Who pays Wal-Mart's workers?



Barry Ritholtz, in Bloomberg, ask a a simple question: What should it mean to be employed full time in America?


He is interested, specifically, in Wal Mart, and why a huge, profitable, wealthy mega corporation does not pay its workers enough to makes ends meet. First, let's go over how large Wal-Mart is:

Wal-Mart has 2.2 million employees, including 1.3 million hourly workers. It employs 1.2 million people in the U.S. alone. Gross revenue is $475 billion, generating profits of $17.20 billion. It dominates the discount retail space, and according to Bloomberg, has a 66.70 percent market share (...). . Each week, it has 200 million customers at more than 10,400 stores in 27 countries. If the company were an independent country, it would be the 25th largest economy in the world.

The problem is, this gigantic economic colossus does not pay its workers enough to make ends meet. In fact, Wal-Mart Employees receive $2.66 Billion in government help every year.

Wal-Mart's low wages have led to full-time employees seeking public assistance. These are not the 47 percent, lazy, unmotivated bums. Rather, these are people working physical, often difficult jobs. They receive $2.66 billion in government help each year (including $1 billion in healthcare assistance). That works out to about $5,815 per worker. And about $420,000 per store.

Here at the CAHS blog we talked about this issues last November - a family of four with two adults working full time at Wal-Mart in Connecticut would only get less than two thirds of their income and benefits from the company; the state and federal governments would be footing the bill for the rest, with SNAP, Husky, Care 4 Kids and other benefits.

Can Wal-Mart increase its wages? Ritholtz does the math, and yes, it can:

Can Wal-Mart afford to increase employees’ salaries? Let's crunch the numbers. The retail giant does $474.88 billion a year in sales; across their 2,200,000 employees, that nets out to $213,255 sales per employee. Given a 5.93 percent operating margin, that nets out to $12,646.02 profit margin per employee. Adding $3 per hour per full-time employee would consume almost half of that profit. But that before any potential increase in productivity, reduced turnover costs and higher revenues.

The full article is here, with plenty of links showing why low wages are one of the reasons why Wal-Mart has very high staff turnover and very low productivity per employee. His analysis of McDonalds, another large corporation prone to dumping part of its labor costs on the tax payers, is here.

The obvious solution is, of course, an increase of the federal minimum wage, something that we have advocated for years. The economic benefits of an increase would be immediate, but Congress doesn't seem to eager to move in that direction.


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