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The Trouble with Wal-Mart

An interview with Liza Featherstone

[ by Carrie McLaren ]

If there is one chain that stands above all others in deserving your wrath it is Wal-Mart. The most successful retailer in the world is, not coincidentally, a pioneer of some of the shadiest business practices imaginable. I'm not just talking about reckless sprawl, Kathy Lee's sweatshop line, or the censorship of popular music, but about Wal-Mart's uncanny knack for uncovering some of the most innovative ways to screw people over, all the while maintaining its wholesome, all-American image. For instance, the company locks late-shift employees in at night, forbidding them to leave the store. Managers have required workers to clock out yet stay on the job, in order to avoid paying them overtime. The company has hired illegal immigrants and forced them to work seven-day weeks without breaks. It spies on employees, fires anyone remotely suspected of union activity, violates child-labor laws, and discriminates against female employees.

It is this last misdeed that Liza Featherstone focuses on in her new book, Selling Women Short: The Landmark Battle for Workers' Rights at Wal-Mart. Featherstone, a New York--based journalist, chronicles the emergence of Dukes v. Wal-Mart, a class-action suit by Wal-Mart's women workers that is currently winding its way through the courts. In telling the employees' stories, Featherstone discusses the broader societal impact of the retail giant, and the terrifying prospect of its continued growth. Wal-Mart thrives in part by offering poor and working-class people (its primary consumer base) the lowest prices around. But this boon to consumers is also a disaster for workers and local community members. That is, it hurts the very people it helps. Reading Featherstone's book made me realize that shopping at Wal-Mart is a little like smoking crack: the low-prices undoubtedly fill a need (particularly for the poor) but they only come back to bite you in the end.

STAY FREE!: In your book you discuss patterns of sex discrimination in Wal-Marts across the country. Women earn less; they can't get promoted; if they complain, they're punished; and so on. The plaintiffs in the current class-action suit have an airtight case. Did any of these women seriously consider pursuing private lawsuits? How did this end up as a class action?

LIZA FEATHERSTONE: Some of the women had filed claims with the Equal Employment Opportunity Commission, but a lot of them wouldn't have pursued individual lawsuits, because most lawyers will say, "you don't want to do this." Small lawyers don't have the resources to take on a company of Wal-Mart's size. Some women have won lawsuits, and evidence from those cases informs this case, but women in general haven't had very good luck in getting lawyers to pursue Wal-Mart. So that's a reason why class action is a good strategy.

STAY FREE!: I was amazed that some of these women--who had been through hell with Wal-Mart and had incredibly solid cases--would opt for a class-action suit, because they'd get a lot more money out of a private lawsuit. Also, they wouldn't have to worry about the case dragging on for years.

FEATHERSTONE: Yes, actually, in their cases, they have the resources to pursue individual suits, but they really want to change Wal-Mart. If they were to sue as individuals, Wal-Mart would settle and it would never have to make any institutional reforms. The only reason these women are doing the class action--aside from the strength in numbers--is because they want to change the company.

STAY FREE!: But if a bunch of women sued Wal-Mart individually, wouldn't Wal-Mart see that they're losing money and see that discrimination is ultimately against their interest?

FEATHERSTONE: No, there would be so few cases that it wouldn't matter. A million dollars every few years is nothing to Wal-Mart.

STAY FREE!: How successful are class-action suits in changing companies? If the workers win, what then?

FEATHERSTONE: With a class-action suit, you can order a company to pay back wages to the people it wronged. You can order it to change its promotion system, to provide better incentives for promoting minorities, to post its jobs, and you can have some degree of enforcement. That's the ideal scenario. Those reforms are so much better than nothing, but they're ultimately kind of limited because they don't really change the balance of power between the worker and the employer very much. What you can accomplish with a class-action suit is nothing next to what you can accomplish if the workers organize.

STAY FREE!: In the book, you also pointed out that one of the key advantages of class-action suits is media coverage.

