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Taking on Wal-Mart and Its Subcontractors
Progressive Populist
by Nathan Newman
June 01, 2004

The evil effects of Wal-Mart's low wages and union busting is becoming well understood among progressive activists. What's less well understood is that the problem is far larger than the 1.1 million workers directly employed by Wal-Mart. In fact, given its network of suppliers and contractors, Wal-Mart's influence is far-reaching in driving down wages in its manufacturers and service suppliers across our nation and the world.

The Service Employees International Union (SEIU) has launched a new initiative, Justice At Work, to educate the public about the exploitation happening at mega-corporations like Wal-Mart and among their innumerable subcontractors.

But they face a bit of a public relations hill in making people understand the connection between the problems created by subcontracting and the things they care about in their lives.

Obviously, SEIU cares about subcontracting. As a union that organizes janitors, who are overwhelmingly not employed directly by the companies whose buildings they clean, the union has to care.

But why should the rest of us even think about small fry like the subcontractors when the big targets like Wal-Mart are the real problem?

The answer is because those small fry don't really exist, not as real companies. It's all a big lie. If a subcontracting company lives and dies based on the commands of a giant corporation, they aren't an independent company; they're a division. General Motors used to call their divisions Pontiac, Chevrolet, Cadillac, etc., and they were each managed semi-autonomously day-to-day. But the General Motors board of directors made any ultimate decision-making.

Today, those divisions are labeled "subcontractors" and are incorporated separately, which has all sorts of legal, labor and tax advantages for the main corporation. (Think Enron and its "special-purpose vehicles.") But they are all the same company in reality as long as they take orders from Wal-Mart or any other mega-corporation head office.

Wal-Mart's Reach: Those 1.1 million workers on payroll at Wal-Mart are only a portion of the people whose employment is dependent on the decisions Wal-Mart management makes every day.

Along with janitors, exploited across the country in anonymous little companies slaving for Wal-Mart, there are delivery companies, advertising agencies and any other manner of service firms that live and die on Wal-Mart orders and business. An estimated 20,000 separate companies supply the behemoth's needs.

Assume just a few hundred people at each of those suppliers working on behalf of Wal-Mart and that's additional millions of people de facto on Wal-Mart's payroll.

The Lie That Small Business Creates Jobs: Which gets us to the main point, which is the often worshipful descriptions of "small business," when the reality is that a large portion of small companies are short-lived sweatshops living and dying at the whims of big corporations like Wal-Mart.

The biggest hoax in economics is that small business drives job creation in this country. While lots of jobs at small business appear each year -- usually at the demand of large corporations &endash; usually an equal number are destroyed as those same large corporations switch between an ever-changing musical chairs game of captive suppliers.

The toxic effect of the myth of small business job creation is that "pro-business" politicians then call for lighter regulation of "entrepreneurial firms," meaning that those underregulated firms become a safe haven for exploitation.

Which is incredibly convenient for big companies like Wal-Mart or Intel which can unload their dirtiest jobs on their small contractors, knowing they can get away with often illegal exploitation that the bigger firms could not pull off. When janitorial subcontractors were raided last year, the wage and overtime violations pervasive in those cleaning firms were just the tip of the iceberg of the subcontracted exploitation in the small business subcontractor sector.

The Global Sweatshop: The problem is only deeper at the global level of manufacturing, where companies dance to Wal-Mart's tune or they are out of the game. Wal-Mart searches the world for ever cheaper sources of supply, pitting vendor against vendor, country against country. Manufacturers therefore are desperate to do what Wal-Mart management tells them to do, or they are often out of business.

So how many employees does Wal-Mart really have?

Between domestic and overseas contractors, it's a pretty fair estimate that Wal-Mart essentially employs five to ten million people worldwide.

So what's the strategy? A campaign against Wal-Mart and other corporations needs to concentrate on subcontractors, both domestic and overseas.

First, those subcontractors are where the worst labor abuses happen. However pathetic the pay and the violations of the law for core Wal-Mart employees, workers in these underground contractor jobs and in slave labor jobs in China face even greater hardships.

But the very fact that Wal-Mart's profits depend on squeezing its suppliers means that this is a pressure point on the company. Exposing those abuses and supporting those workers means that Wal-Mart will get a big black eye in public relations and lose its easy way to outsource exploitation.

Taking on the subcontractors will need a combination of lawsuits on behalf of the workers, changing the law to strengthen their rights (which can often be done with local regulation), supporting union campaigns across the country and mounting major public education campaigns to highlight these abuses. This can then be combined with a serious campaign to bring labor issues into trade negotiations with China and other countries where Wal-Mart exploits workers.

And the advantage of targeting the Wal-Mart subcontractors globally is that concrete victories can be won for workers at the various subcontractor companies without having to defeat Wal-Mart first at its core stores. It won't solve the problem overall, but it will put continual pressure on Wal-Mart, as organizing proceeds forward on organizing the core of the company's workforce.

If we want to put it in military terms, it's a campaign of encirclement. Embarrass Wal-Mart with the most obvious abuses that it promotes, then use those abuses to educate the public about the broader social ills Wal-Mart's business practices breed in our economy. Organize subcontractor companies, then pressure Wal-Mart not to abandon them merely because their workers choose to unionize -- a tactic unions like SEIU have practiced repeatedly across the country.

It's not the only strategy we need to take on Wal-Mart and its ilk, but it's one that unions and community allies can take on as a concrete first step in reining in this corporate race to the bottom.

Nathan Newman is a longtime union and community activist. Email or see

Posted by Nathan at June 01, 2004 09:33 PM