The following is an excerpt from Austin Frerick’s new book, Barons: Money, Power, and the Corruption of America’s Food Industry, now available from Island Press.
Like the Gilded Age economy that Walmart exemplifies and helped create, Bentonville’s wealth masks the hardship that surrounds the town. After all, the Walton family can spend so much money on museums and bike paths because they have taken it from the communities in which Walmart operates – from customers, but also from the company’s employees, the towns themselves and even from taxpayers through a series of hidden government subsidies.
For example, when Walmart expanded its traditional stores into supercenters, the company often built a new, larger building nearby rather than simply expanding the existing one. These old stores often sat empty or underutilized, just like the original Walmart in Rogers. This may be why Walmart openings have been linked to falling nearby real estate prices.
Walmart and other major retailers have made matters worse by adding restrictive clauses to the deeds of old buildings that prevent other retailers from using the space for competing purposes. These provisions perpetuate food deserts and tie the hands of communities grappling with these ghost buildings. After all, it’s not easy to find a use for an old Walmart other than grocery or retail. A former Walmart Supercenter in Brownsville, Texas, became the center of a national debate when it was purchased by a company that detains migrant children.
Limiting competition is apparently not enough for Walmart. The company knows what happens to communities when its stores close and uses that knowledge to obtain tax breaks. The company often uses the so-called “dark stores” loophole, a tax trick that allows it to avoid millions in property taxes by assessing its stores as if they were closed.
These schemes further benefit Walmart and deprive communities of important tax revenue. They are particularly egregious when you consider that many of their stores were built with massive tax subsidies anyway. Of course, this is not the only tax loophole the family has exploited. In 2013, Bloomberg reported that the family created an inheritance tax loophole that is now used by many American billionaires.
As bad as Walmart is for communities as a whole, it creates conditions that are especially harmful for workers. As labor historian Nelson Lichtenstein noted, Sam Walton built a company rooted in a “Southern-style, union-free post-New Deal America.” Walmart has long been characterized by transnational trade, job insecurity, and poverty-level wages, an ironic geographic twist of history given that the region was at the heart of the New Deal and the anti-chain movement.
Walmart employs about 1.6 million people in the United States alone, making it the largest private employer in the country. In fact, the company’s payroll includes more people than the population of eleven states. The company’s influence on the labor market is so great that it depresses wages in the areas where it builds supercenters. In the words of one academic, Walmart practically sets the “real minimum wage” in the country. That’s why when the company decides to raise wages, it’s a national issue.
Walmart has been notorious for its poverty wages since its founding. In its early years, the company used a legal loophole to pay its predominantly female store employees half the legal minimum wage. It took a fight in federal court to get the workers the minimum wage. In 2021, the median income of Walmart employees was about $25,000, while CEO Doug McMillon took home $25.7 million that year.
Given that history, it should come as no surprise that Sam Walton hated unions. “I always believed strongly that we didn’t need unions at Wal-Mart,” he wrote in his memoirs. Over the years, the company has aggressively fought efforts to unionize, seemingly closing stores whenever they succeed. For example, when deli counter workers at a Walmart Supercenter in Texas voted to unionize in 2000, the company switched to prepackaged meats and closed the department. In 2015, Walmart suddenly closed five stores, supposedly to fix extensive sanitation problems that would take six months to fix. Some speculated that the real reason the stores were closing was to fire employees in retaliation for union activism.
And the company hasn’t just evaded labor laws. A 2017 report based on a survey of over a thousand Walmart employees concluded that the company likely violated worker protection laws such as the Americans with Disabilities Act and the Family and Medical Leave Act. According to the New York Times, “The company regularly refuses to accept doctor’s notes, punishes employees who are required to care for a sick family member and otherwise penalizes employees for lawful absences.”
As the corporation’s power grew, it changed work opportunities and norms for millions of Americans. Labor market expert Gary Chaison told the New York Times in 2015, “You’re increasingly finding that Walmart is the primary earner because many workers have more or less given up hope of a middle-class job.” At the same time, many older Americans are working at the store beyond normal retirement age because of their financial insecurity—a sad reality reflected in the recent TikTok trend of older Walmart employees asking for donations.