FEATHERSTONE: That's right. If you sue Wal-Mart as an individual, the media isn't going to care very much. But if you're suing Wal-Mart on behalf of 1.6 million other women, as Betty Dukes is, you get an enormous amount of attention, and that embarrasses the company.

STAY FREE!: The woman in the Wal-Mart commercials who talks about how great Wal-Mart treats women looks like Betty Dukes. Do you think that's intentional?

FEATHERSTONE: Oh, absolutely. She's a black, middle-aged woman, just like Betty Dukes. She's a department manager, which is the job Betty Dukes has been seeking the entire time she's been at Wal-Mart. She is Betty Dukes in the ideal Wal-Mart.

STAY FREE!: How effective do you think the commercials are?

FEATHERSTONE: A lot of workers tell me that their friends think Wal-Mart must be a great place to work because they see the commercials. And people have told me they went to work at Wal-Mart in part due to the commercials. The commercials have always featured happy employees.

STAY FREE!: All the commercials seem to be the exact opposite of the reality. You described one that talks about how great the Wal-Mart health-care package is.

FEATHERSTONE: Yes, it shows a very sweet, caring young father whose baby had some horrible disease, and he says that, thanks to Wal-Mart, the baby was able to get coverage. In real life, that baby would have indeed been covered for some terrible disease, but the sneaky thing is that Wal-Mart's health-care plan is weighted toward exactly that kind of catastrophic illness. That's not what most babies need. Most babies need preventive care, which Wal-Mart's plan doesn't provide. Babies need a lot of checkups. Wal-Mart doesn't cover all kinds of vaccinations. If the father had been a new employee, it would have taken him about six months to get coverage for his family.

STAY FREE!: Aren't many employees gone by that time?

FEATHERSTONE: Yes, and he would have had to pay a third of the cost of the health insurance from his salary. If that same father were to work for another large company, that baby would have a better shot at getting the preventive care he needs in case he recovers from the terrible illness and needs stuff that regular babies need.

STAY FREE!: Wal-Mart used to run a "Buy America" campaign. What happened to that?

FEATHERSTONE: Sam Walton started the "Buy America" campaign in the late 1980s in response to criticism that Wal-Mart was selling more foreign goods than American goods. Again, like the health ads, the spots were impressively nonspecific. They never said that everything at Wal-Mart was made in America; they never even said a majority of the items were made in America--and even at that point I'm pretty sure that the majority of items in the store were made overseas. It was merely intended to highlight that some of their goods were made domestically. Since then, they have dropped the campaign because it has become so implausible. If Wal-Mart were a country, it would be China's largest export market. Very few items sold in the store are made in the U.S.

STAY FREE!: Do they still run the "Buy Canadian" and the "Buy Mexican" campaigns in those countries?

FEATHERSTONE: I don't know about those, but they do have a nativist campaign in China. I'm sure it's convincing there because the stuff really is made in China! [laughs]

STAY FREE!: When Wal-Mart decides to open a store in a town, is it protested more than other big-box stores?

FEATHERSTONE: Yes. It's easier to get a campaign against Wal-Mart. I think the general public is becoming more familiar with their practices.

STAY FREE!: The arguments Wal-Mart makes for bringing the store to a town are that it offers low prices, new jobs, and more tax revenue. Clearly, Wal-Mart has low prices, but what evidence is there to support or discredit the other two claims?

FEATHERSTONE: The increase in jobs claim isn't always true because Wal-Mart puts other stores out of business.

STAY FREE!: Have there been any empirical studies along these lines?

[ NOTE: Images for this interview appear only in the print version of Stay Free!, which you can purchase right here. ]

FEATHERSTONE: Yes, but I don't know much about them. The research on this is very ambiguous because a lot of small businesses don't have great pay or benefits, either. Plus, a lot of them don't employ very many people--they're small. So I wouldn't say it's a myth that Wal-Mart brings jobs. There are large areas of this country where there is no meaningful economic development at all, and Wal-Mart tends to target those areas because they contain a supply of poor customers and workers--people who will accept the jobs and be eager for the low prices.

