Now Portland and the Portland Deveopment Commission, the city's urban renewal agency, are embroiled in a controversy over whether redevelopment at the east end of the Burnside Bridge should be anchored by a so-called "big box" store, like Lowe's or Home Depot. Progressives in the community, like my favorite radio talk show host Joe Uris, say "No way!" Big out-of-state retail operations, like the two being considered, hurt local retailers, they say, and ultimately suck money out of the local economy.
Well, probably so. Oregonian columnist Steve Duin wrote that he found 36 different kinds of a special kitchen cabinet hinge at locally owned Winks Hardware, but Home Depot didn't even carry them. Good hardware stores, the local and independent kind, are increasingly hard to find. We should do whatever we can to keep them around. Locating a Home Depot in inner city Portland won't help.
That said, there's a big difference between a good "big box", and a lousy one, like Wal-Mart, the world's largest retail employer. Everyone assumes that Wal-Mart is an efficient, if ruthless, business model. It makes a fortune largely because of its size and its poverty level wages and benefits. Consumers, and investors, benefit, while the workers suffer.
But what if the assumption is wrong? What if Wal-Mart isn't the efficient business model that it, and Wall Street, claim it is?
Last April, Business Week published an article comparing the performance of Costco to its rival, the Wal-Mart warehouse subsidiary, Sam's Club. And guess what? Costco, with its higher wages, its generous benefits, and its partially unionized workforce, won, hands down, in every significant category of business efficiency:
"Surprisingly, however, Costco's high-wage approach actually beats Wal-Mart at its own game on many measures. BusinessWeek ran through the numbers from each company to compare Costco and Sam's Club, the Wal-Mart warehouse unit that competes directly with Costco. We found that by compensating employees generously to motivate and retain good workers, one-fifth of whom are unionized, Costco gets lower turnover and higher productivity. Combined with a smart business strategy that sells a mix of higher-margin products to more affluent customers, Costco actually keeps its labor costs lower than Wal-Mart's as a percentage of sales, and its 68,000 hourly workers in the U.S. sell more per square foot. Put another way, the 102,000 Sam's employees in the U.S. generated some $35 billion in sales last year, while Costco did $34 billion with one-third fewer employees."
Now that's from Business Week, not some left-wing alternative 'zine. The authors have this to say about a low wage strategy:
"Yet the cheap-labor model turns out to be costly in many ways. It can fuel poverty and related social ills and dump costs on other companies and taxpayers, who indirectly pick up the health-care tab for all the workers not insured by their parsimonious employers. What's more, the low-wage approach cuts into consumer spending and, potentially, economic growth. 'You can't have every company adopt a Wal-Mart strategy. It isn't sustainable,' says Rutgers University management professor Eileen Appelbaum, who in 2003 edited a vast study by 38 academics that found employers taking the high road in dozens of industries."
They conclude:
"Costco shows that with enough smarts, companies can help consumers and workers alike."
To my knowledge, the Business Week findings weren't covered in the mainstream press, at least not extensively. I came across the article on a site named, appropriately, Inequality.org, which featured a piece originally published on Tom Paine. com, entitled "The Wal-Mart Myth." Here's a quote:
"The authors point out that Costco recently posted a 25 percent profit gain, as well as a 14 percent sales hike. Yet Wall Street punished Costco's stock, driving it down 4 percent. What gives? As the authors report: 'One problem for Wall Street is that Costco pays its workers much better than archrival Wal-Mart Stores Inc. does, and analysts worry that Costco's operating expenses could get out of hand.' 'At Costco, it's better to be an employee or a customer than a shareholder,' says Deutsche Bank analyst Bill Dreher."
"And there it is in a nutshell. In today's economy (or, for that matter, yesterday's economy), whether a company treats its workers fairly and satisfies consumers does not matter to Wall Street. Stock analysts don't reward such a feat--preferring instead that a company conform to Wall Street standards by wringing out every cent from regular people's wallets."
So, here's to the alternative press. Three cheers for a job well done.
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