Last week, the Census Bureau revealed that an astounding 44 million Americans live in poverty. This is the highest number ever and a jump of 4 million from the prior year.
Inequality in the country is getting ever more extreme: The richest 1% of the country owns a third of the country's assets and the poorer 50% owns less than 2.5%.
Well-paid manufacturing jobs are getting shipped overseas. Unemployment is 10%. Real wages are stagnant. Job security is a relic of the past. The "middle class" is disappearing. Americans who want to work are often forced to take poorly paid "McJobs" in the service industry that no one aspires to, that don't produce anything, and that won't lead anywhere.
Meanwhile, one of the world's largest corporations is still on a roll.
Walmart's global sales crossed $400 billion last year. Its profits exceeded $15 billion. Its market value -- $200 billion -- has weathered the Great Recession and market crash and remains near all-time highs.
Walmart employs an astounding 2.1 million people. In the United States alone, the company employs 1.4 million people. This is a staggering 1% of the U.S.'s 140 million working population.
Walmart, in other words, matters. Its payrolls, and its pay, move the needle.
And right now, many people argue, Walmart is very much part of the problem.
The average Walmart "associate," Wake Up Walmart reports, makes $11.75 an hour. That's $20,744 per year. Those wages are slightly below the national average for retail employees, which is $12.04 an hour. They also produce annual earnings that, in a one-earner household, are below the $22,000 poverty line.
On the other hand, these wages are far above minimum wage of $7.25 an hour. They also aren't that far below the national retail average (only 2.5% below). In a two-earner household, moreover, these wages would produce a household income of $40,000+, which, in some areas of the country, is comfortably middle-class. Walmart offers benefits to some of its employees, as well as store discounts and profit-sharing plans.
Most importantly, in an economy that is desperate to find some way to employ the ~25 million Americans who are either unemployed or under-employed, Walmart provides 1.4 million jobs.
But Walmart is constantly under attack for reaming its associates, for paying them too little, for putting higher-paid workers at other companies out of work, for making a major contribution to the national problems described above.
And with $15 billion of annual profits, Walmart could certainly afford to pay its employees more.
So should Walmart pay its employees more? Should Congress pass a law forcing Walmart to pay its employees more? If so, how much more? If Walmart did pay its employees more, what would happen? Would this begin to address some of the country's problems above?
The point of this essay is not to provide definitive answers to these questions. It is to put the questions up for debate.
Given the depressing wealth, employment, and income trends facing our country, questions like these are critical for our nation's future. So they are worth thinking through carefully.
Please weigh in below. But before you do, here are some more things to think about.
First, how much more could Walmart afford to pay its employees, given its current financials?
Here's one way of looking at it.
If Walmart took its entire $22 billion of annual pre-tax income and used all of it to give each one of its 2.1 million employees a raise, this would amount to about $10,000 a year apiece.
In other words, if Walmart decided to use 100% of its operating profit to pay all of its employees more, the average store associate's salary would go from $20,000 to $30,000. If Walmart paid bosses like CEO Mike Duke less (Duke made $6 million last year) that would create some more operating profit. So reducing inequality at the company would also certainly help.
A raise from $20,000 to $30,000 would be a nice bump, certainly. But it would not be earth-shattering. Walmart associate jobs still wouldn't be the $45,000+ a year unionized manufacturing jobs that the country has lost so many millions of in recent decades. The salary increase wouldn't radically change associates' lives, especially after taxes.
Now, Walmart is a private corporation, run for the benefit of not only employees but customers and owners, and Walmart's owners might justifiably squawk if the company suddenly decided to run at break-even (or were forced to). So Walmart might be able to channel, say, half of its pre-tax profit back into compensation, which would give the average associate a raise from $20,000 to $25,000. That's still better, but it's even less to write home about.
And then there would be other consequences.
For one thing, Walmart would almost certainly raise prices to offset some of the increased costs. This would make Walmart's products more expensive--not just for other Americans but for Walmart employees. So some of the increased wages would quickly be repatriated back to the mother-ship through increased prices.
Secondly, if Walmart's employment costs went up, Walmart would almost certainly find ways to make do with fewer employees. There are now apparently store check-out systems that are largely automated, for example, and if Walmart were to invest in some of these systems, it would radically reduce its need for cashiers. So the remaining Walmart employees might make a bit more money, but several hundred thousand of those 2.1 million employees would be on the unemployment line.