Now, the question about tax revenue: Wal-Mart is a serious drain on communities because it aggressively seeks out huge tax breaks. They often come into small towns and get several million dollars in corporate tax breaks and subsidies for buildings. And on top of that, they drain the communities by creating a low-wage workforce that requires public subsidy. People who aren't making a living wage need housing, they need health care, and they even need food stamps. In many places, Wal-Mart is the leading company in the number of dependents on welfare. That's well-documented. These are people who are working--they shouldn't need welfare! The benefits that Wal-Mart may appear to bring to a community are a double-edged sword. People tend to buy the idea that low prices equal a better standard of living. They tend to focus on how they're treated as consumers rather than how they're treated as taxpayers or workers or citizens.

STAY FREE!: Have any towns or other municipalities passed laws against Wal-Mart in particular?

FEATHERSTONE: I don't think you can pass a law against a particular company, but some places have passed laws banning retailers of a certain size, which can rule out Wal-Mart Supercenters. Many places have tried to pass such a law and have been defeated by Wal-Mart front groups with names like Citizens for Fair Commerce.

STAY FREE!: Where's the nearest Wal-Mart here in New York?

FEATHERSTONE: There's one in Union, New Jersey. And there's one in Valley Stream, Long Island. I periodically check on the website to find the closest, and there's always a new one.

STAY FREE!: Do you think they'll try to open a store in New York City?

FEATHERSTONE: I do. They have been talking to real estate people; they've made public statements saying it's a market they'd like to get into. They don't know how to approach it, because it would be a huge political battle. Actually, somebody last night asked me if Wal-Mart's expansion into urban areas would possibly have a good effect because, as Wal-Mart goes into places where organized labor is stronger, it might be forced to change its bad practices. But I don't think that we in New York should risk having Wal-Mart come in, lower wages, and be a blight on the landscape. Here, it's also a cultural issue. On one level, that's a little bit elitist. On the other hand, I don't think people come to New York to see chain stores. As more of the country becomes overtaken by this stuff, it's important to have places that are not, to show that it can work.

STAY FREE!: Yeah, we're now seeing cities imitating Times Square by putting up these large moving billboards in their business districts.

Does Wal-Mart engage in predatory pricing? Do they use price to intentionally put other retailers out of business?

FEATHERSTONE: Yes, and it's so central to the way they do business that I can't even think of an example. Wal-Mart has gone to some places, put all the stores out of business, found that their store still isn't profitable enough and closed it down, leaving those places with no stores at all.

STAY FREE!: I know Wal-Mart has hurt the music industry. They use CDs as loss-leaders, selling below cost. Tower Records, for example, has filed for Chapter 11 bankruptcy protection. Wal-Mart has also priced out toy retailers.

FEATHERSTONE: Yes, FAO Schwarz has filed for bankruptcy, and Toys 'R' Us is having serious problems, and a lot of that is due to Wal-Mart. I think they do that in almost every area. They're also very aggressive in selling books, which is one of the reasons independent bookstores hate them so much. Hopefully, they'll therefore aggressively promote my book! [laughs]

STAY FREE!: Can you talk a little bit about Wal-Mart's effects on other businesses? I've read that it really puts the squeeze on suppliers and other companies it works with. Wal-Mart continually strives to lower its prices from the previous year, which strikes me as incredible.

FEATHERSTONE: Wal-Mart suppliers are in a bind because they can't not do business with Wal-Mart, but that forces them to lower their prices, which can affect wages everywhere. So Wal-Mart ends up driving down wages in industries they are not directly involved in. They affect wages in trucking and manufacturing, even in other countries, by putting pressure on suppliers to get them things faster and cheaper. They're creating even more dire sweatshop situations in China.

STAY FREE!: Back to predatory pricing, I guess what they've done to grocery stores would be an example.

