As retailers and consumers gear up for the holiday shopping season, it’s a good time to take a closer look at what things are like for the person on the other side of the cash register. Over the past year, there have been an increasing number of retail strikes as workers in the industry call for higher pay and better working conditions. Why should this matter to the ordinary shopper just out looking for the perfect gift? Because poor wages in retail may be shrinking your paycheck as well, and in more ways than one.

Retail workers tend to be paid significantly lower than workers in other industries. As the graphic below shows, the median hourly wage for workers in the retail sector is 32.4% lower than the median hourly wage for all other industries.1 Importantly, the lower wages in retail are not simply the result of demographic factors that might contribute to lower wages, such as the age or education levels of typical retail workers. Using a regression approach to control for demographic and regional factors, the data show that wages in retail are 18% lower than in other industries.2 This is the “wage penalty” of working in retail.

The prevalence of low-wage work in the retail sector leads to lower annual incomes and higher concentrations of poverty among retail workers. In 2013, the average annual weekly earnings of nonsupervisory retail workers was $423—that’s less than $23,000 per year, and more than $500 below the federal poverty line for a family of four. It should come as no surprise then that poverty rates for retail workers are significantly higher than for workers in other industries. The poverty rate for workers in retail was 10.1 percent, compared with 6.6 percent of workers outside of retail.3

Being paid so little by their employers, workers in retail often have to turn to public assistance and income support programs just to make ends meet. Nearly one in three retail workers or their families (31.5 percent) receives support from at least one means-tested public assistance program—such as food stamps (SNAP), the Earned Income Tax Credit (EITC), Temporary Assistance for Needy Families (TANF), or Medicaid4—compared with less than one in four (22.2 percent) workers or their families in all other industries. Public assistance to families of workers in retail can be conservatively estimated to top $13.4 billion each year.5 These safety net programs provide critical protection from undue material hardship for millions of workers and families, and if anything, the benefits they currently provide are inadequate to deal with the levels of poverty we are facing today. But these programs were never designed to serve as permanent wage subsidies to what are often highly profitable corporations that can afford to pay more. Raising wages for low-wage workers could provide significant savings to safety net programs—savings that could be put back into strengthening our antipoverty programs or repurposed into economy-boosting investments, such as infrastructure programs or universal pre-K.

At the same time, there’s robust research showing that the exceedingly low wages paid by some large retailers significantly depresses wages at smaller competing firms.

There are certainly retailers that provide high-quality jobs, but the data show that far too often, retailers are paying wages that are woefully inadequate to live on. So long as companies get away with paying unlivable wages, the American taxpayer is getting a bad deal. The savings may seem great on Black Friday, but we’re effectively paying extra all year long.

Endnotes

1. EPI analysis of Current Population Survey Outgoing Rotation Group microdata, 2011-2013.

2. Ibid. Regressions include controls for age, sex, race, education, marital status, weekly hours of work, metropolitan status, occupation, and state.

3. EPI analysis of Current Population Survey Annual Social and Economic Supplement microdata, pooled 2011-2013 years to provide adequate retail sample.

4. These percentages represent workers or family members of workers participating in at least one of the seven major means-tested federal income-support programs: the Earned Income Tax Credit (EITC); the Supplemental Nutrition Assistance Program (SNAP), also known as food stamps; the Low Income Home Energy Assistance Program (LIHEAP); the Supplemental Nutrition Program for Women, Infants, and Children (WIC); the Section 8 Housing Choice Voucher program; and the Temporary Assistance for Needy Families program (TANF) or equivalent state and/or local cash assistance programs.  Note also that they do not exclude supervisors in retail who tend to be paid more and have more regular, full-time hours – meaning that if we restricted this analysis to only nonsupervisory workers, the percentages would likely be even higher.

5. EPI analysis of Current Population Survey Annual Social and Economic Supplement microdata, 2011-2013 See Raising the Federal Minimum Wage to $10.10 Would Save Safety Net Programs Billions and Help Ensure Businesses Are Doing Their Fair Share for greater detail on the methodology.