Welcome to the 39th installment of The Wal-Mart Weekly, a column dedicated to bringing you insight, wit, facts, results, opinions and just a bit of everything else when it comes down to a very hot topic these days: Wal-Mart.
Last week, I looked at a recap of Wal-Mart Stores, Inc. (NYSE: WMT) Black Friday and Cyber Monday sales and related marketing efforts. This week, I'll be talking about a "Black Sheep" when it comes to Wal-Mart's employee pay policy -- the "Living Wage," as it's been called.
This is the wage that would significantly up the amount of pay many Wal-Mart employees would see in their pockets while not affecting pricing very much from the consumer standpoint. Sounds like an oxymoron, doesn't it? Any slight upward movement in pricing would be seen by Wal-Mart's price-savvy customers, yet the retailer is constantly bombarded by accusations of low pay. How can it mesh the two for a solution?
Wal-Mart's pay scale could be improved, right?
One of Wal-Mart's largest public relations nightmares in the past ten years or so has been the lower pay and substandard benefits it provides the majority of its workers. Wal-Mart, though, is not alone here -- many retailers pay at the same level as Wal-Mart and most likely provide comparable benefit levels. But. Wal-Mart is the most visible retailer in the world -- and as such, it is the largest target by far. Just like Microsoft in the computer industry, the largest elephant in the room always attracts the most arrows.
But, could Wal-Mart really raise wages for many employees -- taking its own "minimum wage" to no less than $10 per hour -- and not cause any price increases for its customer base? That is the ticket -- Wal-Mart's customer base is the most price sensitive of any other retailer in any industry. Raise prices by a few cents on many items and many customers will recognize. Or, will they?
In a study by the University of California at Berkeley, the university's center for Labor Research and Education concluded that the world's largest retailer could increase its minimum wage to $10 per hour and greatly boost the well-being of its low-income workers with little financial impact on most shoppers. Sounds like a win-win solution, doesn't it?
What the research is
The UoC's research, the implementation of a "big box living wage" ordinance would give many Wal-Mart workers a significant upgrade in pay and benefits (raising their standard of living) by spreading costs to the Wal-Mart customer base in such a way that consumer segments in multiple income spectra would share those costs in small, incremental ways. It's akin to implementing a small fee on your home phone bill somewhere in the call detail, but without affecting most home phone subscribers more than pocket change.
That may be a bad analogy, but it's appropriate. Would you notice if your home phone bill went up by $0.28 ever month? Probably not. Now, multiply that amount by over a hundred million home phone subscribers and what do you get? If you do the math, you'll get the idea pretty fast.
But then again, a Chicago city ordinance last year suggested and implemented what it called the "living wage ordinance" that would have required big-box retailers such as Wal-Mart to pay a $10 per hour minimum wage. The ordinance was eventually vetoed and was not put into effect after complaints from just about every big-box retailer (including Target). Going from an estimated average of $7 to $8 per hour for a basic Wal-Mart wage to at least $10 would have surely bankrupted the retail giant, right? Not quite.
What the research concluded
In the UoC's labor center study, the overall conclusion was that Wal-Mart could indeed raise its own minimum wage to $10 per hour by passing on those overall costs fully to its consumer base. Want a number figure? The researchers suggested that the overall shopping bill increase most Wal-Mart customers would see would be in the area of 0.9%. As an example, you buy $250 worth of groceries, and your applicable increase based on that level would be $2.25. Would you notice such a small increase? Here's another: Buy a $1,300 flat-screen TV and you'd see $11.70 tacked on. Make a large difference to you?
Here are some facts released in the study:
- Increasing Wal-Mart's minimum wage wages to $10 per hour would contribute to a payroll of $2.38 billion a year, a 9.3 percent increase over the retailers' current payroll.
- Poor and low-income Wal-Mart workers could expect to earn an additional $1,020 to $4,640 a year in pre-tax income, depending on what they earn now and whether they work part-time or full-time.
