As Wal-Mart blitzes Internet retail, debate rages over company's impact on US wages

Doug McMillon, president and CEO of Walmart
David Orrell | CNBC

Wal-Mart, the big-box behemoth where nearly every American shops, is both the U.S.'s largest private sector employer and a consistent lightning rod for controversy.

As the Arkansas-based retailer makes inroads in online retail — reportedly near a deal to buy men's web retailer Bonobos and recently offering discounts for items purchased online but picked up in stores — Wal-Mart's social impact is still a hot topic.

The company's supporters point to countless jobs it provides to low-skilled workers while selling affordable goods, but detractors fault Wal-Mart's encroachment on small businesses, and how it treats workers.

In a number of different ways, Wal-Mart has attempted to move the needle of public opinion in its favor. Stung by years of worker protests, the retail giant boosted its minimum wage to $10 per hour in 2015 — even as critics insist they could go as high as $15.

Separately, the company this week launched a "sustainability platform" that aims to curb a gigaton of emissions by 2030. However, Wal-Mart remains dogged by questions about whether it's doing enough to balance business concerns against its commitment to workers and customers.

I mean, if Wal-Mart starts paying its cashiers $20 an hour, people are going to start shopping at places that don't have cashiers ... it's nice to raise people's wages, but you're going to put them out of work.
John Tierney
Contributing editor, City Journal

Wal-Mart's chief criticism is in the area of worker pay. In a study last year, the University of California-Berkeley Center for Labor Research and Education estimated that an increase in pay to $15 per hour for Wal-Mart employees would mean an additional $4.95 billion in annual income for the company's nearly 1 million hourly employees.

Additionally, a 2015 University of New Hampshire survey found that nearly three-quarters of those polled oppose a broad minimum wage mandate of $15 per hour. Echoing a frequent critique of the minimum wage policy, the survey found that five out of six economists believed it would have negative effects on youth employment levels.

Supporters of a higher minimum wage, however, remain undeterred. "Wal-Mart's business model is pretty simple," said Amy Traub, an associate director of policy and research at equality advocacy group Demos, at a recent debate hosted by Intelligence Squared U.S. (IQ2) in New York.

"The company pays its workers poverty wages. It offers few benefits, and it manipulates workers' hours and understaffs its stores," Traub said. "That low-wage business model serves one purpose: It's so the company can maximize profits that go to some of the wealthiest people on the planet."

Other retailers have shown they can pay workers a living wage, offer good benefits and fair schedules, and still turn a profit, Traub added, citing Costco and grocer Trader Joe's as examples. She charged Wal-Mart with adding to the problem of stagnant working-class wages by wielding its "tremendous influence throughout the service sector."

Author Nelson Lichtenstein, also a participant at the IQ2 debate, linked Wal-Mart's wage and business policies to the populist wave that's reshaped the political landscape.

"I would say that part of the reason for the political turmoil we're in right now is that for many, many people in the white working class, the sense of predictability has fled from their lives, and Wal-Mart and other competitors who follow the 'Wal-Mart model' are responsible for that," Lichtenstein said.

In order to ramp up its online presence and hold the line on costs, Wal-Mart recently said it would slash hundreds of jobs. In total, Wal-Mart has eliminated about 18,000 jobs since early last year, a company spokesman confirmed to CNBC.

Ashley Green, 31, talks to a Walmart personal shopper as she retrieves her online grocery pickup order at the chain's Franklin, Tenn., location.
Sarah Halzack | The Washington Post | Getty Images

'Robot full-employment act'

A few observers have questioned the impact of a higher minimum wage on job creation. In December, the White House Council of Economic Advisors compared employment data for all of the states that raised the minimum wage since the 2009 recession with those that didn't, and found "substantial wage increases with no discernible impact on employment levels or hours worked."

Still, not everyone agrees a wage hike would a good idea for Wal-Mart, or serve as a cure-all for the battered retail sector's woes.

"No one comes close to Wal-Mart in combating poverty," John Tierney, a contributing editor at Manhattan Institute's City Journal, said at the IQ2 debate, arguing the company is already doing its fair share and more.

Richard Vedder, an economist and author of "The Wal-Mart Revolution," said at IQ2, "Wal-Mart lifted many Americans out of poverty by providing goods at lower prices; it has done so by paying billions of dollars, at least $6 billion every year, in federal income taxes, and more billions in sales and property taxes."

Tierney and Vedder both argued that Wal-Mart actually doesn't make enough profit to raise its wages much higher without sacrificing its bargain prices. Given the rise of automation in retail, Tierney suggested that the demand for higher wages could hasten the demise of low-skilled jobs.

"My reaction when I see these living-wage laws of $15 to $20 an hour, I think they should be renamed 'the robot full employment act,'" Tierney said. "I mean, if Wal-Mart starts paying its cashiers $20 an hour, people are going to start shopping at places that don't have cashiers ... it's nice to raise people's wages, but you're going to put them out of work."

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