The potential to buy more stuff at lower prices – it sounds like a godsend for American consumers. But for Wal-Mart, which prides itself on the “Always low prices!” ideal, this pursuit has not been undertaken without criticism.
Wal-Mart recently announced that the Tampa Bay area would be a test market in a larger plan to sell a number of generic drugs for $4 per 30-day supply. Wal-Mart should be praised, despite its problems, for at least attempting to step into the gap and provide low-cost medicines to those who need them most.
Not surprisingly, vocal opponents of all things Wal-Mart have been critical of this plan. According to wakeupwalmart.com, the opposition’s argument seems to center on disputing the number of generic drugs that will be covered, as well as pointing out the “775,000 hardworking families of Wal-Mart workers who have no company health care.”
There is no dispute that there is a health care crisis in America, but the insinuation that Wal-Mart is alone in struggling to provide affordable insurance to its employees is ludicrous. The truth is that Wal-Mart is the nation’s largest private employer, so it conveniently provides some alarming statistics for opponents to use in their shock-and-awe campaign against the retailer.
The plan to provide a variety of generic drugs to consumers at low prices is nothing more than a continuation of the same business model that has made Wal-Mart so successful. By leveraging the volume of the company’s sales, Wal-Mart is able to provide these drugs at lower costs. It makes a logical sort of sense. Too bad the government cannot take a hint and follow this model in confronting the health care crisis in this country.
But by no means should it be assumed Wal-Mart is doing this out of some purely altruistic motive. Capitalism 101: Bring the consumer into the store with low prices and hope they will fill up their shopping carts with more than just generic diabetes medications. Expanding profits makes shareholders happy, and the business grows. Love it or hate it, it’s how the economy works.
This is not to say Wal-Mart hasn’t operated in a way that opened itself up to problems. Hiring illegal immigrants for cleaning crews and not providing adequate management opportunities for women and minorities make for great headlines and aren’t good for public perceptions of the company.
The truth is that Wal-Mart has had some missteps and will continue to stumble because it is constantly under the microscope. But if all the wrongs Wal-Mart has caused were that egregious, consumers wouldn’t have shopped at Wal-Mart stores in August to the tune of $16.98 billion in sales. Many alternative stores are available, but by the looks of the Wal-Mart parking lot, consumers have made their choice.
For the all the fault leveled at Wal-Mart, it is important to note the country’s largest private employer has provided jobs to a large number of Americans. According to Wal-Mart’s figures, the company employs about 1.3 million associates in the United States. These associates may or may not have been able to find employment otherwise, especially in more rural communities.
OK, so Wal-Mart employs many Americans, but their wages must be substandard, right? Understanding that there is a supply and demand for labor, if it were truly the case that wages were sub-par at Wal-Mart, fewer workers would offer their services and the retailer would have to offer higher wages.
That hasn’t been the case. After all, how do you explain 25,000 applicants for 325 jobs at a store that opened in Evergreen Park, Ill.?
Wal-Mart should be emulated for the strides it has made in terms of productivity improvements. Efficient inventory control mechanisms and an ability to work with suppliers to improve manufacturing processes have led to cost reductions that have been passed on to consumers. In fact, in terms of U.S. labor productivity growth over the period of 1995 to 2000, Nobel Prize-winning economist Robert Solow said, “By far the most important factor in that (growth) is Wal-Mart.”
The spillover effects of Wal-Mart’s generic drug plan are already being felt. The competition for market share in a portion of the $250 billion pharmaceutical business has caused Wal-Mart competitor Target to state it will match Wal-Mart’s plan. Other retailers may follow their lead, and consumers will ultimately benefit.
But Wal-Mart cannot address the health care uncertainties entirely on its own. According the U.S. Census Bureau, some 46.6 million people were uninsured in 2005, and that number will probably rise. Wal-Mart’s effort to address the rising cost of drugs is commendable – even if everybody doesn’t love the company backing the plan.
Aaron Hill is a senior majoring in economics.