Market failure to blame for sex discrimination at Wal-Mart

From the University of Illinois media release:

Wal- Mart's relentless pursuit of efficiency has yet to fully extend to its own workforce, as sex discrimination is still a major issue for the ubiquitous big-box giant, according to research published by a University of Illinois expert in employment discrimination.

Law professor Lesley Wexler says Wal-Mart's decision to compete on price de-emphasizes the importance of hiring quality employees, particularly in lower-status positions. Without a strong reason to favor the best employee, Wal-Mart's competition strategy has effectively allowed sex discrimination to flourish at the retail behemoth.

"Many economists expect that an unregulated market will eliminate discrimination in a timely or decisive manner," Wexler said. "In the abstract, a highly competitive labor market should provide Wal-Mart with the financial incentive to hire the best employees and pay them commensurate with their worth. Unfortunately, that's not what happened with Wal-Mart, and that reveals something about the limitations of the market to correct itself."

Although many economists would argue that Wal-Mart's laser-like focus on top-to-bottom efficiency would to tend to at least minimize sex inequity in hiring and pay, Wexler says discrimination most likely persists because of a firmly entrenched patriarchal corporate culture.

"In their pursuit of efficiency, the Wal-Mart workers who make pay and promotion decisions may still hold pre-existing preferences for male workers that their corporate culture either reinforces or does little to counteract," she said. "Although such preferences are certainly not unique to Wal-Mart management, their coexistence with the company's almost single-minded focus on cost-cutting and efficiency-generating measures is puzzling."

Wexler says if the market can't function well on its own, other types of interventions may be necessary to level the playing field for women. But with Wal-Mart's vigorous union-busting efforts and consumers' limited appetite for supporting anti- discrimination measures, most attempted reforms probably would not have much of an effect on the world's largest private employer.

"It's hard to imagine a social campaign doing much good on its own with this issue simply because a lot of people can't afford to vote with their wallets and shop somewhere other than Wal- Mart," she said. "In addition, the most successful campaigns are usually very narrowly targeted. A widely dispersed grassroots effort advocating for a major corporation to overhaul all of its employment practices would definitely not be a small campaign."

The retailer's influence will soon be tested in court. In 2010, the Ninth Circuit Court of Appeals upheld the largest class certification ever granted for a sex-discrimination case, paving the way for more than 1.5 million past and current female employees of Wal-Mart to collectively pursue claims against the retail giant. But before they can proceed as a class, they must wait for the Supreme Court, which recently granted certiorari on procedural questions relating to class certification.

"A lot of the debate in the litigation is about Wal-Mart's corporate culture," Wexler said. "Scholars have firmly established that Wal-Mart maintains a very strong corporate culture. What's debatable is whether that corporate culture explicitly engaged in widespread pay and promotion discrimination against female employees, and what could explain the persistence of such a practice in a company known for its devotion to efficiency."

Wexler says one of the lessons of the Wal- Mart case is that it provides grounds for continued government intervention in this area of employment law.

"This situation is a good example of why you need legal intervention," she said. "One possibility is that the Supreme Court will affirm the certification of the class-action suit, Wal-Mart will eventually lose and will be legally required to change its practices. Another possibility is that if the Supreme Court affirms certification, Wal-Mart will just decide to settle, which would also likely involve a major overhaul of its employment practices. Coca-Cola is a good example of a company that really revamped its corporate culture and employment practices after setting a discrimination suit."

But even if Wal-Mart eventually prevails in the litigation, they've already taken some positive steps to ameliorate future hiring and pay discrimination, Wexler says.

"Some of the changes may be more cosmetic than substantial, but what high stakes litigation does is shine a light on the problem," she said. "Even if Wal-Mart ultimately wins, they've already lost by having two years of unflattering media coverage saying they're sexist discriminators. They would likely be forced to undertake significant changes if they lost, but even at this stage, Wal-Mart is aggressively pursuing damage control."

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Posted by: danica on 2011-06-28 13:57:51

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