Hidden costs, public burden: The real toll of Walmart's "always low prices"

Instead of paying a living wage to their employees, taxpayers are footing the bill

Published March 27, 2024 12:30PM (EDT)

Exterior view of a Walmart store (Kena Betancur/VIEWpress via Getty Images)
Exterior view of a Walmart store (Kena Betancur/VIEWpress via Getty Images)

From "Barons: Money, Power, and the Corruption of America's Food Industry" by Austin Frerick. Copyright © 2024 Austin Frerick. Reproduced by permission of Island Press, Washington, D.C.

Walmart is based in Bentonville, Arkansas, just a few miles from Sam Walton’s first Walmart store in Rogers. Although Walmart currently operates out of a nondescript building that doesn’t seem to match its power and scale, the company is in the midst of building a massive new corporate headquarters on the east side of town. The new offices are designed in the style of a college campus, with twelve buildings spread over 350 acres, and with a price tag estimated to be $1 billion.

Bentonville is sometimes called Vendorville because its economy is built around Walmart and all its vendors. I’ve visited Bentonville several times over the years. I first popped in on a whim in 2018 after attending an agriculture show in Little Rock. It’s a charming town of over fifty thousand people that struck me as something out of "The Truman Show." During most of the twentieth century, the town’s population hovered around two thousand to three thousand people, but it exploded in tandem with the growth of Walmart.

In an ironic twist, Bentonville captures the Main Street, USA imagery that Sam Walton’s Supercenters helped destroy in other towns across the country. Whereas most small-town squares in America are in a state of decay, Bentonville’s is the only one I’ve ever seen with James Beard finalist restaurants next to offices for national brands.

The family’s name and money are everywhere in Bentonville. That’s not surprising, given that the Waltons are not just the richest family in town, or in Arkansas, or even in the United States; they are the richest family on the planet, with a collective estimated net worth of $225 billion. They are so wealthy that members of the family own two separate NFL teams: the Rams and the Broncos.

The Waltons have poured a lot of that money into the town that their company calls home. The Walton name features prominently on the terminal of the region’s main airport as well as on a new medical school that is set to welcome its first students in 2025. The family also backs several restaurants and hotels, along with owning the local bank.

Alice Walton, Sam’s daughter, built the Crystal Bridges Museum of American Art, a world-class facility with a renowned collection featuring artists Andy Warhol, Norman Rockwell, and Georgia O’Keefe, among many others. The museum forms a nearly 360,000-squarefoot complex with a satellite facility recently completed and an expansion underway.

Sam’s grandchildren have made their own contributions to Bentonville’s cityscape. Steuart and Tom Walton financed a new art and music festival modeled after Austin City Limits. Both heirs also have a keen interest in biking. With their influence, the family has pushed to rebrand the town as the ”mountain biking capital of the world.” To claim that title, the family and the company have poured over $85 million into the region’s trails, hosted an international cycling event, and even convinced the national governing body of cycling to open a branch office in town.

But there’s a dark current running underneath that perfect cookie-cutter image. I’ve traveled to Bentonville a number of times since, and the town has felt a bit more eerie on each visit. I first noticed this odd vibe when visiting the recently renovated museum that Walmart built for itself on Bentonville’s town square. The museum suggests that the building housed the first Walmart, but that’s not entirely right. The first Walmart actually opened in nearby Rogers and is now a rundown building that’s only partly occupied by an antique mall. It’s fitting that the museum celebrating Walmart is situated in what’s basically a movie set even as the company’s actual birthplace illustrates the destruction that Sam Walton left behind.

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The symbolism is telling, but I think the town’s underbelly is best captured in its inequality statistics. When one thinks of systemic poverty in America, the portion of Arkansas that’s located within the Mississippi Delta comes to mind. But a 2018 investigation by the Arkansas Advocates for Children and Families found that the number of children living in poverty in the Bentonville region was actually higher than in any county in eastern Arkansas along the Mississippi River. “Almost half of children in Northwest Arkansas—48 percent—are growing up in families with low incomes, or combined incomes that aren’t more than $41,560 for a family of three.”

The idyllic town square may reflect the success of the other end of the income spectrum; the top 1 percent of households in the region earned an average of $2 million annually. But this income disparity makes the region one of the most unequal in America. In fact, the Economic Policy Institute ranked it 15th out of 916 metro areas in terms of inequality.