This power imbalance between Walmart and its employees explains the poverty wages of many of Walmart’s 1.6 million employees, as well as those of its competitors. Some unionized grocery stores have even used the opening of a Supercenter as an excuse to demand cuts in their own employees’ wages and benefits.
These low wages also mask a generous hidden subsidy the company receives from taxpayers. Many Walmart employees rely on government welfare programs such as Medicaid (health care), the Earned Income Tax Credit (a tax subsidy for low-wage workers), Section 8 Vouchers (housing assistance), LIHEAP (energy assistance), and SNAP (food assistance), among others. A 2013 estimate by congressional Democrats found that taxpayers subsidize Walmart by more than $5,000 per employee per year through all the government assistance programs employees need.
Instead of paying their employees a living wage, the Walton family is passing the burden on to taxpayers. Although many people balk at the idea of the public filling the gap between Walmart’s wages and the income workers need to survive, not all politicians see a problem with this kind of welfare for billionaires. Jason Furman, former chairman of the Council of Economic Advisers under President Obama, wrote a paper before he took office, “Wal-Mart: A Progressive Success Story,” calling for even more such subsidies to Walmart’s bottom line.
There is, of course, another way to address the problem. Walmart was unable to establish itself as a market leader in Germany because the country has strong labor and antitrust protection laws. These market protection laws may explain why the company eventually threw in the towel and sold its operations there.
In some cases, Walmart even receives a double subsidy. Its employees and customers often rely on SNAP, the Supplemental Nutrition Assistance Program, formerly known as “food stamps.” The program was originally created as a temporary measure under the New Deal and made permanent in a law signed by President Lyndon Johnson in 1964. That program and several smaller food assistance programs are now part of the Farm Bill. In fact, these food assistance programs make up more than 75 percent of the most recent Farm Bill.
SNAP is in many ways a triumph of progressive social policy. In 2022, an average of 41.2 million people participated in the program each month. The use rate is so high because, unlike many other programs, SNAP was structured by the U.S. Congress to guarantee assistance to anyone who qualifies. As a result, the program is a lifeline for millions of Americans who might otherwise struggle to earn a living.
But because of Walmart’s dominance in the grocery sector, a very large portion of SNAP dollars now flow through the company’s coffers. In 2013, the company generated $13 billion in sales from SNAP shoppers. By comparison, farmers’ markets accounted for only $17.4 million of all SNAP spending that same year. The amount of SNAP money the company received skyrocketed as SNAP benefits expanded in response to the COVID-19 pandemic. After some rough calculations, I came up with a rough estimate that Walmart now receives about $26.8 billion from SNAP each year.
Unfortunately, more concrete numbers are not available, as the U.S. Supreme Court has ruled that the amount of taxpayer money the company receives from SNAP can be kept secret. In 2019, the court heard a case involving the U.S. Department of Agriculture’s (USDA) decision to deny a South Dakota newspaper’s request for this information. “In most cases, the government tells the public which companies benefit from federal money earmarked for taxpayer-funded social assistance programs,” noted agriculture and food journalist Claire Brown. “For example, we know which insurance companies make the highest profits on Medicare and Medicaid, and those numbers have been used to pressure them to offer better options to their customers.” In this case, however, the court rejected that level of transparency, and Justice Elena Kagan joined Republican-appointed members of the court in upholding the USDA’s decision on the grounds that it was “confidential” business information.
The program is so important that it factors into Walmart’s operational decision-making. Many Americans enrolled in SNAP plan their purchases around the days their funds are deposited. In fact, the company factors this period into its ordering system.
From Barons: Money, Power, and the Corruption of America’s Food Industry by Austin Frerick. Copyright © 2024 Austin Frerick. Reproduced by permission of Island Press, Washington, DC
The articles reflect the opinions of their authors and not necessarily those of ProMarket, the University of Chicago, the Booth School of Business, or their faculty.
