Economist  explained why you shouldn’t shop at Walmart on Friday (Black Friday.) A dumbed-down America wasn’t listening. He laid out the hard truths about American labor:

A half century ago America’s largest private-sector employer was General Motors, whose full-time workers earned an average hourly wage of around $50, in today’s dollars, including health and pension benefits. Today, America’s largest employer is Walmart, whose average employee earns $8.81 an hour. A third of Walmart’s employees work less than 28 hours per week and don’t qualify for benefits.

A Nation Sliding Backwards

One of the reasons for the decline of the middle class in America is the decline of labor unions. Membership is down from 33% of private sector workers in the 1950s to fewer than 7% today. Walmart’s employees have no union to represent them, and have been receiving a tiny portion of the corporate earnings compared to that the United Auto Workers members received in the 1950s.

Last year Walmart earned $16 billion, reporting a 9% increase in earnings ($3.6 billion) in the third quarter, but most of the profit went to Walmart’s shareholders, including the Walton family.

  • The Walton family earned more on their Walmart stock than the combined earnings of the bottom 40% of American workers.

The employee strike on Friday was a show of protest against wages as low at $8 an hour, unsafe and unsanitary working conditions, excessive hours, and sexual harassment.

A Company In Denial

Walmart fought back, filing a complaint with the National Labor Relations Board to ban the strikes. OUR Walmart, the worker organization that is coordinating the protests backed by the United Food and Commercial Workers Union, estimates that nationwide, there were more than 1,000 individual actions. But Walmart chose to put out dishonest talking points, saying that less than 500 workers absented themselves. Bill Simon, president and CEO of Walmart U.S. issued this lie:

Only 26 protests occurred at stores last night and many of them did not include any Walmart associates. We estimate that less than 50 associates participated in the protest nationwide. In fact, this year, roughly the same number of associates missed their scheduled shift as last year.”

On a conference call Friday, Dan Schlademan, director of the union’s Making Change at Walmart campaign, said that, while his organization does not yet have a precise count of the number of workers who walked off since the strikes are ongoing,  there were hundreds of workers and thousands of supporters. Many cities around the country had higher-than-expected turnouts. According to The Huffington Post’s  and 

At the Walmart in Paramount, where The Huffington Post counted 600 people at one point, organizers later said that a total of 1,500 people had shown up. Nine people were arrested for sitting in the street, which had been blocked off for the protesters. Those arrested included three Walmart employees, a father of a worker, a former worker, two clergy members and two other supporters, according to organizers.

In places where fewer strikers than expected joined the protests, one reason is that the company intimidates anyone who considers joining a labor group. Three workers who did not participate strike told The Huffington Post that they shared the concerns about low wages, lost benefits and retaliation for speaking up, but they were too afraid of losing their jobs to strike.  Jaime Durand, a Walmart human relations manager  said:

In Texas, we own our parking lots. We won’t ask them to stop what they’re doing, but we will be asking them to leave private property so we can maintain a safe area for our customers.

Why It Matters To All

What happens at Walmart has far-reaching economic consequences. Its pay scale and working conditions set the standard for competitors. Today, the median wage is 8% lower than it was in 2000.  Without a vibrant and growing middle class, the economy will continue to falter. This is especially true now that most new jobs in America are in personal services like retail, and have low pay and bad hours. According to the Bureau of Labor and Statistics:

  • The average full-time retail worker earns between $18,000 and $21,000 per year.

“But Walmart Labor Policies Keep Prices Low”

A new study by the think tank Demos reports that low salaries actually depress the economy. The report finds that even raising the salary of all full-time workers at large retailers to $25,000 per year would lift more than 700,000 people out of poverty. The cost: only a 1% price increase for customers.

But what would the wage increase cost retailers? According to the report:

  • the cost to major retailers of raising salaries would be 1% of the sector’s $2.17 trillion in total annual sales – $20.8 billion.
  • Yet the increased purchasing power of lower-wage workers would generate $4 billion to $5 billion in additional retail sales.