Like the broader Gilded Age economy that Walmart exemplifies and has played a role in shaping, the wealth in Bentonville obscures the hardship surrounding it. After all, the Walton family has so much money to spend on museums and bike trails because they have extracted it from the communities in which Walmart operates—from shoppers but also from the company’s employees, the towns themselves, and even from taxpayers through a series of hidden government subsidies.

"Like the broader Gilded Age economy that Walmart exemplifies and has played a role in shaping, the wealth in Bentonville obscures the hardship surrounding it."

For example, as Walmart expanded its traditional stores into Supercenters, it would often construct a new, larger building nearby instead of simply adding on to the existing one. Those old stores frequently sat empty or underused, just like the original Walmart in Rogers. That may be why Walmart openings have been linked to declines in nearby home values.

Walmart and other major retailers have made the situation even worse by including restrictive covenants in the deeds of old buildings, which prevent other retailers from using the space for competitive purposes. These provisions perpetuate food deserts and tie the hands of communities struggling to figure out what to do with these ghost buildings. After all, it’s not easy to find a use for an old Walmart that doesn’t involve grocery or retail. One former Walmart Supercenter in Brownsville, Texas, became the center of a national debate when it was bought by a firm detaining migrant children

Limiting competition is apparently not enough for Walmart. The company understands what happens to communities when its stores are abandoned, and it uses this knowledge to leverage a tax break. The company often engages in what is known as the “dark stores” loophole, a tax dodge that lets it evade millions in property taxes by valuing its stores as if they were closed.

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These shenanigans further tilt the scales in Walmart’s favor and deprive local communities of needed tax revenue. They are particularly egregious in light of the fact that many of their stores were built with massive taxpayer subsidies in the first place. Of course, this isn’t the only tax loophole the family has exploited. In 2013, Bloomberg reported that the family pioneered an estate tax loophole that is now widely used by American billionaires.

As bad as Walmart is for communities as a whole, it creates conditions that are particularly damaging for workers. As labor historian Nelson Lichtenstein noted, Sam Walton built a company rooted in a “southernized, deunionized post-New Deal America.” Walmart has long been defined by transnational commerce, employment insecurity, and poverty-level wages, which is an ironic geographic twist on history given that the region was at the heart of the New Deal and the antichain movement.

Walmart employs about 1.6 million people in the United States alone, making it the nation’s largest private employer. In fact, more people are on the company’s payroll than the populations of eleven states. The company’s impact on the labor market is so big that it drives down wages in the areas in which it builds Supercenters. In the words of one academic, Walmart effectively “determine[s] the real minimum wage” in the country. That’s why it’s national news when the company decides to raise wages.

From its founding, Walmart has been notorious for its poverty-level wages; in its early years, the company exploited a loophole in order to pay the mostly female store employees half of the federal minimum wage. It took a federal court battle for the workers to receive the minimum wage. In 2021, Walmart employees’ median income was about $25,000, whereas CEO Doug McMillon took home $25.7 million that year.

Given this history, it should come as no surprise that Sam Walton hated unions. “I have always believed strongly that we don’t need unions at Wal-Mart,” he stated in his memoir. Over the years, the company has aggressively fought efforts to unionize, and it seemingly closes stores whenever they gain traction. For example, after deli counter workers in a Texas Walmart Supercenter voted to unionize in 2000, the company switched to prepackaged meat and closed the department. In 2015, Walmart suddenly closed five stores to deal with what it said were extensive plumbing issues, which it said would take six months to fix. Some speculated that the real reason it closed the stores was to let the employees go as retaliation for labor activism.

And it’s not just labor laws that the company has eluded. A 2017 report based on a survey of over one thousand Walmart employees found that the company was likely violating worker protections such as the Americans with Disabilities Act and the Family and Medical Leave Act, among others. According to the New York Times, the company “routinely refuses to accept doctors’ notes, penalizes workers who need to take care of a sick family member and otherwise punishes employees for lawful absences.” 

As the company’s power grew, it reshaped labor options and norms for millions of Americans. Gary Chaison, a labor expert, told the New York Times in 2015, “What you’re increasingly finding is that it’s the primary wage earners who work at Walmart, because a lot of workers have more or less given up on getting middle-class jobs.”  Meanwhile, many older Americans are working at the store past the normal retirement age because of their financial insecurity, a sad reality reflected by the recent TikTok trend of elderly Walmart employees asking for donations.

