Tim Worstall is becoming one of my favorite writers on Walmart. We are polar opposites on the level of the 60 Minutes Point/Counterpoint duo of James J. Kilpatrick and Nicholas von Hoffman, but Worstall does get a conversation going. Like this one headlined: Walmart Is Changing Its Labor Model: How Many Workers Will Lose Their Jobs? Worstall writes:
Walmart is quite significantly changing its labor model. Moving from a near hire any live body and let them get on with it one to something where people are well trained, well paid and presumably of rather higher productivity. This is what many have been crying out for the company to do for years of course: move to something closer to the Costco model than the one that Walmart has traditionally pursued. However, as some like me have been pointing out all along there is a flip side to that change in models. Which is that the end aim is of course to employ fewer of those more productive people at those higher wages. The point being that if one can raise productivity levels by more than the increase in cost then of course profits will rise: that being the end goal for all shareholder owned companies. The interesting question is going to be how many people either lose or don’t get jobs as a result of this strategic change: and I’ll suggest a method by which we can calculate this a little later.
I don't disagree with Worstall there---I offered my own spin on the story in CAN WALMART UPSKILLING CREATE LIFERS…?---but where he goes down the wrong road is where he attempts to make a comparison to support his case.
For well over a decade now I’ve been pointing out that yes, sure, Costco pays its workers very much better than Walmart does. But it also uses, per unit of sales, about half the labor that Walmart does. Thus the shouting that Walmart can and should pay its workers like Costco does comes with that sting in that tail: for moving to the same pay structure would entail at least attempting to move to the same productivity levels. Meaning that Walmart would employ about half the number of people per unit of sales than it currently does. And now we’re seeing that Walmart is taking at least baby steps to that higher road labor model. And the interesting thing is going to be, well, is the prediction about employment levels going to come true too?
Costco is not Walmart (full disclosure, I have a Costco card) and workers in the two operations do very different jobs. When I worked retail back in the dark ages of the '70s, I would estimate I spent one-third to one-half of my hours actually helping customers on the floor find what they needed. Granted, I worked mostly hardware which involved answering a lot of home fix-it questions, but I think the model held generally throughout the store. Costco is a warehouse operation where most customer questions, when they have questions, are in the vein of where do I find the cases of toilet paper? That takes a lot fewer people on the floor. Walmart is different. The challenge is more than simply retaining workers who can stock a shelf at more than a snail's pace. Walmart needs people who are not surly, who are not focused on when their shift ends so that they can get out from under the moronic department manager's gaze. Walmart needs people who are personable and helpful, and that is not a matter of productivity---accomplishing financial goals with fewer employees---that is a matter of having workers who actually enjoy their jobs. Jeff Hess: Have Coffee Will Write.


  1. antichue says:

    From 2000-2006, Walmart stores often had large numbers of employees in the stores, making it easy as a customer to find someone. Starting with the NYT-leaked HR email talking about reining in wage costs, the company experienced a rapid change. The wage scale went from a percentage-based yearly increase (maximum of 6% of current wages) and merit raises (which the Duke class action suit argued had been abused), to the institution of a maximum cap of about 2x base wages for a position, a flat maximum of $0.60 yearly (so lower growth for anyone over $10/hr), and no merit raises. This was coupled with Eduardo Castro-Wright’s attempt to “Targetize” Walmart’s stores, reducing total sku’s and thereby allowing the stores to reduce people overhead as well. The last vestiges of attempts to reduce people overhead (the infamous backroom system) has mostly been abandoned as well.

    But that isn’t to say things have gotten better on the people front. The new wage scale isn’t much better. The floor has gotten higher, but that hasn’t translated into retention or morale increases, as you’ve seen, mostly because the wage increases have only impacted those already at cap and newcomers. In fact, the new yearly potential pay increases seem to be maxing out at about 3.5% of an employee’s wages, so to even get near the $0.60 raises the second system potentially provided, and still well below what anyone who made more than $10/hr under the previous one could get, you are looking at needing to be near cap as well, approximately $17/hr. Wage growth is still a focus.

    I’d argue that none of the changes in the past 10 years have been retention friendly. If anything they’ve either been hostile or or neutral at best. If they want to keep the productive ones, the current system isn’t any better. It’s the same old story, contra what the linked author claims.

  2. UncleBob says:

    >the moronic department manager’s gaze.

    Was this jab at so many hard-working folks really necessary for this piece?
    I get that you make negative comments towards specific individuals or small groups of high level management within the Walmart structure, but this seemed unnecessarily cruel for no reason whatsoever.

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