Walmart and unemployment
As consumers, we welcome Walmart's (WMT) low prices.

But here's the thing about these low prices -- they're doing the U.S. more harm than good.

A new research report has found that low prices have actually caused unemployment to rise, and dealt a massive blow to the manufacturing sector.

Look no further than the 7 million manufacturing jobs the U.S. lost from 1980 to 2011, according to a recent research report from Demos. The report acknowledges this happened because of "a variety of complex factors." But Walmart had a bigger hand in this than most of us realize.

Cutting Prices Does Have Its Cost

The problem starts with Walmart's selling point: low prices.

These low prices are possible both because Walmart pays its employees low wages and because the bulk of Walmart's products are sourced from foreign factories, where raw materials and labor are cheaper.

What's more, Walmart can -- and does -- use its massive size to bully American companies whose products it sells to do the same. In fact, Levi's jeans and Master Lock "were pressured to shut their U.S. factories and moved manufacturing abroad to meet Walmart's demand for low prices," Demos said.

What's more, many well-known companies rely on Walmart for more than 20% of their revenue, according to Business Insider's calculations, including:

  • Helen of Troy (which manufacturers kitchen tools under the OXO name)
  • Jarden (behind the Mr. Coffee brand).
  • Hanesbrands (the undergarment company known for Hanes and Wonderbra).

And they're not alone. Because these businesses are so heavily dependent on Walmart, they have no choice but to acquiesce to whatever Walmart asks of them.

So -- like Levi's and Master Lock -- if Walmart tells these companies their products must become even cheaper, they have to cut costs. Doing that requires finding cheaper raw materials (sourcing internationally) or cheaper labor (again, from overseas).

But This Can Only Go So Far

This cost cutting has tangential side effects that cost more jobs than just those folks working at factories.

Four of Walmart's top 10 suppliers in 1994 had filed for bankruptcy protection by 2006, according to Harper's Magazine, meaning disappearing factory jobs as well as the white-collar jobs at their headquarters.

Then consider Walmart's competitors, Target, Kmart, Dollar Tree, etc. To remain competitive with Walmart, they have to do exactly what Walmart does: look for cheap foreign product sources, or squeeze low prices out of their suppliers.

All of which continues to trickle down the economy, sending an increasing number of jobs abroad and allowing Walmart (now the nation's largest employer) to keep their employees' wages low.

So remember this next time you rejoice in finding a low-priced item at your local Walmart: Those "everyday low prices" may have cost you or someone you know their job.




This article was written by Motley Fool analyst Adam J. Wiederman, who owns no shares of the companies mentioned above.


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Rush

As was pretty much said in this article, Walmart plays blackmail on the companies or makers of the products. In the 1990's the cost of resin skyrocketed and the company Rubbermaid had to raise it's prices due to the costs. Walmart said no and it put them out of business. They were bought out since Walmart quit carrying their merchandise. Here where I live there was a Pace Wholesale Clup(Kmart). It was very close to a Walmart. Walmart soon opened a Sams Club next door. It put Pace out of business. Sams was closed down within the next year. That's their style of business. So they put in a store, hire one or two hundred, put a hundred out of jobs at Pace, then close their own store putting more out jobs. Walmart is also opening banks, selling used cars, etc...........they're becoming such a huge monopoly that it's hurting other companies dramatically.

September 15 2012 at 1:15 AM Report abuse rate up rate down Reply
marthaboice

The National Trust for Historic Preservation names Walmart as a chief concern in historic preservation. Walmart effectively destroys the "mom and pop" businesses that make up the downtowns of the small historical communities. The Big Store gradually sucks the energy out of the town and takes the business to the outer edges of community.

September 10 2012 at 11:47 PM Report abuse rate up rate down Reply
amyinouray

I hope I live long enough to see walmart/fall apart go out of business, like Woolworth, although last I heard, Woolworth was "FootLocker"shoes! I hate Wm too!