This power imbalance between Walmart and its employees explains the poverty-level wages for many of Walmart’s 1.6 million workers but also for employees of its competitors. Some unionized grocery stores have even used the opening of a Supercenter as an excuse to demand cuts to their own employees’ wages and benefits.

These low wages also obscure a generous hidden subsidy that the company receives from taxpayers. Many Walmart workers depend on government public assistance programs such as Medicaid (health care), the Earned Income Tax Credit (a low-wage tax subsidy), Section 8 vouchers (housing assistance), LIHEAP (energy assistance), and SNAP (food assistance), among others. In 2013, one estimate by congressional House Democrats found that taxpayers subsidized Walmart to the tune of more than $5,000 per employee each year through all of the government assistance programs that its workers need.

In effect, instead of paying a living wage to these employees, the Walton family shifts the burden onto taxpayers. Although many people may recoil at the idea of the public filling the gap between Walmart’s pay and the income its workers need to survive, not all policymakers see an issue with this sort of billionaire welfare. Jason Furman, former chair of the Council of Economic Advisers under President Obama, wrote a paper before joining the administration titled “Wal-Mart: A Progressive Success Story” that called for even more of these subsidies to Walmart’s bottom line.

"Although many people may recoil at the idea of the public filling the gap between Walmart’s pay and the income its workers need to survive, not all policymakers see an issue with this sort of billionaire welfare."

There is, of course, another way to address the issue. Walmart failed to establish dominance in Germany because of the country’s strong labor protections and antitrust guardrails.These market protections may explain why the company eventually threw in the towel and sold off its operations there.

In some instances, Walmart even receives a double subsidy. Its workers and shoppers frequently rely on SNAP, the Supplemental Nutrition Assistance Program, formerly known as “food stamps.” The program originated as part of the New Deal as a temporary measure and was made permanent by President Lyndon Johnson in a bill signed in 1964. This program and several smaller food assistance programs are now part of the Farm Bill. In fact, these food assistance programs make up more than 75 percent of the most recent Farm Bill

SNAP is in many ways a triumph of progressive social policy, with an average of 41.2 million people participating in the program each month in 2022. The use rate is so high because, unlike many other programs, SNAP was structured by the US Congress so that anyone who qualifies is guaranteed to receive assistance. As a result, the program is a lifeline for millions of Americans who might  otherwise struggle to put food on the table.

But because of Walmart’s dominance of the grocery sector, a very large portion of SNAP dollars now run through the company’s cash registers. In 2013, the company received $13 billion in sales from shoppers using SNAP. By comparison, farmers markets took in only $17.4 million of all SNAP spending that same year. The amount of SNAP money received by the company surged with the expansion of SNAP benefits in response to the COVID-19 pandemic. With some back-of-the-envelope math, I came up with a rough estimate that Walmart now receives somewhere around $26.8 billion each year from SNAP.

Unfortunately, more concrete numbers are not available because the US Supreme Court has ruled that the amount of taxpayer money that the company receives from SNAP can be kept secret. In 2019, the Court heard a case involving the USDA’s decision to deny a request by a South Dakota newspaper for this information. “Most of the time, the government tells the public which companies benefit from federal dollars earmarked for taxpayer-funded public assistance programs,” agriculture and food reporter Claire Brown noted. “We know which insurance companies make the highest profits from Medicare and Medicaid, for example, and those figures have been used to pressure them to offer better options to their clients.” But in this instance, the Court rejected this level of transparency, with Justice Elena Kagan joining the Republican-appointed members of the Court to uphold the USDA decision under the notion that it was “confidential” business information.

The program is important enough that it factors into Walmart’s operational decision-making. Many Americans enrolled in SNAP schedule their trips to the grocery store around the days when their funds get deposited. In fact, the company factors this bump into its ordering system.

One Arkansas reporter noted that sales of Hot Pockets triple on these days. Accordingly, Walmart worked with the company to ensure that its stores would not run out of these highly demanded items on cash infusion days.

