Every Day, Low Wages

On Wednesday, the Washington, DC, City Council passed the Large Retail Accountability Act (LRAA), a bill that will require large retail corporations—specifically businesses with more than $1 billion in sales and retail locations of at least 75,000 square feet—to pay their workers a minimum wage of $12.50 per hour. The bill’s passage may only be a temporary victory for proponents, however, as there is speculation that DC Mayor Vincent Gray may veto the bill now that Walmart, the primary target of the bill, has said that they will cancel construction of three planned stores in the District if the legislation becomes law.

It’s hard to view Walmart’s threat to scuttle the three stores, made literally the day before the Council vote, as anything but outright bullying by the largest and one of the most profitable corporations in the world. Walmart has alleged that the bill unfairly singles them out, although a few other retailers—Macy’s, Costco and Home Depot—would also be affected by the bill. But Walmart does deserve special scrutiny because of their unique track record in driving out smaller retail businesses, depressing wages (pdf), and siphoning off public tax dollars.

To be clear, Walmart is not the only big-box retailer that has shut down smaller competitors, but Walmart’s market dominance in many regions, and their role as the largest private employer in the United States, gives them a unique ability to affect living standards for significant segments of the population. Unfortunately, their typical wages are abysmally low. The minimum wage of $12.50 required under the LRAA is just below the average wage of Walmart employees nationwide: $12.67 per hour. And when companies like Walmart don’t pay sufficient wages for workers to make ends meet, the American taxpayer picks up the tab. In nearly every state where it operates, Walmart has more employees on Medicaid than any other company. In some states, its employees are also the largest groups of food stamp and other cash assistance recipients.

The $12.50 per hour wage that Walmart is refusing to pay its workers would equal $26,000 per year before taxes for a full-time worker. Even that isn’t a particularly forgiving income level in a high-cost area like Washington, DC. EPI’s updated Family Budget calculator shows that for a family of one parent and one child, it takes over $70,000 a year to achieve a modest, yet adequate, standard of living in the Washington, DC area—nearly three times the proposed minimum Walmart salary.

For Walmart to claim that paying such wages would be too burdensome is a bit hard to swallow. Until now, the company’s business model of taking over local retail markets then squeezing suppliers, employees, and local and state governments (pdf), has allowed the Walton family to acquire a combined wealth greater than the bottom 48.8 million American families combined—41.5 percent of all U.S. families. Yet the company can’t afford paying a wage that’s not even 60 percent of the average wage of its closest competitor? (Costco’s average wage is $20.89 per hour.)

The truth is that Walmart is simply going to pay the lowest possible wages that it can get away with. Researchers at U.C. Berkeley calculated in 2011 that if every Walmart nationwide had a minimum wage of $12 per hour and passed the entire additional cost on to consumers—i.e., without taking anything out of Walmart’s profit margins—it would increase prices by a mere 1.1 percent, or $0.46 per shopping trip for the average Walmart shopper. But when local officials can be won over with promises to anchor new development projects and “create jobs”—even if that development kills existing businesses with higher paying jobs—why bother to cut into profits or endanger your ability to undercut your competitors’ pricing?

The DC Council should be commended for standing up to Walmart, standing up for workers, and refusing to be bullied. Mayor Gray, it’s your turn to do the same.

  • Third_stone

    Let Walmart go to hell. Others will take the business, and Walmart is a net loss for the city, not a gain.

    • Classy_Username

      Right? If the market exists to support THREE brand new Walmarts, think of how many small businesses would flourish.

  • Bud Meyers

    Why do reports like this always use the “average” wage instead of the “median” wage? If the CEO’s salary was a $1 billion the “average” wage might be $1 million.

  • Derpanese

    They will cancel the construction of 3 Walmarts that will bring them thousands in revenue? Suuuuuuuuuuuuuuuuuure.

    I am also glad to see another evidence that free-market fundamentalism would work like absolute crap. If companies can get away with something, they WILL.

    • Walmart is being nice and letting other businesses have that market share, for once.

  • Jerry Rehsil

    Of course “researchers at Berkley” would come to this conclusion. they hate business generally. Payroll received by a worker is only a portion of employer costs, which are calculated on wages, such as worker’s comp, unemployment ins, vacation, sick pay, etc. These employer costs amount to about $.45/hr on $1.00 of increased pay.