- If Wal-Mart shoppers were asked to absorb all of the wage increase, the average impact would be a price increase equivalent to 36 cents per shopping trip or $9.70 per year, for the store's average consumer, who spends $1,088 per year at Wal-Mart.
- High-spending Wal-Mart shoppers, (the 12.5 percent of store customers who account for 54 percent of all Wal-Mart sales and average expenditures of $9,775 per year) would see an additional cost of $1.47 per shopping trip, or up to $87.98 a year. The study estimates that 3.4 percent of Wal-Mart shoppers are both high-spending and low-income.
The study also found that close to half of the wage income gain by Wal-Mart implementing a $10 per hour minimum wage -- or 46.3% -- would accrue to workers living below 200% of the federal poverty level. In other words, customer price increased would be used to basically subsidize living for those living at or near the poverty line. At least, an argument can be made for that point of view.
But then again, workers at Wal-Mart choose to work there and are choosing to accept the lower pay amounts the retailer gives. It's a free country where any worker can apply to and work for any company he or she chooses. The antithesis of that statement comes from liberal types, who argue that low-income and near-poverty workers have no choice than to work for Wal-Mart (or another low-paying company), and therefore that company should be required to pay a wage that brings a majority of workers out of living in or close to poverty.
Does government fiddling with private industry seem appropriate in a capitalistic society? According to conservative types, absolutely not.
What do you think? This is an issue that will surely divide many across political lines just as sure as it will those who "have" and those who "have not," as the saying goes.
See you here next week for another edition of The Wal-Mart Weekly. Until then, take care!
Closing Bell: Economic Catapult for Thanksgiving & Black Friday (WMT, TGT, GRMN, GOOG, MSFT)
Deere up on Q4 earnings performance
Reid Hoffman: LinkedIn will go public (at some point)
Reader Comments (Page 1 of 1)
6-23-2009 @ 11:41PM
spider2thefly said...
I can sympathize with the individual who is single with grown kids. I, too, work at Wal-mart. I have worked for lawyers, architects, tax preparation services, and was a licensed Realtor in 3 states. I disagree with the comment that Wal-Mart hires the "unemployable". Circumstances change and lives change. ,I too, am single and have no children living at home. I qualify for absolutely no government benefits whatsoever and am taxed at a ridiculously high rate. 3 months of my wages go to paying state and federal taxes. I struggle every month. I DO make more than $10 and hour ($10.25) but it is far from enough for the average single person to live on adequately. I would be better off financially if I had a kid or 2!
12-08-2007 @ 2:48PM
Brockage said...
Yet another study from the "perfessers" at a school. Well, it's ok by me if the US Chamber of Commerce study agrees. Otherwise I'll stick with people getting paid as I am, according to my talents and ability to work hard.
12-08-2007 @ 3:40PM
Mike said...
Is there a shortage in workers applying at Wal-Marts nationwide?
Doesn't seem to be. 24,500 people applied for 325 spots at a Wal-Mart in Chicago last year.
Seems to me that at least 24,500 people have determined that Wal-Mart's pay and/or benefits were desirable.
Why should I add to my family's budget in order to subsidize pay for a retail employee? Would I notice an additional $2.00 in my grocery basket? Absolutely! That's why I cut coupons.
But it's not THAT $2.00 that is the problem. Once the socialists get Wal-Mart to raise prices in order to artificially raise wages for it's employees, who is next?
McDonalds? Starbucks? Movie theaters?
Where does it end? Should we all pay a living-wage tax in order to raise the standard of living of the lowest wage-earners in the country? What is their incentive to perform better in their jobs? What is their incentive to learn a new skill-set?
There is a reason why some jobs pay better than others. Those skills are in demand. Wal-Mart...and Target...and K-Mart...and McDonalds...etc. is a company who employs the otherwise unemployable. They also employ teenagers and retirees. It is what it is. Those jobs will never pay what a line worker at an auto assembly plant get paid. They'll never pay what an airline pilot gets paid. They'll never pay what a doctor or a lawyer gets paid. But they are good jobs that provide industry-standard benefits.