Both Walmart and Amazon are working hard to increase their share of SNAP dollars. Echoing the company’s pivot to omnichannel sales, Walmart was one of the first retailers to begin taking part in the USDA’s online SNAP program. With the onset of the COVID-19 pandemic, online SNAP purchases increased twentyfold, and unfortunately, Walmart and Amazon hold a virtual duopoly on those sales

As a result, these programs end up subsidizing the fortunes of the Walton family and, by extension, Bentonville. Like barons of past eras, the Waltons have spent at least a chunk of their wealth on charity and public works. These contributions, of course, have aligned with the family’s personal interests, such as fine art and bike riding.

Journalist Jeffrey Goldberg illustrated this point when he traveled to Bentonville for the opening of Crystal Bridges. After touring the museum, he went to one of the Walmart locations in town to ask employees what they thought of it, but he couldn’t find a single one even contemplating a visit. “One worker I met in the parking lot said that the museum wasn’t meant for Wal-Mart workers,” Goldberg wrote. “Others were resentful. One middle-aged woman noted how odd it was that the Wal-Mart heirs could spend so much on paintings, but Wal-Mart workers couldn’t get health-care benefits. ‘Merry Christmas,’ she said.”

Alice Walton, the daughter who led the charge to build Crystal Bridges, has now focused her energy on health care. Her efforts led to the construction of the new medical school campus in Bentonville. In 2021, she told the Arkansas business publication, “We have a health industry that does not produce healthy outcomes because we do not have a system that addresses behavior change.”

Meanwhile Walmart, the company she controls alongside her family, is the country’s largest seller of junk food and continues to sell cigarettes and guns. In Walmart stores alone, there were 363 gun-related incidents resulting in 112 deaths between 2020 and the end of November 2022. And in 2022, Walmart agreed to pay over $3 billion to settle thousands of lawsuits over its pharmacies’ role in the opioid crisis

"So much of this wealth has been built on the backs of workers, supercharged by taxpayer-funded subsidies and, ultimately, extracted from the communities in which the company operates."

The family also created a think tank called Heartland Forward with the stated goal of working to “unleash the Heartland’s potential and improve the economic performance in the center of the United States.” The think tank hosts an annual extravaganza known as the Heartland Summit, which features thought leaders and celebrities engaging in “participatory conversations that explore topics important to the Heartland’s future.” “This is a very powerful room,” famed singer, songwriter, and producer Pharrell Williams said at a recent iteration of the Heartland Summit. “There’s a lot of energy in here tonight.”

Meanwhile, the family has harnessed this energy to spend over a billion dollars undermining public schools by underwriting academics and policy organizations that advocate for charter schools. As one national reporter noted, the Waltons have “subsidized an entire charter school system in the nation’s capital, helping to fuel enrollment growth so that close to half of all public school students in the city now attend charters, which receive taxpayer dollars but are privately operated.”124

And both the Waltons and Walmart itself have long made significant political contributions. Walmart promised after the January 6 riot at the US Capitol that it would indefinitely suspend donations to members of Congress who opposed the Electoral College certification of President-elect Joe Biden. But the following year, it contributed to sixty election deniers.

The Waltons have, without a doubt, brought wealth and prosperity to their company’s hometown. Between the high-paying jobs at the headquarters of a massive global corporation and the family’s significant contributions to the community, it’s very clear when you visit Bentonville that the city is having a moment.

But so much of this wealth has been built on the backs of workers, supercharged by taxpayer-funded subsidies and, ultimately, extracted from the communities in which the company operates. As Stacy Mitchell, co-executive director of the Institute for Local Self-Reliance, argued, “Communities dominated by global retail chains function in many respects like the colonial economies of the European superpowers, which were organized not to foster local development and prosperity but to enrich the colonizers.”

Steuart Walton, during a panel discussion on the future of Arkansas, recently remarked that “the communities that outperform are inevitably communities where resources are being reinvested.” Perhaps, then, every decaying heartland town just needs to recruit its own barons.

This is an excerpt from "Barons: Money, Power, and the Corruption of America's Food Industry" by Austin Frerick. Reproduced by permission of Island Press, Washington, D.C.

By Austin Frerick

Austin Frerick is an expert on agricultural and antitrust policy. He worked at the Open Markets Institute, the U.S. Department of Treasury, and the Congressional Research Service before becoming a Fellow at Yale University. He is a 7th generation Iowan and 1st generation college graduate, with degrees from Grinnell College and the University of Wisconsin, Madison. He is the author of "Barons: Money, Power, and the Corruption of America’s Food Industry," published by Island Press.

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