Walmart made $26 billion of operating profit last year.
Walmart pays its average “associate,” of which it has about 1.5 million in the U.S., just under $12 an hour. This equates to an annual salary that is below the poverty line.
Like other healthy corporations, Walmart could afford to pay its associates more. It chooses not to because it doesn’t have to.
This decision, which is repeated by many other healthy companies. is responsible for one of the biggest problems in our economy.
Specifically, one of the biggest problems in our economy right now is the disappearance of the middle-class. The middle-class is disappearing because middle-class jobs are disappearing. This is not just because of the loss of “manufacturing jobs.” It’s because of the loss of middle-class jobs. Many of these jobs have been replaced with “low-wage service jobs.”
Low-wage service jobs are not low-paid because they are low-skilled. They’re low-paid because they’re low-paid. Companies don’t have to pay their employees more, so they don’t.
Unfortunately, this situation is one reason inequality in our economy has become so extreme in recent years. And it’s one reason economic growth is so weak: Most Americans live paycheck to paycheck and have no money to spend on anything other than basic necessities.
Photo: St. Louis Fed
If the middle-class were stronger–if the vast majority of American consumers had more disposable income–the American economy would be much healthier. Instead, a greater portion of the country’s income is going to highest earners than any time since the 1920s. And “the 99%,” meanwhile, are getting the shaft.If Walmart used ~$7 billion of its $26 billion of operating profit to give each of its American associates a $5,000 raise, its associates would no longer be below the poverty line. Its associates would also likely spend that $5,000 on goods and services in the economy, probably at Walmart. This would stimulate the economy and Walmart and make life easier for the associates.
If Walmart paid its employees more, it would also likely get better employees. And keep them longer. And these better, more experienced, and more loyal employees would likely make Walmart a stronger company over the long-term. And that would enhance shareholder value.
If Walmart paid its employees more, it would also better balance the interestes of its three constituencies: 1) customers, 2) employees, 3) shareholders. And that would make it a much more valuable company in the societal sense of the word.
Photo: St. Louis Fed
Henry Ford decided to pay his workers more than the market would bear–enough so that his workers could buy his cars. This was a smart decision, and it helped usher in the era of prevalent middle-class manufacturing jobs.If America is to regain its economic might, we need to find a way to restore these middle-class jobs. A good first step would be Walmart following in Henry Ford’s footsteps and paying its employees more.
Based on several earlier posts I’ve written on this topic, the mere idea that a company would pay employees a penny more than it absolutely had to drives people insane with rage.
So this is your opportunity to make your case.
Please add your thoughts on this in the comments below. I will listen carefully and keep an open mind. And, for the next hour, I will respond to comments that I think make fair, smart points.
A word of warning, though:
The goal of this exercise is to hear both sides and have an intelligent debate. Anyone who just insults me or anyone else will be instantly booted to the Bleachers. And so, unfortunately, will anyone who makes stupid, dismissive, or exaggerated arguments.
(If you get booted to the Bleachers, try to say something really intelligent and maybe I’ll feature the comment. And then all of your “Strikes” will be removed.)
So, should Walmart give its employees a raise?
And then have at it!
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