The recovery from the 2008-2009 recession has been tepid at best, and has disappointed many. Coming out of such deep recessions we have historically seen accelerated growth for several years, which has somewhat softened the pain of recessions and enabled businesses large and small to recover their losses. This tepid recovery is projected to develop into slower growth long-term, as has been concluded in independent evaluations by a leading economist and a leading money manager, according to the WSJ article “U.S. Stocks: Look Out Below?” While not the point of the WSJ article, this slower economic growth will directly and necessarily reduce the wealth creation of firms, which will directly and necessarily impact wage expectations for 2013 and beyond.
The first impact that this slower growth will have on wage expectations is through an increased gap between the income earned by the top tier wage-earner and rest of the workforce. While not desirable for the economy, this will be the logical result of an economic environment that has less opportunity for growth. This environment will increase the relative value of workers who are able to find opportunities for growth, especially those able to lead the implementation of expansion into new areas of business for company ownership. The most critical of these will be the CEO’s and company leaders who are able to successfully implement these growth initiatives; the pay of these individuals will therefore increase due to this value that they are bringing to the ownership.
The rest of the workforce, meanwhile, will be pressured from two sides. The flip side of the previous paragraph is that although the work they do is still important, it is not as critical because the Big Question will not be “How Can We Do This?” but more fundamentally “What Should We Do?” On the other hand, the slower growth will reduce the availability of jobs and result in a higher unemployment rate. As a simple matter of supply and demand, this slower demand will necessarily work against salary growth for the bulk of the workforce.
This raises the inevitable question of how wage negotiations must be managed especially with a unionized labor force. Unionized labor forces in the long term have shown negative impacts to the profitability of a company, although they have been able to “negotiate” lucrative contracts in the short run. This long-term negative impact has resulted in bankruptcies at GM and Chrysler, and most recently at Hostess. A concept missed by the unionized labor force is the fact that if the growth in profit does not exceed the increase in value that the labor force provides such as through higher efficiency, the long-run viability of the business is at risk. From the perspective of the labor force, the workers as a whole and every worker individually must pursue how he can add more value to his work for his employer, and this will be the only way to justify wage increases.
In a low-growth environment, what ideas are there to reduce the income gap?
U.S. Stocks: Look Out Below?
Hostess Preparing For Bankruptcy-Protection Filing
Right to Work Isn’t All It’s Cracked Up to Be
Over the past several weeks Walmart has made headlines for employee protests rather “everyday low pricing”. Walmart has opposed unions since they opened in 1962 and there have been several failed attempts to organize the over 1.4 million Walmart employees. The efforts in the past few years are gaining momentum and even Walmart executives have acknowledged their efforts.
Employees of Organization United for Respect at Walmart , OUR Walmart coordinated protests on the busiest shopping day of the year. It involved 1,000 stores, 4,000 members and thousands of others sympathetic to their position. The members of OUR Walmart want more full-time positions, predictable schedules, and respect. The members of OUR Walmart say that they some of the employees aren’t making enough for a decent living. Some of the Walmart representatives rely on government support and food banks where Walmart is a contributor.
The claims against Walmart extend beyond the complaints from the employees. Many activists say that Walmart’s growth has come at the expense of its workers, environment, and the law. The articles sited that since 2005 Walmart has paid $1 billion in damages related to unpaid work. There are also allegations of corruption in its Mexican subsidiary and a potential cover up by Walmart executives. In November there was a fire at a factory in Bangladesh that Walmart uses for sewing clothes. The previous year declined to sign an agreement among retailers that would have improved working conditions.
On Walmart’s side, CEO Mike Duke told Bloomberg that “This tension for me is not a tension.” Walmart executives stand firmly that they are supporting their workers better than their competition and claims that their turnover rate is lower. David Tovar, a spokesman for Walmart said “we have human resources teams all over the country who are available to talk to associates”. Walmart says that their benefits are affordable and comprehensive and overall they are proud of the jobs they offer. The protests on Black Friday only impacted one tenth of one percent of the company’s workforce. If Walmart employees unionize they are risking vacation time, bonus, discounts and other Walmart employee benefits.
Each side of the fight has brought a team of experts to tell their side of the story. Walmart brought in a strategist for the Democratic campaigns to improve Walmart’s reputation. Leslie Dach specifically focused on reducing waste and energy use and supported Obamacare. OUR Walmart is working with ASGK Public Strategies and the UFCW. ASGK is making OUR Walmart a brand and using tactics such as social media to build the base of supporters. Their efforts have been highly organized and effective compared to previous union attempts.
QUESTIONS: Walmart’s strategy to ignore the efforts is not working as it did with other attempts. I questioned if Walmart make OUR Walmart an ally rather than an opponent? Do you think Walmart employees are treated and compensated fairly?