The Wal-Mart model
When Robert E. Scott, an economist with the Economic Policy Institute, talks about manufacturing jobs driven overseas by Wal-Mart, he likes to relay "an amazing" story he heard at a trade dinner.
A Montana farm sold mint to an American toothpaste company. One day the toothpaste company mysteriously ceased its orders.
Wal-Mart, the toothpaste company explained, had decided that by its calculations a cheaper toothpaste could be made by importing vats of mint oil from China. Wal-Mart, known for trying to reduce costs by 5% every year, said it wanted to buy the cheaper paste and would find somebody else to make it, if necessary. The farm took a serious financial hit.
The story is remarkable to Scott because it is not traditionally the role of the retail buyer to design a cheaper mousetrap and tell other companies to build it. But any book on Wal-Mart's bullish drive to lower prices would reveal that it's hardly unique for suppliers to feel driven overseas to reduce costs.
When Scott crunched the numbers, he traced a loss of 200,000 U.S. manufacturing jobs to China just by looking at Wal-Mart's additional sales for the six years ending in 2006. That's 33,333 jobs per year, or 641 every week.
Those numbers don't include the hundreds of thousands of jobs already lost to meet existing sales, he said. Nor do they take into account U.S. manufacturing jobs that suppliers to Wal-Mart moved to other countries, such as Mexico, Vietnam, Thailand and India.
"Total job displacement may be two or three times as high as what I estimated there," Scott said. "The question is who is going to make the goods that go in those shelves, and that's what's being overlooked and hidden in the PR statements from companies like Wal-Mart."
"This is not just a problem with Wal-Mart," Scott points out. However, "in the retail sector, they really led the way. Everybody is now following the Wal-Mart model."