Thirdly, by making so much profit each year, Walmart currently pays a lot of taxes. Last year, for example, the company paid $7 billion of taxes -- a bill that reduced its income before taxes from $22 billion to $15 billion. If Walmart were to eliminate its $22 billion of income before taxes by giving every employee a raise, it would then pay no taxes. Which wouldn't help our national budget deficit.
Lastly, forcing Walmart to pay its employees more wouldn't address our long-term economic problems. It would lift some people out of poverty, certainly, and make others lives a bit more comfortable. But it would also increase costs for everyone else. More importantly, it wouldn't address our loss of manufacturing jobs, income and wealth inequality, or our horrific unemployment problem. In fact, it might make the latter worse.
So, should Walmart be forced to pay its employees more? Weigh in below. We'll send your comments down to Bentonville.
See Also: 15 Mind-Blowing Facts About Wealth And Inequality In America
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All of these factors help offset the federal deficit by reducing need for federal aide to local governments. Another thing to keep in mind here is that any money paid out in dividends to share holders is taxed at the capital gains rate of 15%, the same rate that their average employee is in! It's likely that Wal-Mart's higher income employees would actually be paying a higher tax rate on the increased income than their shareholders.
Remember that when you are on the bottom of the income ladder, marginal changes are a big deal and create a lot of added security.
I know business folks don't see it that way because apparently CEOs in America need hundreds of times what a "lesser" worker makes in order to even think about trying to work hard... and I'm not sure it helps their self esteem.
Of course, given that comment, I bet you know where I think the money should come from.
But I often forget that WalMart provides an important service: selling cheap crap that will need to be replaced much faster than something that costs marginally more elsewhere, but it's all people can afford right now on the retail, part-time, WalMartesque salary scheme so common these days.
Who but WalMart has the purchasing power to get quality companies to create lousy, defective versions of their products so that their price is in line with the pricing philosophy?
WalMart: helping poor people stay poor and driving down quality!
But they make up for it by monopolizing the hiring in small towns, I suppose.
which is a social responsibility and by doing that they burden the tax payer because all of these people need help, food stamps, housing assistance, healthcare, etc. This should not be permitted. Does the CEO really need to make so many millions and the stock market drives up the stocks higher and higher, which is
finite as well. How many more hours can one cut in order to gain more bottomline? If everyone made a decent living we all could pay higher prices, too.
But I will point out they pay more than Target does.
Ever heard of the "intermittent" category, there is full time, parttime, and intermittent. Do you think Dillard's or Macy's pay more LOL?
So its really just a question of *who* should be forcing them to treat their staff better.
1 - Raising prices
The premise of your blog to that point was redistributing profits without changing prices ... hence prior references to running at "break even" if all profits were turned into salary. You need to stick with a constant premise throughout, else we can look at further increasing salary by raising prices, etc.
2 - Fewer People
We make "good" jobs by finding a way that one person can do several "bad" jobs and paying them a lot more than before. So long as the remaining people aren't being worked slave hours and are making a middle class living this is OK.
3 - Less Tax Revenue
You are ignoring the increase in income taxes from the higher salaries. Furthermore, when the employees spend their extra income it hits sales tax ... etc etc etc. It is basic "Trickle UP" economics. Money for the wealthy just hangs out in tax shelters. Money for the poor goes out and does stuff ... that means it will generate lots of tax revenue and economic activity that will get us going.
4 - Isn't a silver bullet.
Actually, due to the flaws in counterpoints 1 and 3, it would do a lot to help. The premise of most of your blog and market forces will prevent them from raising prices very much and trickle UP activity is exactly what we desperately need to fire up our economy.
I guarantee you it would be earth shattering to the people who could suddenly conceive of a world where they have enough savings to send their children to college.
Yes, Wal mart should be forced to pay alot more. All companies should. Just reduce the wages and bonuses of all the excutives.
During the layoffs, lay off the executives who created the problems.
Unheard of in large wage stores I would think.
First: It would be politically impossible to target just one corporation.
Second: The political mechanism for raising wages is the minimum wage. Raise the minimum wage to poverty level-say $12.00 per hour--and watch while most American jobs decamp overseas.
If you want to re-patriate good jobs, you need to move to a progressive consumption tax, yes, there are several viable proposals, which completely eliminates taxes on businesses, and establish "Fair Trade" rather than "Free Trade" rules.;
WalMart's wages are the symptom not the disease.
"A raise from $20,000 to $30,000 would be a nice bump, certainly. But it would not be earth-shattering."
A 50% wage increase wouldn't be earth shattering? Try telling that to the people who are working for the average Walmart poverty level wages. These people will likely never make above a poverty wage working at Walmart and most of the other retailers that imitate Walmart.