Posted on 06/16/2006 12:33:44 PM PDT by KneelBeforeZod
Wal-Mart Stores Inc. (NYSE:WMT - news) could significantly increase employee wages and benefits without raising prices, and still earn a healthy -- albeit smaller -- profit, research released on Thursday concluded.
The Economic Policy Institute study comes as the world's biggest retailer faces a barrage of criticism from labor unions, politicians and community activists, who say it pays poverty-level wages and drives competitors out of business.
Wal-Mart, which has taken steps to improve its health care and other benefits, argues that its low prices boost consumers' buying power and increase their standard of living. The retailer regularly cites a Global Insight study that found Wal-Mart saves U.S. families more than $2,000 per year.
"The more important question for the future isn't whether Wal-Mart is a force for good or evil in the American economy, but whether the economic benefits provided by Wal-Mart can be preserved even if their labor compensation is dramatically improved," economists Jared Bernstein and Josh Bivens wrote.
They concluded that if Wal-Mart reduced its profit margin to about 2.9 percent, where it stood in 1997, from the 3.6 percent margin it recorded last year, that would free up some $2.3 billion to pay workers without raising prices. That works out to just under $2,100 per non-managerial employee, the researchers calculated.
They noted that rival Costco Wholesale Corp. (Nasdaq:COST - news) posted a profit margin of about 2 percent in 2005. The study did not mention Target Corp. (NYSE:TGT - news), Wal-Mart's biggest competitor in the discount sector, which reported a 4.7 percent profit margin for last year.
In a telephone interview, Bivens said his research was aimed at refuting "outsized" claims that Wal-Mart saved consumers hundreds of billions of dollars and that its margins were so thin that it simply could not afford to pay employees more without forcing low-income consumers to foot the bill.
"I always thought that they had really, really tight profit margins," he said. "They're really a microcosm of the U.S. economy. They are very, very good at generating income, but it needs to be spread out more equitably."
His research refuted many of the findings from the Global Insight study released last year regarding how much money Wal-Mart saved consumers.
Jim Dorsey, a spokesman for Global Insight, said the research firm stood by the accuracy and methodology of its study, which was independently reviewed.
"Our study produced estimates of Wal-Mart's impact on prices and consumer savings that make common sense and are consistent with the findings of other rigorous, peer-reviewed studies on the subject," he said.
"In its criticism of Global Insight's findings, the Economic Policy Institute's paper does not properly account for the indirect impact of Wal-Mart on prices."
Wal-Mart said that its stores were good for U.S. working families, and noted that they created tens of thousands of jobs last year, many of them in underserved neighborhoods.
The retailer also criticized the Economic Policy Institute as "funded by big labor."
"We will treat the findings of this study with the same amount of skepticism as other statements made by labor leaders who oppose us," Wal-Mart spokesman Kevin Thornton said. "We are proud of the economic impact we have on communities -- from the job opportunities we provide, to the money we save working families, to the tax revenue we generate, to the contribution we make to local charitable organizations," he added.
Thornton said Wal-Mart's average full-time wage is $10.11 per hour, and the retailer does market analysis to ensure its wages are competitive. He noted that Wal-Mart offers 18 different health care plans that cost as little as $11 per month in some areas.
Bivens and Bernstein concluded: "Wal-Mart does a lot right. It has expanded productivity by being more efficient and leaner than many other companies. Many of the benefits shoppers accrue from Wal-Mart's expansion could be preserved even if the retailer had to meet the expectations of its critics regarding fair worker compensation."
Surprise, surprise -- the board is loaded with union thugs.
The Economic Policy Institute could feasibly also pound sand while at the same time keeping their heads firmly encrusted up their @sses, and still sound like a muffled "fart"!
You're confusing profit margins with return on investment. 3.6% is a healthy margin because it is a percentage of the sales, not of the original investment.
"Reuters could hike pay and keep unbiased reporting low"
or
"Economic Policy Institute could hike pay and keep union worker competence low"
Wonder how they will cope with the yuan revaluation.
I think everyone should be paid like lawyers, $500/hr.
And yet another FReeper swerves into the concept of "economic profit."
LOL! Are you joking? I sure as hell hope so.
If working at Wal-Mart is so bad....
8,000 Applicants For 350 Jobs At N.J. Wal-Mart
By DAVID LOMBINO - Staff Reporter of the Sun
June 13, 2006
Wal-Mart tomorrow will open its newest store just more than seven miles from Manhattan, in Kearny, N.J., part of its strategy to ring the city with stores in order to hasten their arrival here.
The store received more than 8,000 applications for 350 jobs, a Wal-Mart executive said.
http://www.nysun.com/article/34316
The Wal-Mart recruiters grabbed those 8,000 at gunpoint.
Outsmart 'em. Shop somewhere else and pay more.
That'll teach 'em.
There are a lot of folks around here who don't know what an ROI is, but still feel qualified to tell companies how to run their business.
You obviously have no clue how businesses work. That "predatory pricing" BS is a myth; companies that tried it have failed because the moment they hike prices, people go elsewhere and new competitors enter the market.
>>>no one takes a low rate like that for nothing, what..... to help consumers???
No, to make a profit. Here's the idea: You give your dollars in exchange for goods. You want their goods more than your dollars. They want your dollars more than their goods. So everybody is better off.
How would that sit with the effin Marxists at the Economic Policy Institute
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