Is Walmart Bad for the Economy?

Sunday, December 10, 2006
By Faisal Laljee

Since everyone on and off Wall Street has an opinion of Walmart (WMT) and the recent controversy that surrounds it, I figured it is my turn to sing the song that is Walmart.

First, I want to lay out the controversies that surround this behemoth:

Walmart is accused of unjust labor practices – this includes giving their workers minimum wage and not providing health insurance. My take on this – minimum wages are set by the federal and state governments. There are many companies, both small and large, that give only minimum wage to their employees. Now on the positive side, Walmart saves an average of over $2000 per year for those who shop there regularly. These shoppers who save so much, include the same demographic that works at Walmart. As for health care, Walmart is disadvantaged only by the fact that it is the largest retailer in the world. If that were not the case, this would not be an issue. Aside from Starbucks, no large employer I know of gives health insurance to part time employees, and this is due to the high cost of health care, which in turn is due to the high cost of insurance that doctors/hospitals must purchase to fend off lawsuits, which in turn …. I could go on and on. There are CEO’s that make millions, yet are often caught golfing in the afternoon – and thats fine by me – but then I ask those who accuse Walmart of unfair labor practices, why they don’t ask United Health or Aetna to cut down their executive salaries by 75%? They can then afford to cut down insurance premiums, which would then bring down the cost of healthcare.

Walmart is also accused of harming smaller “mom and pop” businesses through pricing power. Yes – I believe it is called free market capitalism. People accused Microsoft of pricing power through monopoly too. Has anyone ever really done a detailed analysis of how much Walmart has hurt these small businesses and compared it against how much money it has saved shoppers? I bet the latter number is heavier. Most small shops that offer good products and service at reasonable prices should be able to survive the Walmart threat.

It is said that Walmart brings down property values in surrounding areas by its sheer presence. That is ridiculous. Whats next? Should we shut down the Salvation Army drop offices because they attract low income shoppers? Should we also discriminate against Denny’s and IHop’s? On the flip side, golf courses and high rises drive up the price of surrounding properties, making those areas unaffordable for middle America. Why not lobby against those too?

Walmart is hiring illegal immigrants. Again, its sheer size gets in the way of Walmart. Every car wash I know of in Southern California, and believe me there are plenty of them, hire illegal immigrants. I think we need to be fair here. Most American’s complain about minimum wages being too low, so really the only people willing to work for such low wages are illegal immigrants. On one hand we complain about low wages, but we also complain about those who are willing to work for these low wages.

The affect of Walmart on our economy is significant. From employing hundreds of thousands of people to saving customers a lot of money to ensuring that competitors like Target (TGT) and KMart (SHLD) keep their prices in check (thereby inadvertently also saving money for those who don’t shop Walmart), this giant retailer needs to focus on its core business to make money for its shareholders and to save money for their customers rather than fight off controversy. I say let them do their job. Perhaps they might have provided their employees with health insurance if they didn’t have to dish out the legal fees for these battles. Hey lets go after those lawyers for charging so much!!! ….. Sigh

In conclusion, I’d just like to say that Walmart, in my opinion, is good for the economy. It is good for the people that shop there and those that shop at competitor’s. It is good for those that it employs because otherwise they might not have a job at all. Now if they pay below minimum wage, they need to be brought to justice, otherwise, ff people have a problem with their practices, I have a simple suggestion – don’t shop there.

– Faisal Laljee
Full Disclosure: I don’t own any shares of Walmart. I don’t shop at Walmart primarily because they have been blocked out of Los Angeles. But that is not to say I have never shopped there, although I must say I prefer shopping at Costco, Best Buy, Target, Trader Joe’s and specialty retailers for their products, service and atmosphere.

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3 Responses to “Is Walmart Bad for the Economy?”

  1. Boris B

    zumiez comes down to $30.04 monday 12-11-2006. this is a $2.60 dip with potential. 4 houses started coverage last week.

  2. Boris B

    wow wednesday morning zumz bounced $1.70 off the 29.40s lows up to $31.10s only to crash back. i remain hopeful the shares will recover from expectations of 29s being the new low end. and then move towards the 32s-35s. what is a good just cause for $35 being a dependable 1 month bounce goal?

  3. Boris B

    walmart is just coming back from a heavy $7+ selloff. it was smokin wednesday morning when government released monthly retail sales figures. i am gonna pass on this bounce potential in favor of Zumiez, Chipoltes, and Panera. also passing on sold off Starbucks.


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