Yesterday, 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.
Business Insider Emails & Alerts
Site highlights each day to your inbox.