More money, more profit
How's this for a good deal?
Large U.S. retailers raise their base pay to $25,000 a year / $12.25 an hour. Five million American households see a rise in their standard of living. Over 1.5 million Americans are lifted out of poverty. Employers create more than 102,000 new jobs. GDP rises by as much as $15 billion from new consumer spending. Retailers add between $4 and $5 billion in revenue. And it only costs you 15 cents per shopping trip - about $17 a year.
Those are the conclusions of a new report this month by think tank, Demos, which says our nation's largest retailers - including Walmart, Target, and Home Depot - could provide a significant economic stimulus and make more money by raising their wage floor for the low-low cost of 1% or less of total sales. They could do it while still making billions of dollars in profits and improving growth prospects.
"The fact is, for large retail firms low-wage jobs are not a business necessity but a choice," says Catherine Ruetschlin, who authored the report.
Walmart is always the big elephant in the room in any discussion about low-wage work. Walmart employs more people (1.4 million) in this country than any other corporation, but the company pays its workers 28% less on average than other large retailers. Walmart's aggressive low-wage policies depress wages paid by other retailers. For example, the scale of Walmart's ability to set wages industry wide is such that one study cited in Demos' report concluded workers at other retailers earned $4.5 billion less than they would have if Walmart didn't exist.
"Yet Walmart could easily afford to set a different pattern for the retail sector—and, as the country’s most profitable retailer whose shareholders are among the wealthiest people on Earth, do so without passing any of the costs to customers. The six heirs to the Walmart fortune have more wealth than the bottom 42 percent of American families combined, with holdings of almost $90 billion. Since last year, they’ve received more than $1.8 billion in dividend payments from their Walmart shares.
"By raising wages and putting more than $4 billion into the hands of it underpaid workers, Walmart could have a significant impact on retail employment and the overall economy, while taking the lead as a trailblazer for the industry as a whole." -- Catherine Ruetschlin, Demos
Click here to read Demos' report, RETAIL'S HIDDEN POTENTIAL: HOW RAISING WAGES WOULD BENEFIT WORKERS, THE INDUSTRY AND THE OVERALL ECONOMY.
Status quo costs more than you know
The cost of doing nothing is higher than just the unrealized gains because large retailers choose to pay low-wages. When workers cannot earn enough money to feed and clothe their family or buy their own health insurance, everyone else picks up the tab.
One reason low-wage employers like Walmart are so good at maximizing private profits by effectively socializing their debts:
"In 2004, a year in which Wal-Mart reported $9.1 billion in profits, the retailer's California employees collected $86 million in public assistance, according to researchers at the University of California-Berkeley. Other studies have revealed widespread use of publicly funded health care by Wal-Mart employees in numerous states. In 2004, Democratic staffers of the House education and workforce committee calculated that each 200-employee Wal-Mart store costs taxpayers an average of more than $400,000 a year, based on entitlements ranging from energy-assistance grants to Medicaid to food stamps to WIC—the federal program that provides food to low-income women with children." -- Sasha Abramsky, Mother Jones, January/February 2009
The rallying cry for Walmart workers in the OUR Walmart campaign has been "Stand up. Live better." When it comes to raising wages in the retail sector, that goes for all of us.