Precarious workers or satisfied customers: a fine line for giant retailers

This post is an appendix of sorts to my article, “Fired by Walmart for Christmas”, to be published this weekend by Common Dreams. In the article, I describe the stresses and difficulties faced by Walmart workers during the holidays. Overwork, a climate of fear and barely-organized chaos make for taxing shifts at work. Low wages, insufficient hours and inadequate benefits stretch budgets and make it harder to find holiday joy at home. A Walmart Christmas could have easily been written by Dickens.

Here, I want to focus on an aspect of Walmart’s practices that stood out from my interviews with long-time Walmart employees and OUR Walmart organizers: the increased use of temporary workers and the greater degree of precarity experienced by all workers at the retail giant. The workers and organizers I interviewed all described a long-term shift in company culture. From the perspective of veteran employees, the company has gone from one that at least outwardly respects its workers to one solely focused on profit, even at immense cost to worker well-being. My interviewees all claimed this change took place during the transition in management after the death of founder Sam Walton.

Make no mistake: Walmart was always focused on cost-cutting. However, through a shrewd mix of charisma and good business sense, Walton was able to maintain a sense of community amongst his employees. He knew what he needed to do to keep costs down, but he also knew how to do it in a way that did not completely alienate and break his own employees.

In the two decades since his passing, Walmart has changed. Without Walton’s calculated approach to cost savings, working conditions have deteriorated. Wages, benefits and hours have all been reduced.  In addition, without Walton’s charisma, not even a veneer of respect for workers remains. Today’s Walmart employees are not only tired, poor and often on social assistance; they are also deeply disheartened and afraid.

Most recently, Walmart has moved a step further and rapidly increased its reliance on temporary workers. Over just the past year, the percentage of temporary workers in Walmart’s workforce has grown several times over – from an estimated one to two percent to somewhere near 10%. This increase, especially combined with previous cuts to employee hours, signal’s the company’s embrace of precarious labour. All of my interview subjects emphasized that workers are now even more afraid – afraid not only that conditions will get worse, but that they will lose their jobs altogether.

While increasing precarity has been successful in sowing greater fear among Walmart employees, further depressing labour costs and hampering organizing efforts, the strategy has also produced some negative consequences. It has raised the ire of customers to the extent that Walmart’s sales and profits have been stagnant or actually decreasing since the beginning of this year.

In response, Walmart has stated that despite hiring 55,000 additional temporary staff for the 2013 holiday season, it will also be promoting 35,000 temporary workers to permanent part-time as well as a further 35,000 part-timers to full-time. This may sound like somewhat of a capitulation but my hunch is that these numbers betray a well-calculated strategy that aims to entrench precarity among the workforce while just alleviating its most adverse on customer satisfaction.

The following is the back-of-napkin calculation I mention in the Common Dreams article. It aims to show that Walmart could easily be increasing the hours of its permanent employees by far more than it is and doing this instead of hiring more temporary staff.

• Walmart has a total of 1.3 million employees in the US; let’s say 1.2 million of that is the relevant group
• Walmart claims that most of their workforce is full-time; let’s take them at their word and assume that 70% is full-time, though the 70-20-10 distribution of full-time to part-time to temporary this produces seems too generous on the full-time given the mass of anecdotal evidence
• full-time at Walmart is anywhere between 34 and 40 hours per week; let’s just take the numerical average of 37 hours per week as average full-time hours
• since employees qualify for benefits if they work over 24 hours a week, then part-time hours will be below that; let’s assume they are an average of 22 hours per week
• no need to worry about overtime as Walmart is no fan of overtime pay
• the extra weekly hours budgeted for the holiday rush are
  • new temporary hires: 55,000 x 37 = 2,035,000
  • part-time moving to full-time: 35,000 x (37 – 22) = 525,000
  • temporary moving to permanent part-time (could be zero but say ten extra hours per week): 35,000 x 10 = 350,000
  • total: 2,910,000 hours
• this same weekly increase in hours could be achieved by simply giving all part-time employees the minimum full-time hours for the holiday period; that is increasing their hours from 22 to 34 hours per week
  • (20% x 1,200,000) x 12 = 2,880,000 hours
• it is certain that not all part-timers would want their hours increased but given how many workers Walmart has cut from full-time to part-time, it is very likely many of them would want more hours; in addition, the above calculation does not factor in overtime, but at least some workers would be happy to take on some overtime near the holidays to pad out holiday budgets (especially given Walmart’s normal wages)

The point of this exercise is not to come up with firm numbers. Rather, I want to show that the distribution of holiday rush hours amongst current employees and new temporary staff is not geared towards giving current employees the hours they want and then hiring temporary staff to fill the gaps. Instead, this distribution of hours is a calculated bid to achieve an “optimum” level of precarity – one that will leave customers sufficiently satisfied to keep coming back and workers sufficiently afraid to keep labour costs down.