Whatever Happened to Smart Management Practices?

The real costs of Dickensian labor policies like those practiced at companies like Walmart and Hostess are more than our economy can afford. At Hostess, labor unions were unfairly blamed for a pending bankruptcy that was caused entirely by this kind of mismanagement. The end result is that the workers, company and consumers all lose.

The Real Story At Hostess Brands: Hostess Brands, Inc., maker of Twinkies, founded in 1930, is about to permanently shut its doors, putting 18,500 people out of work. While management has been placing the blame on the BCTGM (Bakery, Confectionery Tobacco and Grain Millars International Union), the union representing Hostess employees, the real cause was inexcusably poor management.

  • The company has had two bankruptcies since 2004 due to poor management, as witnessed by the fact that it has had no less than six CEOs since 2002.
  • A Wall Street private equity firm and two hedge funds made matters worse, burdening Hostess with $800 million of debt.

Yet, the company was never moved to employ sound business practices to improve it’s market position.

  • In the 1990s, Hostess overextended itself, doubling its production facilities and employees.
  • In the early 2000s, ignoring the advice of market analysts, it bought back numerous shares of its own stock, which caused enormous debt described as “balance sheet degradation.”
  • During the 2000s, Hostess shut down 21 production facilities and cut its total workforce from 35,000 to 18,000.

To make matters worse, rather than face the fact that they were a company in distress, and working to improve their market position and rationalize their management, the company chose to ignore its fundamentals:

  • Hostess failed to invest in upgrading technology that was growing obsolete.
  • It failed to address the fact that it continued to lose market share.
  • It continued accruing debt.
  • It generously rewarded its top executives, doubling and even tripling their annual salaries.

Hostess’ Union Pitches In To Rescue The Company

Even so, following In the wake of Hostess’ 2004 bankruptcy, the union (BCTGM) did what they could to help, giving back $110 million in concessions. They showed more business acumen than the highly paid executives. They provided the give backs in exchange for the company’s promise that it would invest in new machinery and new technology, and improve it’s market position.

Hostess Fails To Do Their Share

Hostess broke that promise, and failed to follow through on those long-term investments. Instead they continued to churn their assets and their CEOs, rewarding themselves bigger bonuses. Rather than address their failing business model, here’s how they hey attempted to keep the scheme going by doing the following:

  • Management approached the BCTGM with unrealistic demands for pay and benefit cuts of between 27-32 percent.
  • They began looking to “harvest” as much of the company’s assets as it could on the way out.

The union and workers by now understood what was going on.  Hostess management could not be counted on to run a business. By a 92% vote, the union rejected the massive cuts, knowing the company was no longer sustainable.

Lessons Learned: Labor Has A Stake

Labor has a huge stake in the operations of a company.  By excluding them from the table, American businesses have written their own epitaph. While the corporate propaganda machine would have you believe that mismanagement of the American economy is the fault of the government and regulations, this is not even close to the hard economic truth that large corporations are running their businesses as cash cows for their top executives without regard for the real long-term interests of the company, it’s employees, consumers or the economy at large.  sums it up well:

Hostess is a cautionary tale. It’s a company that was not only systematically picked clean by Wall Street vultures, it’s one whose executives lavishly compensated themselves during its death throes. For Hostess, it’s been one reckless, greedy move after another — one management fiasco after another — and yet they’ve been unwilling to blame themselves. They blame the union for this whole mess.

Given the increased power of these vulture capitalists, Americans increasingly feel powerless to do anything but express angst in unfocused displays of tea party revolt. Rather than learn the lessons of history, our anger is increasingly coopted by corporate populist fronts like the tea party. The very fact that incompetent heirs like corporate vulture Mitt Romney and George W. Bush were considered to be viable presidential candidates is indicative of the extent of the problem.

So what can we do? Stand with the workers of Walmart, as they express their grievances.

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