Would the union like 1.6 million new members to take 2% out of their paycheck? Absolutely!
Will those people notice that 2%? According to you, it's only a few pennies ... so why should it matter?
If the United States Government believes that the minimum wage should be raised -- then by all means raise it!!!
But raise it equally for ALL employers. Not just big box stores. Level the playing field.
If you are going to force big-box stores to provide certain benefits -- then force ALL business to provide those benefits. Because last time I checked, most of those Mom N' Pops that everyone is so keen on saving don't offer medical insurance, life insurance, 401K, profit sharing, etc...
12-08-2007 @ 4:30PM
CURTIS FRY said...
I LIKE SHOPPING AT WAL-MART TILL THE OTHER DAY I WENT AND BOUGHT ANOTHER BATTERY I TALK TO THE SALS REP AND SHE TOLD ME THAT THE WARRENTY IS ONLY GOOD FOR 90DAYS I LOST MY WARRENTY ON MY LAST BATTERY SO I WENT AND BOUGHT ANOTHER IT WAS FOR AN ATV FOUR WHEELER THAT I USE FOR HUNTING THE SERCOUND BATTERY LASTED ONLY THREE WEEKS I WAS OUT IN THE WOODS HUNTING ABOUT TWO MILES WENT TO START THE ATV AND IT WOULD NOT SO THANKS TO WAL-MART I WALKED I TOOK THE BATTERY BACK AND DEMANDED MY MONEY BACK AND THAY NOT BUT THAY DID GIVE ANOTHER BATTER I TOLD THE CSM ILL SEE THEM IN THREE WEEKS SO AS FAR AS IAM CONCERNED JUST LOST ANOTHER COUSTERMER AND ILL LET EVERONE KNOW THAT WAL=MAT HAS A NEW WARRENTY PLIICE BRINK BACK WHAT YOU GOT AND WILL GIVE YOU ANOTHER LIKE IT AND AS ALL WAYS THANKS FOR SHOPPING WAL-MART
12-09-2007 @ 8:39AM
flipsbuddy said...
WHEN A PERSON APPLY'S FOR A JOB AT WAL-MARTS, THEY KNOW WHAT THE PAY SCALE IS.
THEY CAN'T WAIT TO START WORKING. THEY DON'T EVEN GET A PAY CHECK AND THEY ARE CRYING ABOUT THE PAY. WAKE UP AMERICA
WAL-MART IS A GREAT PLACE TO WORK. THE PEOPLE WHO REALLY NEED A JOB WILL TELL
YOU THE PAY SCALE IS FINE. THE CRY BABIES ARE THE ONE WHO HAVE OTHER MEMBERS OF THERE FAMILY WORKING AND DON'T NEED THE JOB.WE CALL THEM THE GREEDY ONES.
12-10-2007 @ 11:05AM
Brad Schmitz said...
I absolutely agree with comment number 2 (Mike). People who are applying for a job at Wal-Mart know what they are getting into. The pay scale is the industry standard. You have to look at what that job is worth paying. A person pushing in shopping carts is not worth the same as a person who has to learn all the functions of the Customer Service Desk and putting up with all those crabby customers. What is the job worth. It is RETAIL. Yes the unions want a piece of the pie. The unions are a business. The union cant guarantee anything but to speak for you. If you raise the prices at Wal-Mart the low-income customer will feel it. With gas prices fluctuating like they are, and we want to raise prices. This is not the answer. Maybe if the federal and state government takes a look at the educational systems, maybe they will find that this is the answer. Tell “UoC” to do a study on how many High School and College graduates work at Wal-Mart. Look at how many people come from broken homes. Look at how many people didn’t have to opportunity to graduate high school or college. This is the answer. EDUCATION
12-10-2007 @ 1:08PM
Carolyn said...
