A Higher Wage Is Possible

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November 19, 2013

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Catherine Ruetschlin,

Amy Traub

American workers are working harder for less, with productivity rising but living standards stagnant or declining.¹ At the same time, stock market wealth and incomes for the highest-paid Americans have risen.² Against this backdrop, the pay practices of the nation’s largest private employer have come under increased scrutiny. Walmart, with 1.3 million U.S. employees and $17 billion in annual profits, sets standards for all other retailers and across the supply chain of one of the nation’s fastest growing industries.³ Walmart’s practices impact the public sector and taxpayers as well when employees earn too little to meet their needs and require public assistance.⁴ Finally, Walmart is a leader in promoting an employment model in which workers earn too little to generate the consumer demand that supports hiring and would lead to economic recovery. In the last year, Walmart employees themselves have been increasingly vocal in protesting their low pay. Since the last holiday season, Walmart employees in stores throughout the country have repeatedly spoken out in pursuit of a modest wage goal: the equivalent of $25,000 a year in wages for a full-time employee.

KEY POINTS

• Walmart workers and a growing number of community supporters are taking a stand this holiday season, calling for wage increases and sufficient hours on the job to earn the modest income of $25,000 a year. This brief explores one way to pay for raises.
• Walmart spent $7.6 billion last year to buy back shares of its own stock. The buybacks did nothing to boost Walmart’s productivity or bottom line. If these funds were redirected to Walmart’s low-wage workers, they would each see a raise of $5.83 an hour.
• Curtailing share buybacks would not damage the company’s competitiveness or raise prices for consumers.
• If Walmart redirected its current spending to invest in its workforce, the benefits would extend to all stake-holders in the company—customers, stockholders, taxpayers, employees and their families—and the economy as a whole.

Now as another holiday season approaches, this research brief considers one way Walmart could meet the wage target its employees are calling for— without raising prices. We find that if Walmart redirected the $7.6 billion it spends annually on repurchases of its own company stock, these funds could be used to give Walmart’s low-paid workers a raise of $5.83 an hour, more than enough to ensure that all Walmart workers are paid a wage equivalent to at least $25,000 a year for full-time work.⁵ Curtailing share buybacks would not harm the company’s retail competitiveness or raise prices for consumers. In fact, some retail analysts have argued that by providing a substantial investment in the company’s front-line workforce, higher pay could be expected to improve employee productivity and morale while reducing Walmart’s expenses related to employee turnover.⁶ With more money in their wallets, Walmart employees would likely spend a portion of the cash at Walmart itself, boosting the company’s sales. Sales might also increase as customers benefit from an improved shopping environment.⁷

In Demos’ prior study, Retail’s Hidden Potential: How Raising Wages Would Benefit Workers, the Industry and the Overall Economy, we found that increasing pay for low-wage workers at America’s largest retailers would also have benefits for the economy as a whole, reducing poverty, boosting economic growth, and creating over 100,000 jobs. While the impact of raising wages at a single company—even one as large and central as Walmart—would have a much smaller impact, similar benefits could be ex- pected from a wage increase: the economy would gain from the addition of economy-supporting jobs, taxpayers would pay less to subsidize Walmart’s low- wage business model, and the company would no longer be the leading example of inequality in an economy being rapidly undermined by the shrinking middle class and lack of purchasing power. Significantly, these gains could be attained without any impact on Walmart’s low prices.

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