Save Money. Redistribute Costs.
A group of democratic congressmen released a new report on Thursday titled “The Low-Wage Drag on Our Economy,” detailing a complex Walmart effect wherein sinking employee salaries and stripped benefits programs have shifted the burden of employee compensation onto us — the taxpayers.
“When low wages leave Walmart workers unable to afford the necessities of life, taxpayers pick up the tab,” the report reads. Produced by the House Committee on Education and the Workforce, and chaired by Rep. George Miller (D-Calif.), the report pulls data from a single 300-person Walmart superstore in Wisconsin, due to the availability of Medicaid data in the state.
“The labor policies of Walmart, and those of companies that emulate its low-road approach, end up leaving taxpayers holding the bag,” Miller says. The report is a revision of a similar one released in 2004, with many of the same findings.
So, just how much does it cost us? Examining health care alone, that single Wisconsin store cost taxpayers an estimated $251,706 per year in Medicaid costs for employees, many of whom are working full time and still not hitting a livable wage. If you factor in all the federal relief programs available to the chain’s employees (reduced-price meals, subsidized housing, earned income tax credit, etc.), that number would theoretically soar to just over $900,000. Per store. Per year.
The report notes, accurately, that few employees take advantage of all relief programs available to them. Though the chain still had more workers enrolled in Medicaid in the last quarter of 2012, 3,216, than any other employer in the country. Accounting for all their dependents, that number jumps up to 9,207 enrollees.
“Taxpayer-funded public benefit programs make up the difference between WalMart’s low wages and the costs of subsistence…With wage stagnation income inequality, and federal budget deficits of increasing concern to public policy, this issue is due for a re-examination.”
If there’s any store that captures the uniquely American, bigger-is-better mentality, it’s Walmart. The store employs 2 million workers worldwide, 1.4 million of which here in America — one out of every ten retail workers in the country. They are 1.23% of all private-sector American jobs, and 9.3% of all retail and trade service jobs.
Walmart’s employee mega mob eclipses the populations of 96 countries.
In short — their big, and they set the standard. What Walmart does, so do the rest.
“Unfortunately there are some people who base their opinions on misconceptions rather than the facts,” argued Brooke Buchanan, a Walmart spokeswoman, noting that 75% percent of Walmart managers started as hourly employees. She says that though employees start at a base pay, the store works hard to allow them the opportunity to advance throughout the company — at least at the store level.
“Every month more than 60% of Americans shop at Walmart,” she said, “and we are proud to help them save money on what they want and need to build better lives for themselves and their families.”
But not everyone is satisfied, and more importantly, not all of them are partisan. Another 2004 study, released by researches at the University of California, Berkeley, came to many similar conclusions. “Reliance by Wal-Mart workers on public assistance programs in California comes at a cost to the taxpayers of an estimated $86 million annually; this is comprised of $32 million in health expenses and $54 million in other assistance,” the study found.
They found that Walmart employees in California were 38% more likely to apply for public non-health assistance money than workers in competing retail stores. “If other large California retailers adopted Wal-Mart’s wage and benefits standards,” the report continues, “it would cost the taxpayers an additional $410 million a year in public assistance to employees.”
The hyper-gluttonous megachain — which hit the number one spot last year on the Fortune 500 list, pulling in a cool $444 billion in sales during 2012 — continues to squeeze its employees on the bottom rungs, reaping almost nauseating gains as entry-level employees continue to work full time without even scraping the poverty level. Amy Traub, a senior policy analyst at the Manhattan-based think tank Damos, says this model is unsustainable:
“Today we are really seeing the limits of the ultra-low-wage model that Walmart pioneered,” she explains. “Workers are consumers, and when they aren’t paid enough to buy goods, the economy can’t grow.”
Traub is referring to the economic microcosm that Walmart has become, the lone driving force in many small American towns and cities — entire communities live, shop, work, and survive off Walmart, an off-balanced relationship that thrives on widespread poverty and decreased choice — both in where to shop, and where to work.
“We end up trapped in a vicious cycle of low growth,” Traub continues, “and companies that persist in trying to cut labor costs further only make matters worse for themselves.”
But Corporations Are People … ?
And they’re doing so well! This is America, after all, the land of the capitalists where hard work and ingenuity pay off big for a few at the expense of the many. We make billions using impossibly-complex global supply chains, outsourcing cheap labor and hellish conditions (not to mention our moral culpability) to those countries that are most desperate — placing foreign factory owners on razor-thin margins that keep prices low, profits high, and conditions terrible. All this as extravagantly-paid lawyers and accountants continue to come up with new and ingenious money-saving strategies (looking at you, Apple) to avoid corporate taxes, which only result in those taxes being redistributed to employee paychecks.
It is a new and icky brand of American Exceptionalism — everything for the bottom line, all for the investor. And the workers … well. The government can take care of them.
“Rising income inequality and wage stagnation threaten the future of America’s middle class,” the congressional report continues. “While corporate profits break records, the share of national income going to workers’ wages has reached record lows.”
Barbara Gerts, a Walmart employee from Commerce City, Colorado, is one of the many to be faced with the hard-line realities of a minimum wage job. She’s begun trying to mobilize her fellow employees to push for better conditions, after low wages forced her to sell an antique doll collection just so she could make rent. “I’m not a screw-off employee by any means,” she said, “and it’s upsetting to me that I can’t even support myself at 45 years old.”
