1. Business Strategies and Employment Practices of Wal-Mart and other Mass Retailers Annette Bernhardt Brennan Center for Justice at NYU School of Law Prepared for the 56th Annual Meetings of the Industrial Relations Research Association, 2004

2. Backdrop 1.Economic pressures on employers Globalization of capital markets and production Advances in information technology Changes in financial markets 2.Institutional changes Deregulation of industries Decline in unions Decline in minimum wage Have resulted in:  Reorganization of work and production  On net, deterioration of front-line jobs

3. Growing wage inequality

4. Retail trade 18% of workforce (23.3 million workers) Low wages, few hours, few benefits, little training Major segments are:  Hard goods: department stores, specialty stores, mass discounters  Food: supermarkets, upscale grocers, mass discounters

5. Upheaval in the industry Strong increase in competition has led to an intense focus on cost-reduction  Industry maturation: “the overstoring of America”  Two new market entrants: “category killers” (Toys-R-US) and mass discounters (Wal-Mart)  Rapid consolidation of the industry – no more mom-and-pop stores  Increased power of shareholders in the stock market

6. The Wal-Mart model Immense coordination problem: Tens of thousands of products Shipped to more than 3,000 stores via 103 distribution centers Stores manned by a million workers serving more than 100 million customers weekly (domestic) The answer: “Just-in-time” linking of: 1. buying products from manufacturers 2. distributing them to the retail stores 3. selling them to customers

7. Three keys to success 1)Technology: Integrated inventory management Barcode at cash register Real time inventory updates Linked back to warehouses and suppliers Automatic replenishment 2)Relationship with suppliers Focus on core set of manufacturers Cut out middle men Relentless pressure for bigger discounts Require help in delivery and stocking products Require integration into Wal-Mart’s IT systems

8. Keys to success, continued…. 3) No investment in front-line workers Starting wages $6-$7 per hour; yearly raises 25 to 30 cents an hour Even department heads start at only $8/$9 an hour Chronic understaffing Full-time is defined as 28 hours/week: allows Wal-Mart to increase the hours without hitting up against the mandatory over-time limit Health benefits: workers must contribute 40% There is no pension plan; stock options plan hollow Virulently anti-union: growing evidence of wage & hour and labor law violations

9. Upshot Wal-Mart emphasizes reengineering process, not the workplace The model is extremely efficient, productive, profitable  Wal-Mart outperforms other retailers on almost every measure of productivity, sales, and profits  Has had profound impact on industry practice, throughout the supplier chain  Now the biggest private employer in the country  Near monopoly status in hard goods

10. Wages graph

11. Lack of career ladders Lean hierarchy:  Typical Wal-Mart store: one store manager, four assistant managers, 200 hourly workers  In 2002, general merchandise stores had: 6% Managers and professionals 6% Front-line supervisors 52% Sales workers 22% Office and administrative support Increasing external hiring of managers Retailers train workers an average of seven hours, putting the industry last among 14 business sectors

12. Can quality service help? High quality customer service requires skilled workers (Nordstrom’s, Home Depot) But there is also growing demand for fast, no- frills service and cheap products (McDonald’s, Wal-Mart) These two definitions of “good service” have led to segmentation of industry and job quality – and this is unlikely to change

13. Can new technology help? Technology has had a major impact on industry But effect has primarily been on back-end of retail operation Has not affected the actual work that sales workers do, has not increased demand for skill  Store workers still ring up sales, stock and neaten shelves, and handle lay-aways

14. Top ten occupations, job growth 2000-2010 Job growth Quartile rank of wages Skill requirements Food preparation and serving workers, including fast food 673,0004Short-term on-the-job training Customer service representatives 631,0003Moderate-term on-the-job training Registered nurses561,0001Associate degree Retail salespersons510,0004Short-term on-the-job training Computer support specialists490,0002Associate degree Cashiers, except gaming474,0004Short-term on-the-job training Office clerks, general430,0003Short-term on-the-job training Security guards391,0004Short-term on-the-job training Computer software engineers, applications 380,0001Bachelor’s degree Waiters and waitresses364,0004Short-term on-the-job training

15. The lesson The absence of “high-performance” does not mean lack of performance Alternative strategies have emerged, which do not emphasize human resources but which are nevertheless highly efficient and profitable Non-market intervention will be needed to shift retailers and other service firms away from the Wal-Mart model

16. Need two-pronged approach 1.Policies to shut off the low road:  (Re)create the legal structures that set the ground rules for what employers can and cannot do – i.e. wage floors, right to organize, “pay or play” health insurance, etc. 2.Policies to pave the high road:  At industry level, create intermediary institutions that simultaneously address issues of productivity and workforce training Different industries need different mixes of these strategies. Retail in particular will need an emphasis on #1.