...Wal-Mart's ability to keep prices low depends not just on its productivity but also on its ability to contain, or even reduce, costs, above all labor costs. As Sam Walton wrote in his memoirs:

You see: no matter how you slice it in the retail business, payroll is one of the most important parts of overhead, and overhead is one of the most crucial things you have to fight to maintain your profit margin.

One of the ways to win this particular fight is to make sure that the growth of labor's productivity well exceeds the growth of its wages and benefits, which has in fact been the dominant pattern for US corporations during the past decade.

From a corporate perspective, this is a rosy outcome. When the productivity of labor rises and its compensation stagnates, then, other things being equal, the cost of labor per unit of output will fall and profit margins will rise. Wal-Mart has carried this strategy to extremes. While its workforce has one of the best productivity records of any US corporation, it has kept the compensation of its rank-and-file workers at or barely above the poverty line. As of last spring, the average pay of a sales clerk at Wal-Mart was $8.50 an hour, or about $14,000 a year, $1,000 below the government's definition of the poverty level for a family of three.[4] Despite the implied claims of Wal-Mart's current TV advertising campaign, fewer than half— between 41 and 46 percent—of Wal-Mart employees can afford even the least-expensive health care benefits offered by the company. To keep the growth of productivity and real wages far apart, Wal-Mart has reached back beyond the New Deal to the harsh, abrasive capitalism of the 1920s.

[...]

One of the most telling of all the criticisms of Wal-Mart is to be found in a February 2004 report by the Democratic Staff of the House Education and Workforce Committee. In analyzing Wal-Mart's success in holding employee compensation at low levels, the report assesses the costs to US taxpayers of employees who are so badly paid that they qualify for government assistance even under the less than generous rules of the federal welfare system. For a two-hundred-employee Wal-Mart store, the government is spending $108,000 a year for children's health care; $125,000 a year in tax credits and deductions for low-income families; and $42,000 a year in housing assistance. The report estimates that a two-hundred-employee Wal-Mart store costs federal taxpayers $420,000 a year, or about $2,103 per Wal-Mart employee. That translates into a total annual welfare bill of $2.5 billion for Wal-Mart's 1.2 million US employees.

Wal-Mart is also a burden on state governments. According to a study by the Institute for Labor and Employment at the University of California, Berkeley, in 2003 California taxpayers subsidized $20.5 million worth of medical care for Wal-Mart employees. In Georgia ten thousand children of Wal-Mart employees were enrolled in the state's program for needy children in 2003, with one in four Wal-Mart employees having a child in the program.

[...]

The exploitation of the working poor is now central to the business strategy favored by America's most powerful and, by some criteria, most successful corporation. With the re-election of a president as enamored of corporate power as George W. Bush, there is every prospect that this strategy and its harsh practices will continue to spread throughout the economy.

Talk about indirect corporate welfare, Wal-Mart's profits seem to depend on the government providing the vital services its employees need, and which they would otherwise pay for themselves if Wal-Mart paid them a living wage.

It's enough to revive one's interest in Marx.

The full article goes into some detail about the indignities Wal-Mart employees are put through.