How 'Everyday Low Prices' Are Costing Americans Their Jobs

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As consumers, we welcome Walmart's (WMT) low prices.

But here's the thing about these low prices -- they're doing the U.S. more harm than good.

A new research report has found that low prices have actually caused unemployment to rise, and dealt a massive blow to the manufacturing sector.

Look no further than the 7 million manufacturing jobs the U.S. lost from 1980 to 2011, according to a recent research report from Demos. The report acknowledges this happened because of "a variety of complex factors." But Walmart had a bigger hand in this than most of us realize.

Cutting Prices Does Have Its Cost

The problem starts with Walmart's selling point: low prices.

These low prices are possible both because Walmart pays its employees low wages and because the bulk of Walmart's products are sourced from foreign factories, where raw materials and labor are cheaper.

What's more, Walmart can -- and does -- use its massive size to bully American companies whose products it sells to do the same. In fact, Levi's jeans and Master Lock "were pressured to shut their U.S. factories and moved manufacturing abroad to meet Walmart's demand for low prices," Demos said.

What's more, many well-known companies rely on Walmart for more than 20% of their revenue, according to Business Insider's calculations, including:

  • Helen of Troy (which manufacturers kitchen tools under the OXO name)
  • Jarden (behind the Mr. Coffee brand).
  • Hanesbrands (the undergarment company known for Hanes and Wonderbra).

And they're not alone. Because these businesses are so heavily dependent on Walmart, they have no choice but to acquiesce to whatever Walmart asks of them.

So -- like Levi's and Master Lock -- if Walmart tells these companies their products must become even cheaper, they have to cut costs. Doing that requires finding cheaper raw materials (sourcing internationally) or cheaper labor (again, from overseas).

But This Can Only Go So Far

This cost cutting has tangential side effects that cost more jobs than just those folks working at factories.

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Four of Walmart's top 10 suppliers in 1994 had filed for bankruptcy protection by 2006, according to Harper's Magazine, meaning disappearing factory jobs as well as the white-collar jobs at their headquarters.

Then consider Walmart's competitors, Target, Kmart, Dollar Tree, etc. To remain competitive with Walmart, they have to do exactly what Walmart does: look for cheap foreign product sources, or squeeze low prices out of their suppliers.

All of which continues to trickle down the economy, sending an increasing number of jobs abroad and allowing Walmart (now the nation's largest employer) to keep their employees' wages low.

So remember this next time you rejoice in finding a low-priced item at your local Walmart: Those "everyday low prices" may have cost you or someone you know their job.

How 'Everyday Low Prices' Are Costing Americans Their Jobs

A man was thrown in jail after trying to steal socks from a Walmart store in Exton, Pa. But it seems socks weren't the only article of clothing he needed, as he was buck naked.

Store surveillance footage caught the 6-foot-4, 300-pound man walking around the store in the buff. No word on why the man was nude or what style of socks he tried to lift.

AP Video below slide show.

Plenty of people use Walmart as their drugstore -- but not all the drugs being sold there are found in the pharmacy department.

A janitor found a "shake and bake" methamphetamine lab in the women's restroom at a Walmart store in Boaz, Ala. The custodial worker discovered a Nestle water bottle and five empty packets of pseudoephedrine -- the makings of the psychostimulant drug also known as "the poor man's cocaine" -- in a bathroom stall.

Curiously, the pseudoephedrine wasn't a brand sold at Walmart, so the chemists couldn't have gotten it in house. But apparently, they thought Walmart would make a good meth den.

At a Walmart in Lexington, N.C., a man loaded his cart with $476 worth of merchandise that included a vacuum cleaner and a microwave oven. He then tried to pay at the register with a fake $1 million bill, insisting to the cashier that it was real. (The largest U.S. bill in circulation is $100 -- not even close.)

Store staff called the police, and the man was charged with two felonies: attempting to obtain property under false pretenses, and presenting a phony document as a legitimate form of payment.

A shopper looking for a new wallet at a Walmart store in Falmouth, Mass., discovered 10 human teeth in the zipper compartment of the billfold he was about to buy. One of the adult teeth had a filling, according to police. Save for its toothy contents, the wallet appeared new, complete with merchandise tags.

In one of the more creative attempts at shoplifting, an 18-year-old man outfitted in a cow suit swiped 26 gallons of milk from a Walmart in Garrisonville, Va. The man was seen crawling as he exited the store in an effort to emulate an ambling bovine.

The cow impersonator was at least generous with his dairy loot: Witnesses told the sheriff's deputies that he was handing out the stolen milk jugs to passersby outside the store. Law enforcement officials later caught the milk thief at a nearby McDonald's.

A man was glued to his seat -- literary, in the men's bathroom at a Walmart store in Elkton, Md. In what appeared to be an April Fool's prank that went way too far, the 48-year-old victim got stuck to a toilet seat smeared with glue and couldn't get up.

The man called for help and emergency workers tried in vain to unstick the man. Eventually, they gave up and unbolted the seat from the toilet, then took the man to the hospital with it still attached to him. There, the seat was removed from his ... er, seat. The man was said to have suffered only minor injuries to his derriere.

To conclude with an episode that is equal parts strange and sweet, Wayne and Susan Brandenburg first met at a Walmart in Brunswick County, North Carolina, when Susan was a cashier and Wayne was a shopper.

Love blossomed, and when the time came to tie the knot, the couple opted to exchange their wedding vows where their courtship began. In front of family and friends, the Brandenburgs said 'I do,' in the layaway section.

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This article was written by Motley Fool analyst Adam J. Wiederman, who owns no shares of the companies mentioned above.

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