A more highly-trained mainstream economist than me could model this problem and solve it to find the optimum level of precarity in 15 minutes. It would take me a few hours longer – as well as risk putting everyone involved to sleep – so I will spare the gory details. Suffice it to say that this is a well-defined economic problem. There is some optimal level of precarity that maximizes profits subject to a constraint on customer satisfaction (customer satisfaction falls at an uneven pace as precarity rises).

At times like this, Walmart is usually compared with Costco. The wholesale retailer is well-known for being an exception in terms of retail industry working conditions, paying a living wage and providing good benefits. This is an appropriate comparison and Costco has taken the opposite tack to Walmart on a host of labour issues from compensation to unionization to precarious work. Here, however, I want to look at another comparison – one potentially more instructive when it comes to precarity.

Compare Walmart with North America’s major online retailer, Amazon. Amazon also hires thousands of temporary workers for its holiday rush; this year the number is 70,000 or about a quarter more than Walmart. Unlike Walmart’s workforce, Amazon’s (outside call centres) does not deal directly with customers. Workers staff a network of warehouses across the US. Amazon’s warehouses rely on a system called “chaotic storage” to transfer goods from suppliers to customers. In essence, this means that goods are not organized in any way within warehouses; they are simply placed wherever there is room. A complex IT system keeps track of everything and directs workers to the location of goods as they are fulfilling individual orders.

While some in the media have romanticized the roving lifestyle of some seasonal Amazon workers or elevated Amazon warehouses to beacons of hope for industrial revitalization, in truth the work performed by most Amazon employees is difficult, toxic and dehumanizing. Workers are directed in most of their movements by hand-held computers that are also constantly gathering data on their efficiency and pace of work. In addition, the warehouses are often environmentally unsafe, work days are long and pay is low.

Finally, the distinction between the kind of service quality that precarious and non-precarious labour can provide is much smaller than at Walmart. SSI Schafer, the company that designed Amazon’s “chaotic storage” model, touts the model’s strengths:

Precarity is the selling point of the entire system. SSI Schafer also claims that using human power is cheaper than automation. This is largely because workers are completely interchangeable and expendable.

Hence, while we should be making the argument that precarity is bad for business, this is the low-hanging fruit, especially as technology opens up new business models like Amazon’s that feed off of precarious labour. In the economic problem I sketched above, Amazon has virtually no customer service constraint on profit maximization. In setting working conditions, it is only limited by laws, the local alternatives available to workers and human biology. With widespread economic stagnation after the financial crisis and constant attacks on labour-friendly legislation, these limitations do not set the bar incredibly high.

While Amazon is only one of two purely online outfits on the list of the Top 100 US retailers, it has been climbing steadily up the rankings and currently holds the number 11 position. Its business model is being copied by more and more companies, even traditional brick-and-mortar sellers looking to have an online presence or update their distribution networks.

Precarity is set to become an even greater feature of work. Walmart’s recent move towards a more precarious workforce is only a taste of what is to come; Amazon shows the mature product. Precarious work, while often physically difficult, is especially damaging psychologically. Stress and fear take their toll on individuals and can poison and destabilize entire communities. It is communities, however, that stand the greatest chance in the fight against precarity. When people stand together to demand stability – as workers, neighbours, producers, consumers or citizens – they directly counteract the isolation and division that precarious work feeds on.

Can Walmart have its discounted-with-a-smile cake and eat it too – a precarious workforce and loyal customers? Sadly, the answer for now seems that, to a large extent, it can. While traditional retail where buyers and sellers still interact demands some attention to customer service and investment in workers, the arrival of new business models, such as that exemplified by Amazon, make precarious work increasingly common. In terms of working conditions, Walmart appears to be playing catch-up; only not with Costco, but with Amazon.