September 10 2012 at 9:55 PM Report abuse -1 rate up rate down Reply
1 reply to amyinouray's comment
Jack E Reeves

So you want to see over 1 million Americans out of work and on the jobless line? Cool.

September 11 2012 at 8:55 PM Report abuse rate up rate down Reply
stacirhughes

If it wasn't for their low prices I wouldn't be able to afford groceries half the time. At walmart $100 feeds us for two weeks. At Food City, $100 is 5 meals, maybe.

September 10 2012 at 5:57 PM Report abuse rate up rate down Reply
margduhon

I HATE WALLY WORLD, ALWAYS HAVE AND ALWAYS WILL.

September 10 2012 at 5:11 PM Report abuse rate up rate down Reply
jadelll4ever

I HATE WALMART!!!!!!!!!!!!!!!!! THAT COMPANY IS EVIL!!!!!!!!!!!!!!!!!!!! I HATE HOW POORLY THEY TREAT AND PAY THEIR EMPLOYEES!!!!!!!!!!!!!!!!!!!!HOW THEY STEAL JOBS AWAY FROM THE SMALL BUSINESS OWNERS!!!!!!!!!!!!!!!UNDER PAY AND OVER LIE TO THE WORLD!!!!!!!!!!!!!!!!WALMART THE ANTICHRIST??????? MAYBE!!!!!!!!!!!!!!!!! UNFORTUNATELY THEY FORCE THE POOR TO SHOP THERE CAUSE THEY PUT ALL THE SMALL BUSINESSES IN THE GRAVE!!!!!!!!!!!!!!!!!!!!! IF YOU CAN POSSIBLY AFFORD TO SHOP ELSE WERE DO!!!!!!!!!! THEY HAVE LEGAL SLAVE LABOR IN MY OPINION!!!!!!!!!!!!! YOU CAN WORK TO DEATH AND STILL FORECLOSE ON YOUR HOUSE AND LIVE IN THE STREETS WITH A WALMART JOB!!!!!!!!!!!!!!!!!!!!!! THEY ARE KILLING AMERICA!!!!!!!!!!!!!!!!!!!!WE NEED TO STOP THEM SOME HOW BEFORE IT TRULY IS TO LATE TO TURN BACK!!!!!!!!!!!!!!!!! ONLY ONE PERCENT OF THEIR EMPLOYEES GET A FAIR WAGE FOR THE JOB THEY DO IN MY OPINION !!!!!!!!!!!!!!!!!!!!!!!!!!! WE HAVE TO STOP THE RICH REPUBLICANS SOME HOW BEFORE ALL WE ARE IS THEIR SLAVES!!!!!!!!!!!!!!!!!!!!!!!!!!!! WALMART IS PHARAOH AND WE ARE BUILDING HIS PYRAMIDS !!!!!!!!!!!!!!!!!!!!!!!!! MIDDLE CLASS PEOPLE SHOULD NOT PAY MORE TAXES THAN THE RICH !!!!!!!!!!!!!!!!!!!!!!! THE ANTICHRIST IS THE RICH STEPPING ON THE POOR AND OPPRESSING THEM EVERY CHANCE THEY GET!!!!!!!!!!!!!!!!!!!!! IN SOUTH FLORIDA YOU HAVE TO WORK 80 HOURS A WEEK JUST TO SURVIVE ON MINIMUM WAGE!!!!!!!!!!!! NO FREE RIDE HERE YOU DON'T WORK YOU DON'T LIVE!!!!!!!!!!!!!!!!!!! WELFARE SHOULD BE CALLED WELL-UN-FAIR A SINGLE MOM WITH KIDS IF SHE WORKS AT WALMART CAN'T GET WELL-UN-FAIR CHILDCARE HELP SHE MAKES TOO MUCH MONEY HAHAHA THAT'S A JOKE!!!!!!DON'T BOTHER APPLYING FOR HELP IF YOU ARE A COUPLE WITH KIDS, YOU WORK YOU MUST MAKE TOO MUCH!!!!!!!!!!!!!! SO YOU PEOPLE WHO THINK ALL THE POOR PEOPLE JUST WANT A FREE RIDE YOU ARE OUT OF YOUR MINDS!!!!!!!!!!!!!!!! WE JUST WANT TO BE ABLE TO CARE FOR OUR FAMILIES AND NOT ALWAYS FEEL LIKE WE ARE IN A PIT AND CAN'T GET OUT. WE DON'T MIND WORKING FOR A WAGE THAT WE CAN LIVE ON!!!!! WE DON'T WANT MUCH, WE JUST WANT TO KNOW WE CAN GET THE MEDICINE AND OTHER ESSENTIALS OUR FAMILY NEEDS!!!!NEEDS NOT WANTS!!!!I'M SICK OF THE HAVE'S LOOKING DOWN AT THE HAVE NOT'S!!!!! TAX THE RICH 50% OF THEIR ANNUAL INCOME OR RAISE THE HOURLY WAGE SO PEOPLE CAN SURVIVE!!!!!!!!!!!!!!STOP ALL OF THE LOOP HOLES AND BACK DOORS THE RICH USE TO AVOID PAYING TAX AND YOU WILL SEE AMERICA PROSPER ALL OF AMERICA NOT JUST THE RICH!!!!! WE ALL CAN'T BE RICH BUT WE ALL SHOULD BE ABLE TO LIVE AND HAVE A BED TO SLEEP IN!!!!! TRY TELLING YOUR CHILD MOMMY CAN'T GET THE MEDICINE YOU NEED I DON'T HAVE THE MONEY AS YOUR 4 MONTH OLD STRUGGLES TO BREATH BECAUSE SHE IS SICK AND MOMS MINIMUM WAGE JOB PAYS TOO MUCH FOR UN-WELL-FAIR!!!!!!!! IT'S NOT HER FAULT OR DADDY'S THEY WORK EVERYDAY AND STILL DON'T HAVE ENOUGH TO JUST LIVE ON!!!!!! PEOPLE WAKE UP!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!PLEASE!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