FEATHERSTONE: Yes. Many grocery stores are unionized and offer good benefits, but that's a real disadvantage when you're competing with Wal-Mart. Some grocers have been put out of business. In California, the grocery strike that went on so long last year was one of the few instances where there was a huge labor dispute because of competition from a company that hadn't even entered the market yet. Wal-Mart was about to start opening Supercenters, which sell groceries, and that put the workers at a major disadvantage, so they ended up getting a lower wage than they would have gotten if Wal-Mart wasn't around. Labor leaders all over the country now say that anytime you're having a negotiation in the private sector, there's always an 800-pound elephant in the room, and that is Wal-Mart.

STAY FREE!: Wal-Mart has repeatedly been fined for falsifying or destroying evidence in court cases involving shoppers who were injured or robbed at one of its stores. Do you know if Wal-Mart is worse than other stores on these kinds of cases?

FEATHERSTONE: I looked into slip-and-fall cases once, but no one seemed to have a good answer for how Wal-Mart compared with other companies. Maybe there are a lot of slip-and-fall cases because there are a lot of Wal-Marts. I've talked to some of those people, though. One woman started a website called WalMartSurvivor.com. [laughs]

STAY FREE!: Do you keep track of other lawsuits? Other class-action suits?

FEATHERSTONE: Yes, there are many other class-action suits, at least 39 on the overtime issue alone, in different states. There's also a class-action suit on behalf of immigrant janitors, who were forced to work for seven days without a break.

STAY FREE!: I read about one lawsuit involving a woman whose husband died of a heart attack. Afterwards, she discovered that Wal-Mart had taken out an insurance policy on his life!

FEATHERSTONE: Yes. Vicky Rice. Her husband was incredibly overworked, as many Wal-Mart managers are. I believe he was an assistant manager, and assistant mangers are forced to work 70--80 hours a week. In some sense, they are more exploited than hourly workers, because they are salaried, so they don't get overtime.

STAY FREE!: You mean that even the law says they don't get overtime.

FEATHERSTONE: Right [laughs], because Wal-Mart workers don't get overtime anyway! Actually, that's another class-action suit: Wal-Mart makes assistant managers perform the duties of hourly workers in order to avoid paying overtime, so assistant managers have sued.

Anyway, this woman's husband was working 80 hours a week. I think he had a weak heart. One day, he was exhausted from working because he was understaffed, but he had to help a customer carry a TV to her car, and when he did, he had a heart attack and dropped dead. So, this is already a really sad story, but then his wife found out that Wal-Mart had an insurance claim on him. They were actually collecting money from his death!

STAY FREE!: And they do this to lots of employees, right?

FEATHERSTONE: Yes. In fact, there are several class-action suits by people who were appalled to discover that Wal-Mart had been profiting from employee deaths.

STAY FREE!: They do it because it's a tax loophole. They store money in these insurance policies so they don't have to pay taxes. How do you feel about big-box stores in general? Are they necessarily bad?

FEATHERSTONE: Other companies have very similar practices. Aesthetically, we all like Target better, but their wages are in many places low or just as low, and they all represent the Wal-Martization of our economy, which is the exchange of low prices for poor work conditions. But I don't necessarily think that largeness is really the problem. Large stores don't have to be worse than small stores. In fact, many studies have shown that large companies on average offer better wages and health benefits and are more easily well-unionized. There are a lot of things you could potentially do better on a big scale.

STAY FREE!: Because you have the advantage of buying in bulk.

FEATHERSTONE: Plus the convenience. No one wants to spend their entire Saturday running errands to different stores. Why not have a place that everyone in the community visits? A lot of people love going to Wal-Mart to run into friends. You could still have fairly cheap prices. Costco pays workers better, and they are quite cheap.

STAY FREE!: You mention in the book that Wal-Mart is expected to run afoul of antitrust laws in 2009.

FEATHERSTONE: I'm eager for that. If you control too great a share of the market, you are in danger of operating as a monopoly. But I certainly hope there will be more of a public outcry before 2009.

STAY FREE!: What do you think is the greatest hope for checking Wal-Mart's power? You've mentioned labor unions.

FEATHERSTONE: I think that the biggest hope lies in labor and communities coming together, but they really need a lot of help.