Wal-Mart CAN afford $15 minimum wage
Wal-Mart Stores raised its minimum wage to $9 in 2015 and to $10 in 2016, after years of protests by workers. While important steps in the right direction, these increases are not enough. An employee working 34 hours per week (which Wal-Mart considers full time) at $10 per hour still earns less than $18,000 per year and cannot meet her family's basic needs on Wal-Mart's wages alone, even in states with low costs of living, according to a recent study.
Why does it matter? Wal-Mart is the country's largest private employer, with 1.5 million employees in the United States alone. And it's a hugely profitable one: it generated $482 billion in revenue in fiscal year 2016. The company simply cannot justify its meager pay practices.
All the evidence suggests Wal-Mart can easily afford a $15 minimum wage. The company, for instance, has routinely poured billions of dollars into stock buybacks as part of a strategy to reduce the number of Wal-Mart shares on the market and increase the value of remaining shares. In the fiscal year ending in January 2015, the company generated more than $16 billion in net profit, and in fiscal year 2015, its CEO, alone, received $19.4 million in compensation, or more than $9,323 per hour based on a 40-hour week.
Low wages matter for taxpayers, too. When workers cannot afford to meet their basic needs despite working full time, they are forced to turn to public assistance. This means that companies rely on taxpayer dollars to subsidize rock-bottom wages. A single adult with one child who works full-time for $10 an hour will still qualify for the Supplemental Nutrition Assistance Programand the Earned Income Tax Credit, for example.
A $15 minimum wage would put billions of dollars in the pockets of hundreds of thousands of workers across the U.S. The UC Berkeley Center for Labor Research and Education has estimated that an increase to $15 per hour for Wal-Mart employees this year would mean an additional $4.95 billion in annual income for 979,000 hourly employees.* Women employees would see an additional $2.7 billion in earnings, and black employees would earn an additional $1 billion. Latino and Asian employees would receive an additional $626 million and $163 million, respectively.**
A $15 minimum wage would be good business for Wal-Mart. Researchers at The Wharton School find that for every additional dollar spent on payroll at a given store, sales can increase anywhere from $4 to $28. Higher wages help reduce turnover, which The Wall Street Journal has described as "a special scourge of retail and service companies where wages are low and hourly workers are often viewed as disposable and interchangeable."
This turnover is costly — research shows that it costs a company $4,275 in staffing and retraining costs each time it replaces an employee. Even Wal-Mart itself has explained that its decision to raise wages was part of the company's growth strategy: Wal-Mart's chief financial officer noted in the company's 2016 annual report that Wal-Mart's investment in wages was "not only the right thing to do for [its] associates, but it positions [Wal-Mart] to be a stronger company going forward."
A shift by Wal-Mart to a decent minimum wage would have positive ripple effects across the retail industry, which employs nearly 15 million workers in the U.S. Wal-Mart employs about 1 percent of the nation's workforce and nearly 10 percent of all retail workers. The company's practices undoubtedly set standards for the retail industry as a whole. Indeed, Wal-Mart's previous dollar wage increase was quickly matched by retailers like Target, T.J. Maxx, Ross, and even McDonald's.
Since November 2012, nearly 10 million workers have won gradual wage increases to $15 per hour through a combination of states and cities raising their minimum wage rates; local, state, and federal executive orders; and individual companies raising their pay scales. Two of the largest states in which Wal-Mart operates, New York and California, approved a statewide $15 minimum wage earlier this year. A federal bill would also increase the federal minimum wage to $15 by 2020.
The movement for a $15 minimum wage may ultimately leave Wal-Mart with no choice but to raise its minimum wage. But Wal-Mart, one of the wealthiest and largest employers in the U.S., can choose to act now and pay its workers what they need, and, more importantly, what they deserve. As Wal-Mart executives and the Walton heirs convene for their annual shareholders meeting this week to chart the future for the company, all evidence suggests that Wal-Mart can easily afford a $15 minimum wage.
* Researchers at the UC Berkeley Center for Labor Research and Education analyzed the distribution of wages and hours worked for hourly workers classified under Wal-Mart's industry code and simulated the impact of raising the minimum wage from $10 an hour to $15 an hour in 2016. Estimates are based on an analysis of the Current Population Survey and the American Community Survey, combined with publicly available information on the size of Walmart's hourly workforce.
**OUR Walmart calculated the impact of $15 per hour for women, Black, Latino, and Asian workers using the number of hourly employees determined to receive a raise and the cost of that increase as calculated by UC Berkeley Center for Labor Research and Education, then utilizing ethnicity and gender breakdowns of Wal-Mart's workforce reported by the company in its 2015 Diversity & Inclusion report.
Commentary by Christine Owens, executive director of the National Employment Law Project. She served as Director of Public Policy for the national AFL-CIO, the Democratic National Committee's American Majority Partnership director, and an attorney in private practice and the federal sector, representing workers in employment law matters. She is also a member of the board of the directors of the Coalition on Human Needs.