    • Jonathan-David Jackson

      So… the average added cost per Wal-Mart shopping trip for this is 46 cents according to Berkley. According to you it’s 45% more, and that’s about 67 cents total, right? I guess I could *probably* swing that extra 21 cents if it meant a better standard of living for millions of Wal-Mart employees. I mean, maybe.

  • MANthrax

    People just don’t understand. Increasing minimum wage causes inflation. Many say the impact is minimal but its not. When minimum wage increases so do wages for skilled jobs just outside of min wage and it follows up the line. If Walmart tried to decrease wages people would look to do other work and they would retain nobody. Let the free market do what its supposed to do.

    • JustAddWater

      No, what causes inflation is greedy business OWNERS, that feel that they deserve 100% of their business’s profits. If they have to pay someone a decent salary to run their company, that is going to take away from what they put into their own bank accounts; therefore, they must raise their prices to offset the cost of paying someone else to run their business. When they don’t have to worry if their $50k a year country club membership is going to be paid or not, they sleep much better at night. (Because, hey, they really do need those 19 holes every day, for a good night’s rest!)

      • Justine D

        Greedy business owners are not the cause of inflation- anything someone sells is only worth what people are willing to pay. Supply and Demand. Unless there is a monopoly on a market, people will pay the least possible for the best quality. Also, business owners are rarely the ones out playing golf, thats the CEOs, VPs and Presidents of major corporations. Regular Joe Business Owner cant afford to pay someone else to run their business, they do it themselves, working well over 40 hours a week, paying more than their fair share of taxes and staying awake all night worrying if the business is going to make it or if they’re going to lose their house.

      • MANthrax

        My first job I made more than minimum wage mowing lawns. I then got a job working minimum wage. It didn’t last long as I realized it wasn’t for me and I moved on. I didn’t cry about it I just moved on. Nobody is keeping those people there they stay by choice.

    • John Bentley

      The free market has taken jobs that could support a family on a single income in the 1960s and reduced them to just over minimum wage today. Profit is based on cost of sales. To increase profit you sell more and cut costs. Wage is a cost. It’s really that simple. There is nothing about the free market that will benefit unskilled workers. When you have an endless pool of people that can do a job, the value of the worker declines until it hits the legal bottom. That is why it is important to artificially raise the bottom from time to time. When workers can’t live on their salaries, companies like Walmart direct them to government aid. When that happens the entire economy suffers. That is called corporate welfare. The taxpayer is who ends up footing the bill through food stamps and medicaid, while the company posts record profits.

      • Justine D

        Hmmm…interesting point “nothing about the free market will benefit unskilled workers. When you have an endless pool of people that can do a job, the value of the worker declines…” I think it is important to note that we live in a country that gives you the freedom and endless opportunity to become skilled through experience, training (which many large companies like walmart pay for), and education.Minimum wage is intended for entry level workers. However, instead of motivating and incentivizing all people to be the very best at what they do and learn valuable skills to compete in a free market; we want pat them on the head give out wages like charity.
        I think it is important to note that pay of entry-level, “unskilled” workers, is only a sliver of a much larger picture. The flow of a capitalist economy is regulated by the people who buy when left to do so. But when some elite group steps in and says they know better- the flow is interrupted and unable to function in a beneficial way.

      • MANthrax

        Really long story made short. WW2 ends world in ruins USA has all manufacturing. Prosperous for decades. Manufacturing is now gone and we have services as the primary employment for lower middle class. Government spends BILLIONS in education and its not going to work because there aren’t enough jobs for middle management or all the other bogus degrees the tax payer has paid and they are now looking to forgive. Its a Jenga game they are playing with inflation by raising min wage. My fear is I’ll be an old man when it all comes crashing down. We are on the road to Greece.

    • Joseph Hart

      Increasing the minimum wage creates jobs and takes people off government dole subsistence. If you make $12 an hour all the money you make you spend which helps create jobs.
      How much money do you need? 80% of America’s wealth goes to the top 20%, is that fair? No. Is a living wage fair? Yes.

