A Project of the American Enterprise Institute and the Federalist Society

Unions Wage Vicious, Misguided War on Wal-Mart

American Enterprise Institute

December 19, 2005

By Kevin A. Hassett

If you're like me, you find it surprising that Wal-Mart Stores Inc. is under such vicious attack. You can hardly flip open a newspaper without finding vituperative anti-Wal-Mart statements. While the bile has been steady over the years, things seem to have stepped up enormously in recent weeks.

It's surprising because Wal-Mart is one of the great economic success stories of our time. Thanks largely to its legendary efficiency, which has enabled it to provide much lower prices than the competition, the once-regional company from Bentonville, Arkansas, has become the world's largest retailer, as well as the biggest private employer in the U.S.

Wal-Mart Chief Executive Officer Lee Scott said in a recent speech that if Wal-Mart were a country it would be the 20th largest economy on earth.

The gains to Americans from Wal-Mart's lower prices are extraordinary. One recent estimate suggests Wal-Mart directly and indirectly (by forcing rivals to keep their prices down) saved the average U.S. household $2,329 in 2004. These gains help low-income individuals the most.

Harvard Harder?

The retailer also is clearly a highly desirable place to work, offering its employees career advancement, health insurance and personal satisfaction. New York University economist Jason Furman notes that a recent store opening in Glendale, Arizona, received 8,000 applicants for 525 jobs. The number of applications suggests, Furman writes, that "A Harvard applicant has a higher chance of being accepted than a person applying for a job at that Wal-Mart."

The academic evidence contradicts the common assertion that it's bad news for a town if Wal-Mart opens a store there. Some individuals may lose their jobs at competing retailers, but a recent study by University of Missouri economist Emek Basker in the Review of Economics and Statistics suggests that Wal-Mart's entry increases a county's retail employment by 100 jobs in the first year, and over time leads to the elimination of 50 jobs in less efficient retailers.

On a net basis, a county gains 50 retail jobs in the long run when Wal-Mart shows up. The competition from Wal-Mart also drives down prices for everyone.

So why the uproar? Has Wal-Mart finally gone too far? Have the grass roots finally had enough?

Unions at Work

Hardly. What's going on is a highly coordinated and heavily financed political campaign. One report puts the total spending on publicity and negative advertisements at $25 million.

It's no fun having enemies in this world, especially those with fat wallets. Guess where the money is coming from?

At the center of the crusade are two organizations, "Wal- Mart Watch" and "Wake Up Wal-Mart." Wal-Mart Watch was started by Andrew Stern, president of the Service Employees International Union. Wake Up Wal-Mart is a project of the United Food and Commercial Workers International Union.

The public relations offensive is one long attempt at image assassination. For example, Wal-Mart Watch has constructed a college "curriculum" that it encourages activists to push. It kindly provides a handy e-mail utility that directs the lucky recipient to the "curriculum" and says, "I thought you might enjoy this story from Wal-Mart Watch, a group who is starting to expose Wal-Mart for their bad labor standards, political corruptness and overall bad citizenship."

Democrats Weigh In

These unions are waging a war against Wal-Mart because its employees aren't unionized. In the past, local retail monopolies could charge everybody in town high prices and split the profits with union employees.

Competition from Wal-Mart has put an end to that. Just as General Motors Corp.'s high labor costs are killing it, unionized retail firms can't keep up with Wal-Mart. Rather than improve their own efficiency, the unions have decided to try to smear Wal-Mart and scare away its customers.

The really striking thing, however, is who is in on the campaign. The anti-Wal-Mart crusade has been a rallying point for Democrats.

Massachusetts Senator John Kerry, the unsuccessful 2004 Democratic candidate for president, described Wal-Mart's treatment of its workers as "disgraceful" (though his wife owns Wal-Mart stock, according to Kerry's latest financial statement). California Representative George Miller, ranking Democrat on the House Committee on Education and the Workforce, described the company as being "in the driver's seat in the global race to the bottom, suppressing wage levels, workplace protections, and labor laws."

Kerry Aide

Yet these same people don't mind taking advantage of Wal- Mart prices: The presidential campaigns for Kerry, Howard Dean and Ralph Nader all spent money at Wal-Mart, according to newspaper reports.

The efforts appear to be coordinated. For example, Paul Blank, former political director for Dean's presidential campaign, is now managing the anti-Wal-Mart crusade for Wake Up Wal-Mart. John Kerry's former presidential campaign manager, Jim Jordan, is a political consultant for Wal-Mart Watch. Tracy Sefl, former deputy director of research for the Democratic National Committee, is the group's communications director.

The very same organizations that are funding the crusade against the retailer are among the most reliable financers of the Democratic Party and they have hired the closest advisers of the same leaders bashing the company.

High-Tech Goons

There's no question that the thuggish attempt to smear and intimidate imposes harsh costs on Wal-Mart. But the money trail reminds us, more than anything, why unionization has had so much trouble taking hold in the U.S.

Imagine if you worked at Wal-Mart and saw your employer demonized by these people. Would it make you want to join the union? The high-tech goons the unions have sicced on Wal-Mart are employing exactly the types of tactics that have given unions a bad name.

Furman notes, convincingly, that low wages generally in some sectors of the economy may be a legitimate policy challenge. A correct response might be to expand the earned income tax credit.

Instead of that, the response in some quarters appears to be "fire at will."

It's irresponsible for leading politicians to vilify our nation's largest private employer. That their leading political advisers are now lining their pockets with union cash makes the enterprise all the more disgusting.

Kevin A. Hassett is a resident scholar and director of economic policy studies at AEI.