It is well known that retail behemoth Walmart built its vast fortune on the backs of their low wage labor force. When they want to squeeze out a bit more profit, they have their employees illegally work unpaid overtime, cut their healthcare benefits, or in recent years, reduce the size of their store staff .
Any first-year economics student could have warned them that this cycle could not sustain itself indefinitely.
A smaller staff means fewer workers to stock shelves. Fewer items on the shelves means customers not finding what they want, leaving them dissatisfied and willing to shop elsewhere. Take away consumer demand, and the spiral goes ever downward.
Walmart may finally be waking up to these basic precepts. Customer complaints are prompting the chain to start adding hours, with the intent of reversing that giant sucking sound on the balance sheet. Giant, as in $3 billion in lost revenue due to reduced staff hours.
Some simple math: Walmart has opened 600 stores in the past 5 years. They employ 20,000 fewer people than they did in 2008. If that formula causes billions in losses, then you may just be the nation’s largest employer.
You have to spend money to make money, or so the saying goes. Some companies call that investing. Investing yields dividends. Dividends in this case would mean greater productivity, and a reasonable supply to meet their customer demand. Demand drives the economy, and a larger staff at Walmart means more jobs, bolstered by consumer confidence.
Have they really learned this lesson? No concrete plans about increasing staff have been announced, other than their executives acknowledging that they will “add labor hours as part of an effort to bolster ‘in-store execution'”. Whether that means adding part-time workers (keeping down those benefit costs), full-time labor, or demanding (paid?) overtime from existing staff, remains unclear.
Consumer unrest hasn’t been the only heat directed at Walmart lately. In the past year, their workforce has been emboldened by a series of strikes, fueled by a broad nationwide push for a higher, livable minimum wage throughout the service sector. There is also greater awareness that Walmart’s low wages create an increasing strain on the fraying social safety net, resulting in a record need for food stamps and other public assistance. Taxpayers have been, in effect, subsidizing Walmart’s low-wage, small-workforce business model. The invisible hand is picking America’s pocket, and America is slapping it back.
h/t: Think Progress