One area Wal-Mart just can't get a break on -- labor issues

In recent years, the world's largest retailer has had several public snafus that revolve around the apparent below-minimum pay of some employees to the use of illegal immigrants (by way of subcontractors) in its stores as cleaning crews and for other purposes. When Wal-Mart began to grow like crazy in the 1990s, it also began expanding outside of its home U.S. marketplace and into the international arena. Now, labor practices and other details related to employees are quite different in many countries outside the U.S. to those paying attention, and the ability of Wal-Mart to become as vital to the lives of its shoppers in markets outside the American one became quite an important goal.

Wal-Mart entered the Mexican market in 1991 with the aid of a partner. Mexico is known for governmental corruption and a low standard of living for a majority of its citizens, and like any other company that operates successfully there, the controls on labor costs (one of the largest costs for a retailer) give way to allowing most companies to squeeze much more out of every customer dollar spent than can be had from an American customer? Why? It's not hard to see that labor laws and minimum wages here are actually well ahead of other nations in terms of being fair to employee and employer both. Sure, there are always exceptions, of course.

Wal-Mart making up for lacking sales by pinching foreign pennies?

But in Mexico, the world's largest retailer is now coming under scrutiny by underpaying (or not even paying) some underage workers at a time when Mexican Wal-Mart stores have never produced better results. Going back to foreign labor laws again, it's technically legal to not pay youngsters between the ages of 14 and 16, and of course Wal-Mart takes advantage of that. Younger employees from that age group rely entirely on customer tips and gratuities to get paid -- but what if nobody is tipping? Apparently, it took quite a while for the Mexican government and other non-governmental organizations (NGOs) to start picking on Wal-Mart for the non-pay practice is has with younger employees, and the company does not try to hide it at all. In signs within stores, it advertises the fact that these young employees work voluntarily.

Sounds odd, right? Remember, this is Mexico, not the U.S. -- by working voluntarily, these "employees" are not subject to most Mexican labor laws. That 's right, there is the kicker -- because then longer hours and all kinds of "employment conditions" can be hoisted on the backs of these younger workers with no problems from Wal-Mart's end. Well, no legal problems, anyway.

Paying back the country that helps you grow

Mexican authorities are now eyeballing Wal-Mart as a potential abuser of young labor since it doesn't pay roughly 19,000 young workers at all, most of whom work as grocery baggers in its Mexican stores. With Wal-Mart now being the largest private-sector employer in Mexico now (150,000 workers), its practices are coming under the microscope just like they were when Wal-Mart was rapidly ascending to the top of the retail world in the U.S. a decade or so ago. Surprised? Hey, it's just the natural order of things, and Wal-Mart's growth invites it at almost predictable stages in its history.

But why can't the retailer face these problems and even correct them before they become more global black eyes on its retailing face? Too much growth to do anything else is a reason I've seen before -- the company is concerned with global retail domination so much that management of that growth at all levels is not considered in the way it should. When Mexican officials start stating things like "These kids should receive a salary," does that begin to single out just one company instead of all companies operating in Mexico that employ workers between the ages of 14 and 16?

Mexican Labor Undersecretary Patricia Espinosa Torres said, "If you ask me, I don't think these kids should be working, but there are cultural and social circumstances [in Mexico] rooted in poverty and scarcity." There's the ticket -- rampant poverty forces these kids to work and bring home (or not) the tips from that grocery bagging position. It's not just Wal-Mart under the gun here, it should be any company with non-paid younger workers. But, since Wal-Mart is the giant, it's the first one to get the glory.

Mexican poverty and the labor market

Most of Mexico's working class rakes in about $4 per day, with many of those incomes based on "tips" instead of official, work-based compensation. But what is the problem here -- which has to do directly with Wal-Mart -- is that the retailer's global code of ethics states that no Wal-Mart associate should work without compensation. Okay, then who is considered an "associate," then? Every single worker on a worldwide basis?

If so, then Wal-Mart is violating one of is largest private-employer tenets regardless of Mexican labor laws (or lack thereof). When Mexico's Federal District Labor Secretary Benito Mirón Lince states that Wal-Mart can afford to pay the federal Mexican minimum wage (less than $5 per day), but chooses not to, it "represents an injustice." That may be true, but when a retailer is only required to follow the law, why should it go any further than the letter of that law? Just to make sure it complies with its own code of ethics? Just to ensure PR nightmares like this don't show up in the press (or in blogs)? Right now, it's Wal-Mart's choice, as there are no legal ramifications for what it is doing. Ethical and moral ramifications are something different, and Wal-Mart is not the only one that should be under the Mexican government's radar here -- far from it.

Hope you have a wonderful week and I'll return later this week for another edition of The Wal-Mart Weekly. Until then, sayonara folks.