The Congressional report continues, “The average family’s income is lower today than at any point in the last ten years. Income inequality is more extreme today than at any point since before the Great Depression, with the top 1 percent of income earners receiving 93 percent of income gains in the recovery.
“In the third quarter of 2012, corporate profits reached $1.75 trillion, their greatest share of GDP in history. During the same quarter, workers’ wages fell to their lowest share of GDP on record.”
What About the Minimum Wage?
As corporate profits soar and wages stagnate, many have begun to reconsider the minimum wage. Not just an increase — a routine battle every couple of years that reeks of all the beat-me-over-the-head partisan nonsense you’d expect — but a fundamental reevaluation in the way we calculate it. The current federal minimum, $7.25, has been in place since former President George W. Bush signed an increase in 2009, and is still the threshold in 31 states.
That amounts to about $14,500 a year for a full time employee. Well below the livable wage in most states.
This stagnation is part of a fairly recent phenomenon, as the minimum wage tended to rise alongside production in the expansion following World War II. The trend gradually began to break apart through the 1970s, however, resulting in a wage stagnation effect that has led to one of the worst income gaps in American history.
19 states and the District of Columbia have opted to raise their minimum, and 10 have tied it to the cost of living — they key modifier that some politicians say is necessary to protect workers over the long term, thus ending the melodramatic partisan rancor that happens every time the minimum is raised.
Rep. Miller, who chaired the Walmart study, and Sen. Tom Harkin (D-Iowa) have sponsored just such legislation to raise the federal minimum wage to $10.10 ... and then index it.
“Indexing the minimum wage to inflation would help working families make ends meet as costs rise,” explains Allison Preiss, a spokeswoman for Harkin. “Sen. Harkin believes that the ability of these families to afford basic necessities shouldn’t be used as a political football by those in Congress.”
“The further that people fall behind, and the lower the minimum wage is, the more government subsidizes these low-wage workers,” Miller continues. “We subsidize them with food stamps, and we will be subsidizing them with health care … I appreciate everybody thumping their chest about how their independent, free-enterprise businesses, [but] they just want a government subsidy to pay the wages of their workers.”
The issue got a kick-start when President Obama called for a raise in his State of the Union speech earlier this year, offering a more modest proposal to raise the level to $9.00 by 2015. “No one who works full-time should have to live in poverty,” he said. Even former Republican nominee Mitt Romney was on board, angering some on the right by claiming that the minimum wage ought to be indexed “so that it adjusts automatically over time.”
Though wage increase measures tend to poll extraordinarily well across the country, with 67% of Americans supporting an increase from $7.25 to $10.00 an hour, statistics are tricky — and are varied enough to support either side of the issue. Those on the right claim that a higher minimum wage is fundamentally inflationary, raises the barrier to new hires, and puts pressure on small businesses.
“When you raise the price of employment, guess what happens? You get less of it,” said a frustrated House Speaker John Boehner, responding to the president’s call for a higher minimum wage. “At a time when Americans are still asking the question, ‘Where are the jobs?’ why would we want to make it harder for small employers to hire people?”
Social progressives on the left, meanwhile, point out that data is divided on the effect of the minimum wage on employment, and note that a livable wage tends to lead to less employee turnover. In one famous case, researches examined the effects when New Jersey raised its minimum from $4.25 to $5.05, in 1992 — comparing employment patterns across 410 fast food restaurants in the state, and in nearby areas of eastern Pennsylvania — which hadn’t changed its minimum. Examining data before and after New Jersey’s increase, they concluded that there was “no indication that the rise in the minimum wage reduced employment.”
Save Money. Live Better.
One way or another, we all pay the hidden costs of cheap prices. And we will continue to do so. “The current strikes suggest that the campaign for better wages and improved working conditions at Walmart is here to stay,” explains John Logan, a professor of labor and employment studies at San Francisco State University. For as long as the rich get richer and families don’t, there will be fewer dollars flooding through those flashy Walmart checkout aisles, and more of our tax dollars paying the wages and benefits the company won’t.
“Historically, the way it’s played out, you have these skirmishes back and forth, everyone writes their editorials,” Miller explains. “But at the end of the day, the American public knows that it’s very unfair for people working for low wages who can’t support themselves, that they go to work every day, in some cases at very difficult jobs, and they end up poor.”
It’s time for a new brand of Exceptionalism, driven not only by profits but by our own moral culpability, and the power of the dollars we spend. We ought to reward those companies that reward their workers, and punish the ones that don’t. It’s time for a new brand of business where labor is rewarded as much for being just as it is for being cunning — where profits are distributed where reward is due, which is investors and employees.
It’s time for a business culture where bigger is better if-and-only-if it’s built on the backs of people — not property, not pons, not cogs lost in a conglomerate system.
As for Walmart? For now, they seem about as concerned as a pig with a fly on its back. “If there is somehow a disruption in their stores, our associates and our managers are equipped to ask folks to leave,” Buchanan continues, referring to last week’s employee protests — which, she points out coolly, included a little under a dozen members of a two million-strong global work force.
“And if it gets to a point that we’ve asked them numerous times, the next opportunity is to then call the police.”