suppliers across East Asia. In an age of intensified global competition among contractors for the orders of big-box retailers, firms supplying to Wal-Mart have scrambled to cut costs in order to meet the 'everyday low prices' mandate. This has sparked a 'race to the bottom', where suppliers strive to create the lowest-cost conditions. As a result, the millions of employees indirectly employed by the company are exploited in similar ways to domestic workers in the U.S., as cost-cutting is displaced onto workers. Wages are extremely poor; even though the local minimum wage in Shenzhen is much lower than the U.S. federal minimum wage - $1.85 compared to $7.25 - many Wal-Mart suppliers violate these laws in an attempt to lower their costs even further.

Photo by Reibai

A study by the International Labour Rights Fund found that one Wal-Mart supplier consistently paid their employees $1.80 per day, less than half the local minimum wage. Wal-Mart's Chinese employees are also forced to work excessive unpaid overtime. Reports of 17 hour shifts demonstrate clear violations of Chinese labour law, which stipulates an 8-hour maximum working day. Yet Wal-Mart contractors continue to ignore these laws in order to meet the high level of efficiency demanded by the retailer. Perhaps most shocking of all is the working conditions inside many supplier factories - employee interviews and smuggled mobile phone photographs reveals a lack of proper training and protective equipment, which has resulted in a range of respiratory problems, skin burns and rashes, and the loss or break of 40,000 fingers per year. These conditions persist despite annual audits of supplier factories by Wal-Mart; factories are given several days’ notice, which allows fake documents to be produced and employees to be coached on what to say to auditors, concealing the true fate of workers.

Like their American colleagues, Chinese employees can do little to resist this exploitation. Areas like Shenzhen are staffed largely with migrant labour, who are denied official worker status under Chinese law. Wal-Mart contractors are able to exploit these loopholes and disregard such laws aimed to protect workers. Despite concessions by Wal-Mart to the All China Federation of Trade Unions in 2004, which allowed its Chinese workers to affiliate with the union, many Wal-Mart subsidiaries control 'yellow unions', a term used in Asia to describe organisations which are undemocratically elected and controlled by employers. As a result, workers have little bargaining power and cannot instigate independent unionising efforts.  

What next for Wal-Mart workers?

However, despite these shocking realities faced by Wal-Mart employees around the world, there are grounds for optimism. There has been a new wave of successful resistance against Wal-Mart, with small-scale strikes in October 2012, and protests in all but four U.S. states on Black Friday in November. A week-long strike by workers in Massachusetts and California followed in 2013, the first ever successful prolonged strike against Wal-Mart. In China, resistance is emerging at the local level, with the establishment of the independent 'Wal-Mart China Staff Association' to pressure the ACFTU to allow democratic elections of union representatives.

Photo by UFCW International Union

Transnational solidarity among employees is also beginning to emerge, thanks to efforts by the UNI Global Union to coordinate and connect Wal-Mart workers across both hemispheres. Although these movements are in their early stages, it is clear that workers' consciousness of the importance of fair representation, and the belief that they can act in ways which will impact their employer, are emerging. It is thus likely that these movements will continue to gather momentum, a long-awaited triumph for Wal-Mart workers worldwide.

Louise Elliot has successfully completed her BA in Politics in the School of Politics and International Relations at the University of Nottingham/UK in June 2016. Her dissertation  on Neoliberal Globalization and the Exploitation of Labour: A Study of Wal-Mart was awarded a first class mark.