Wal-Mart (NYSE: WMT) has never been union-friendly, but China has a lot of leverage with the big retailer. It has pushed a union into Wal-Mart, and now organized labor wants some changes.
According to the FT, all China Federation of Trade Unions has been able to get 8% wage increases in two regions for this year and next. Inflation in China is currently running just under 10%.
The news is not especially good for Wal-Mart, which prides itself on controlling employment costs and running lean operations. The settlement is almost certain to spread to all Wal-Mart locations in the big Asian country.
Wal-Mart is beginning to pay the price for wanting to be in China's huge and fast-growing economy. The central government controls unions, giving them extraordinary power.
Wal-Mart will not be not the last U.S. company doing business on the mainland to come up against wage issues. China will make sure its citizens are taken care of. It could hardly be called capitalism.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
7-25-2008 @ 12:33PM
Kent said...
In a way, this is good news all around. It makes China no longer the source for cheap labor and places the U.S. in a relatively stronger position to compete for Wal-Marts business. Wal-Mart although we took advantage of it can no longer buy marketshare but will be required to compete on a service level to attract and maintain its customer base.
7-25-2008 @ 9:56PM
Chris said...
I'd like to comment on the following statement:
"China will make sure its citizens are taken care of."
To begin with, it depends on *which* citizens you are talking about. If Wal-Mart is forced to pay more for labor, it also means that lower-skilled workers have been priced out of the market (by force).
For example, if Wal-Mart *must* pay a Chinese worker $10 per hour, it means anyone who only has the skills to earn $9, or $8, or $5 etc. per hour can no longer work at Wal-Mart.
If the labor market were free, perhaps Wal-Mart would have hired them....Instead, these lower-skilled workers are forced to remain unemployed.
Anyone who has shopped at Wal-Mart knows that they provide tons of jobs to low-skilled workers.
China has not taken care of its citizens...it has instead harmed those most in need of work.
7-28-2008 @ 12:26AM
mike said...
walmart has to pay like ten cents an hour in china and the cost is killing them
8-01-2008 @ 11:43AM
J said...
my my my, now isn't this a kick in ol' walmart's golden behind... just when they thought that they were going to be "master of the universe" in substandard pay, now the Chinese decides to flex it's collective bargaining muscle... Damn, I wonder if WM is going to pull their tried and true strongarm tactic and threats of outsourcing jobs somewhere else, or closing their stores to move to a "right to work state".. Oh, wait, there aren't such things as
right to work states in China... Guess WM is going to have to start playing fairer for a change...