September 10 2012 at 2:43 PM Report abuse rate up rate down Reply
Rob

Some things you need right away, so it's easy to just grab the first and cheapest thing you find. But if it's something you don;t need right away, like towels, curtains, a blender, a new toaster, etc, take some time and do some research online. Find some American made items and help keep your neighbors employed and your country solvent. I'd rather pay more for an item made in this country than save money and buy a piece of crap made in China. I bought a cheap bathroom scale made in china and the battery lasts about a month. Those batteries are about $3 to $5 each, so that cheap scale is costing me at least double the price each year in batteries. I found an American made scale (Detecto), and while it cost more, it doesn't need batteries and will be cheaper in the long run.

September 08 2012 at 7:49 PM Report abuse +1 rate up rate down Reply
itscoatrack

When a company has this ability to effect our economy it needs to be broken up.

September 07 2012 at 12:05 PM Report abuse +2 rate up rate down Reply
GOLDENBEAUTYUSA

I never shopped at walmart and refuse to do it. Plus I hate all the TPT that shop there..

August 23 2012 at 7:56 PM Report abuse rate up rate down Reply
1 reply to GOLDENBEAUTYUSA's comment
jadelll4ever

DON'T HATE THE PEOPLE WALMART DOESN'T GIVE SOME MUCH OF A CHOICE.

September 10 2012 at 2:46 PM Report abuse rate up rate down Reply
BryanC

Hmmm...up is down, black is white and inexpensive is bad. Why not implicate the costly union benefits as a primary source of why American jobs are going overseas? Nice try AOL...

August 17 2012 at 10:43 AM Report abuse -3 rate up rate down Reply
1 reply to BryanC's comment
itscoatrack

so if we did away with benefits and worked for .25$ an hour then the economy would be great. How much do you make an hour BryanC. Maybe your company would do better if you made less.

September 07 2012 at 12:04 PM Report abuse +1 rate up rate down Reply