Welcome to the 81st installment of The Wal-Mart Weekly, a column dedicated to bringing you insight, wit, facts, results, opinions, and just a bit of everything else when it comes to a very hot topic these days: Wal-Mart.
This week, Wal-Mart Stores Inc. (NYSE: WMT) closed the first shop in North America that had been completely unionized. Does this signal anything to other Wal-Mart locations that form a collective bargaining organization? Sure: form one and the retailer would rather see the operation shut down entirely instead of having employees with any kind of power.
That may sound harsh, but it has to be the feeling around a Wal-Mart tire and lube shop in Gatineau, Quebec, which was literally closed due to its unionization last week. What better a way to leave consumers in the lurch than to close up shop on something that brings in revenue even if its employees decide to stray from Wal-Mart's "non-union" stance in its retail locations.
With the Gatineau location in Canada the first official Wal-Mart location with an actual union contract in place, Wal-Mart's response could be seen as severe. Was the global retailer trying to get a message out to any other Wal-Mart location in North America -- "unionize and we will shut your doors?" If so, that's no way to run a business, right? Is Wal-Mart so afraid of unions in its stores that it would rather shut them down (or pieces of them) instead of continuing to operate?
Lisette Wallingford, a frustrated customer of the Gatineau shop, expressed her disappointment: "They told me to come back today because my tires were coming in ... I think I'll go to Canadian Tire because I can count on them." There's all we need to know: a frustrated customer. Wal-Mart was at least kind enough to direct customers late last week to other Gatineau-area Wal-Mart locations, with no mentioning that the closed location was due to unionization. Nice.
Wal-Mart and the living wage
So, it comes back to this: many Wal-Mart employees are apparently so underpaid that their only recourse is to try and unionize their stores in order to negotiate a better wage. That has to be a logical conclusion to why the Gatineau tire and lube shop employees wanted a union. Although these employees could seek work elsewhere, they decided to stay put with their current employer and just try for better working conditions (pay, benefits, etc.).
I can already see the "personal responsibility" crowd coming out and defending Wal-Mart's move, while the "living wage" folks coming out in defense of the employees in question here. And there valid points to both sides. Then there's the argument of human versus corporate interests. Either can be abused, and both regularly are in many companies. Maybe you've heard of the mortgage meltdown where greedy banks and greedy customers combined to undermine the entire American economy (and the global economy in many ways). I think it's been in the news recently.
Wal-Mart's perspective on the closings
The global retailer stated that costs associated with the new labor agreement was the ultimate cause for closing the Canadian location shortly after it was unionized. The shop's minimum pay scale, which was $8.50 per hour before the agreement, was raised to $11.54 per hour. In addition, the new maximum wage was set at $15.25. Apparently, Wal-Mart couldn't afford those changes.
Some customers disagreed. Customer Hélène Toutloff said, "They should go back to their own country if they don't want to obey Quebec law," while customer Raymond Potvin stated, "they gave me a good price last week, but now they are gone. How's a young guy going to pay for his apartment and his car on $8 an hour? Wal-Mart is going to put these people on welfare."
Personal responsibility versus corporate responsibility
And therein lies the argument: Is Wal-Mart putting these people on welfare, or are they going to do it themselves? It's the classic capitalist vs. socialism argument that seems to be everywhere these days. Wal-Mart said the contract resulted in a 30% in increased costs, which had to be followed by "dramatic" price increases on products. Wal-Mart Canada spokesman Andrew Pelletier said, "the union contract that was imposed is simply unworkable."
Well, Wal-Mart may be in trouble if both scenarios are true: Wal-Mart finds it too expensive to agree to increased wages for lower-paid employees at a single store, while living costs are so much higher now than in the past that workers just can't afford to live on Wal-Mart's existing non-union pay scale.
This situation is certainly going to raise its head again as it's hard to imagine that none of its 3,000+ U.S. locations won't try to unionize at some point in the next decade. Wal-Mart may save customers money, but at the expense of incessant penny-pinching. And since in Wal-Mart's case labor is its biggest expense, this means keeping employee costs low.
Is Wal-Mart's perspective on labor costs "simply unworkable" too? With costs going up for fuel, food and everything in between, Wal-Mart employees will feel the pinch first. That pinch will turn into a tourniquet. At that point, those who can't leave Wal-Mart employment may try to work in some kind of union activity into more of the retailer's North American locations. Wal-Mart can't just shut those locations down when this starts happening. Or, can it?
Join me right here this time next week for another edition of The Wal-Mart Weekly. Until then, have a great week.