I am a typical Wal-mart employee and would like to add my comment. After 10.5 years of serving Wal-mart customers, I receive $8.90 an hour. No over-time is allowed. After deductions for taxes, medical insurance, cancer and accident insurances, $20 to the company stock plan, 2% towards a 401k plan, my two week pay check averages around $450. I am grateful for the benefits I have, and I agree that I have better benefits than most retail offers their employees. Even my earnings would be fine if I was married and sharing expenses with a spouse. As it is, I am divorced with grown children not living at home. Therefore I am responsible for paying my own expenses. I live in a moderate priced apartment complex where my monthly rent is $665. An electric bill and water bill are separate. You can take these real figures and see what I have left for food and car gas.
I realize that I cannot expect to be paid the same as a store manager or a brain surgeon. On the other hand,as a faithful and reliable employee who does my job well, is it asking too much to be able to afford a normal living wage? I don't mean a Mercedes and a house in Saddle Club. I mean a ratty apartment an old Ford and beans and cornbread. The only way I survive is through the kindness of my children who are helping pay my utility bills. If not for them, I would be one of the homeless living on the streets.
My point is this. I believe that any person who is not lazy and works should be able to afford the bare necessities of life. Food and shelter. Is that too much to ask from the richest company in the world?
12-10-2007 @ 3:04PM
resa said...
Man, there is a lot of uninformed people out there that have no clue just how much money Wal-mart makes off the backs of their employees. You have no idea about the way Wal-mart treats it's employees. The answer is the upper echelon getting all the profits instead of sharing it with the people that earn it for them. I have been at Wal-mart for 41/2 years and can work any department in the store except I've never cooked a chicken or baked a cake and always had exceeds on my evaluations.
They just hired a person off the street that had no experience and expected me to train them in my main job and they pay her $.60 and hour more that they pay me. After 41/2 years, very skilled in almost every department, and an extremely hard worker, I still make under $10.00 and hour. There is no fairness at Wall-mart.
12-10-2007 @ 5:56PM
Jenna Raby said...
Walmart absolutely should pay a living wage to it's employees. You all should be ashamed of yourselves. A recent study by the University of California at Berkeley Labor Research Center reported that by paying their employees a living wage, this would increase the cost at the register by 1%--small price to pay for pulling people out of poverty.
12-11-2007 @ 12:20PM
roudy11z said...
Since we want WMT to pay employees better then lets not stop there. We need to make sure KMart,Sears, and Target are also doing this. Maybe someone can answer this for me??
12-14-2007 @ 7:54PM
Alouisis said...
You pose an interesting question.
Is Wal-Mart a private employer or a social pay and benefits company?
Wal-Mart is a private employer, but when a private employer of so many people does not provide adequate pay, then their employees must rely on the social welfare system to subsist.
In the final analysis, Wal-Mart profits are being subsidized by the public social welfare system. You and I and every taxpayer are subsidizing Wal-Mart profits.
So, asking your question again, is Wal-Mart a private employer or a social pay and benefits company? As long as Wal-Mart employees are reliant on social welfare to live, it is incumbent upon Wal-Mart to pay what it costs. Whatever social subsidy a Wal-Mart employee or their dependent receives, Wal-Mart should be required to re-pay.
The next question should be, is this good public policy? No, it is not. We should have a minimum wage sufficient to live on. We should have health care available to low wage earners. That is good public policy.
Wal-Mart has simply taken advantage of the weakness of our labor laws and our backward healthcare policies in the USA. This is what must change.
Forcing Wal-Mart to pay their share will motivate Wal-Mart to exert its considerable political influence to actually raise the minimum wage and provide a healthcare system that serves our least powerful citizens. It becomes in the Wal-Mart self interest to raise wages and benefits for all employers to eliminate any perceived competitive advantage an employer not repaying the subsidy might enjoy.