  • JustAddWater

    If, as the article states, the average wage at Walmart is actually ABOVE the proposed $12.50, ($12.67, according to the article) I wonder if they took into account the salary increases, for those currently making between $12.50 and above? (At the very least, increases for those making between $12.5 – 12,67!

    Don’t get me wrong, I’m all for raising minimum wage, to meet the corresponding (astronomical & totally out of control) “standard of living,” but my cynical side can see them conveniently omitting superfluous information such as that.

    I recently returned to the company where I had my very first “real” job. I was shocked to find out that their new-hire salary was actually less than I was making when I left, 20 years ago. Granted, I had been there nearly 10 years when I left, but still, that was 20 years ago!! — Then I found out what the Exec Dir makes; I wanted to throw up…all over their desk! LOL!

    • One important consideration is the difference between average, mode, and median. An average of 10,000 employees who make $1.00/day and a CEO who makes $1,000,000/day is $1,010,000/10,001 = $100.99/day. So that obviously doesn’t represent that you can expect to make $101/day if you work for that company.

  • glr

    Let’s see if I get this right. It will cost the consumer $ 0.46 per visit. Walmart has 137,000,000 customers per week
    $ 0 .46 * 137.000.000 = $63,020,000 per week additional cost to consumers.
    If the US was not so anti business these jobs would just be stepping stones to better manufacturing jobs as they were in the past, but with high corporate taxes(highest in developed nations) and excess regulation the high paying manufacturing jobs have left. So these jobs we fight for higher wages on which over all will improve nothing.
    I am not against an increase in minimum wage, but we need to start building in America again that is how good paying jobs are created.

  • xBeth

    The trickier question, which is completely ignored by the folks at Berkeley is: If we establish a minimum wage of $12.50, how do we differentiate the compensation for hard working highly skilled people from their unskilled lazy counterparts?

    Does anyone think they would be getting the same level of service at Wal Mart if the employees knew there was no cash reward in being “Customer-centric” in their approach to the job?

    If people who lack the most basic of social skills make $12.50, how do you talk highly skilled, but inexperienced people to stay on without some “green incentive”… But the Berkeley folks, who know all about snobbery in hiring, seem to miss this one…

    • It’s pretty simple. You pay the highly skilled and hard working people more than $12.50, either through raising their wage or promotions, and fire the lazy unskilled workers.

      $12.50 is hardly a lucrative wage to aspire to. If you adjust for inflation, minimum wage has decreased an alarming amount.

      Chances are, that very same $12.50 you paid the workers would be spent in the Walmart itself, and sales would increase. It’s not like it disappears into some void. The multitude of wealth that goes to shareholders and CEOs, on the other hand, is much more likely to sit around not contributing to the economy, because these individuals tend to save and invest more than spend.

      At the moment, you have Walmart employees who work full time needing additional government subsidies. I don’t see how anyone can be okay with a situation where their taxes are paying for employed and hardworking people to get basic necessities. A company should be able to take care of their employees so that they can have a place to live and food to eat.

  • I don’t understand. Not only is Walmart willing to raise their wage, but they also want to create an opportunity for a smaller business by leaving more of the market to them. This is nothing short of pure generosity on their part.

  • Justine D

    I would like to point out that while it seems like they’re not hurting small businesses because they are not requiring them to raise their minimum wage by law; this still greatly effects them. They will now struggle to compete with big business to hire quality employees. And who do small businesses in many instances employ? Skilled workers! So is it worth it for me as a skilled worker to work for a small business doing what I was trained and educated to do for less money? Or is it better for me to go work for Walmart making more money doing a job that requires none of that skill? So now you have skilled, experienced workers competing with unskilled workers for jobs- who does that help?


    Minimum wage actually increases unemployment.

    If I make 8.50 and produce an $9.50 in good/services for my employer he keeps me around.
    If minimum wage raises to $10 an hour I cost my employer $.50
    What happens I get canned.
    You could say what if I produce $12 dollars worth of goods for a company and they only pay me $8.50 a minimum wage increase helps them.
    Those individuals will receive raise because employers want to keep them making money for them. If they don’t give them a raise then they simply Change employers.

    I understand the desire to help those in need but an ” Appeal to Pity” does not help anyone.