How “domestic outsourcing” is making good jobs harder to find

August 7th, 2012 | Economic Opportunity Institute

Marta Medina, Wal-Mart warehouse worker

Marta Medina, a contract worker at aWal-Mart warehouse in California. Photo/NELP

Yesterday’s post examined how Wal-Mart is fueling a downward spiral in American manufacturing by squeezing suppliers to drive down prices. But Wal-Mart needs workers to handle and sell the goods they import, which bring us to Part II of the story: Wal-Mart’s effect on domestic labor conditions, wages and benefits.

Wal-Mart’s track record of outsourced sweatshop labor is well-documented, but a new report from the National Employment Labor Project (NELP) adds a new line to Wal-Mart’s résumé, “domestic outsourcing.”

The NELP report details how Wal-Mart has effectively “outsourced” its supply chain within the U.S. by contracting with third-party companies to handle warehousing and delivery. Contract work is not inherently bad, but Wal-Mart’s policy of demanding lower prices year after year puts enormous pressure on contract employers to cut costs.

After finding every efficiency imaginable, contract employers often begin to cut corners, skimp on wages, benefits, and worker safety, and treat labor laws as negotiable barriers to low prices.

In Mira Loma, California, a mostly Latino workforce contracted by Wal-Mart recently spoke up, detailing a litany of violations, including: “Less than minimum wage pay; long hours with no overtime compensation; illegal and falsified pay records; and hazardous workplace conditions, including dangerously high temperatures, constant pressure to speed up work, and unstable storage stacking.”  Workers who spoke out against the conditions were threatened with termination.

That included workers like Marta Medina, who moved Wal-Mart boxes in a warehouse job she found through a staffing agency. Marta quickly learned what it meant to work for a Wal-Mart contractor. “When I was pregnant and asked for lighter work, they told me ‘we didn’t hire you to have children. Work faster or leave,’” she recounts in the NELP report.  When Marta complained, the company retaliated by reassigning her to unfamiliar work and cutting her hours.

In the Mira Loma case, Wal-Mart cannot claim ignorance. At the facilities in question, only Wal-Mart goods are loaded and unloaded; a Wal-Mart representative is located on site and meets with warehouse managers every morning; workers receive orientation materials that comply with Wal-Mart policies; and Wal-Mart aggressively monitors productivity standards and staffing levels, cutting compensation when workers fall behind.

Evidence suggests Wal-Mart is well aware of what is going on in its warehouses, but uses the mantle of contracted labor to cut costs and shield the company from any legal responsibility.

Domestic outsourcing is an issue that’s bigger than Wal-Mart. Today, more than 30% of the American labor force are contractors. Christine Owens of NELP explains, “The problem goes far beyond Wal-Mart…Domestic outsourcing, or subcontracting, is on the rise across the U.S. economy, and without fair ground rules that are respected by all players and rigorously enforced, the quality of many more jobs in America will spiral downward.”

To ensure domestic outsourcing doesn’t drive illegal practices and poor treatment of workers, existing laws must be aggressively enforced, and violators must be held responsible. Enforcement, in tandem with policies that support a strong minimum wage, worker protections, and minimum workplace benefits like paid sick days, will help to build economic security for workers from the bottom up.

By EOI Intern Ashwin Warrior

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Posted in State Economy

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