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Less than you'd think.
April 7, 2014 10:10 AM   Subscribe

Using food-stamps as a way for corporations to subsidize their payroll, keep people at minimum wage, and profit from tax-payer funded low-income support programs, has become an increasingly well documented phenomena. But how much would it cost companies like Walmart (the largest that takes in food-stamps from their workers) to just pay their employees a living wage, and what impact would that have on the prices? [via]

posted by quin (66 comments total) 24 users marked this as a favorite

 
Tl;dr: 1.4% price bump assuming every cashier is a single mother, makes $8.81 an hour and buys their groceries at Walmart and that Ohio is representative of the nation.

Because making me watch a 2 minute video is so much more efficient than just, you know, typing that.
posted by Skorgu at 10:23 AM on April 7 [100 favorites]


Sure but not everyone understands things as readily and clearly as you.
posted by humanfont at 10:29 AM on April 7 [3 favorites]


someone posted a thing on fb the other day that said ben and jerry's, when they started, had a rule that the highest paid employee (even ceo) could not make more than 15 times (or something) the lowest paid employee. the lowest paid employee is paid $15.85

I had a friend who used to work at ben and jerry's, so i asked her if that's true.

she said maybe that's min at corporate office, but even at the kiosk, she made well above minimum and also got tips.

ben and jerry's ain't doing too bad.
posted by sio42 at 10:30 AM on April 7 [6 favorites]


Thank you, Skorgu. We invented the written word for a reason.
posted by entropicamericana at 10:30 AM on April 7 [15 favorites]


Well, no, but more of the people who need to see this, will watch a video rather than read an article.
posted by MartinWisse at 10:30 AM on April 7 [1 favorite]


From Walmart's income statement I see that their margins are just about 3.7%. Walmart's ability to pass on the costs to customers is unclear. Some of the 1.4% increase would come from the profit margin. Cutting their profit margin from 3.7% to 2.3% would put them under a lot of financial pressure. It might even kill the company.
posted by humanfont at 10:39 AM on April 7 [3 favorites]


sio42: someone posted a thing on fb the other day that said ben and jerry's, when they started, had a rule that the highest paid employee (even ceo) could not make more than 15 times (or something) the lowest paid employee. the lowest paid employee is paid $15.85

It was originally only 5 times (!), but it only held up until Ben retired and they could not find a CEO who was willing to accept that stipulation.
posted by Rock Steady at 10:40 AM on April 7 [6 favorites]


Well, no, but more of the people who need to see this, will watch a video rather than read an article.

20 words does not an article make. I appreciate that different people intake information at different rates and in different ways, but I am one of the people who can't bear to watch a video to get to a bottom line of data that would take me moments to read. It's maddening.
posted by dirtdirt at 10:41 AM on April 7 [65 favorites]


The video makes a reasonable point... but paying sufficient wages that they no longer qualify for food stamps is not necessarily paying a living wage. In Oregon, for example, a 2-person household earning $30,000 would probably not qualify for food stamps, but would be earning less than the $35,500 necessary to afford a 2-bedroom apartment in Multnomah County.

See also:The Cliff Effect

I mean, yes, higher wages would be a good first step and will in many cases be more efficient and humane than forcing low-income workers to rely on supplemental assistance programs, but the goal should be a living wage. But! this is one more tool to help communicate that shafting low-income worker is inefficient, so yay for that.
posted by Kpele at 10:41 AM on April 7 [4 favorites]


I think I would have guessed 1.5% - 2% bump. So yeah a little less.
Humanfront none of it should come out of the profit margin, I assume the 1.4% price increase is to maintain the profit margin while increasing wages.
posted by MrBobaFett at 10:41 AM on April 7 [2 favorites]


The marketplace piece from 4/1/14 has been sticking with me. Walmart lost appreciable business due to the drop in Snap funds available ($30/family per month?). We've all seen stories of people who are in line with food at midnight at 24 hour stores waiting for their cards to activate so they can eat. I'd like to think if only for bottom line reasons, Walmart would back larger food stamp allocations.

It would be too much to believe they'd get behind the minimum wage law. It would be nice, but they're notoriously driven by their in-house financial analytics.
posted by readery at 10:43 AM on April 7 [1 favorite]


Prices are such a weird thing. I was in my local hardware store yesterday, looking at some copper pipe. Home Depot has it for $22 a stick, and it's $25 a stick at the local place. I need 15 sticks, so that's $50, not inconsiderable. Except that

* I have to drive 40 miles to get to home depot in the truck, at 10 MPG, plus and extra two hours of travel time ( 8 * $4 is $48, and if I billed an hour of work with the time saved I'd be ahead of the game)
* I'm buying this once, it's not a recurring thing

People go to insane lengths to save a modest amount of money.

To bring this back to walmart, their employees are also their customer base. I would suspect if you raised the wages to "living wages" a good huge percentage of that money would be spent right in the store again.
posted by maxwelton at 10:43 AM on April 7 [12 favorites]


You also would have to factor in the increased revenue that would result in more customers, as higher wages will make customer service better.
posted by MisantropicPainforest at 10:45 AM on April 7 [1 favorite]


To bring this back to walmart, their employees are also their customer base. I would suspect if you raised the wages to "living wages" a good huge percentage of that money would be spent right in the store again.

*blink*

Holy shit, that makes it sound like Walmart is a company store.
posted by EmpressCallipygos at 10:48 AM on April 7 [7 favorites]


To bring this back to walmart, their employees are also their customer base. I would suspect if you raised the wages to "living wages" a good huge percentage of that money would be spent right in the store again.

In the form of a one minute thirty eight second video, the Walmart employees get the food stamps, the food stamps buy the Walmart groceries, and Walmart gets the proceeds.
posted by ernielundquist at 10:54 AM on April 7 [3 favorites]



From Walmart's income statement I see that their margins are just about 3.7%. Walmart's ability to pass on the costs to customers is unclear. Some of the 1.4% increase would come from the profit margin. Cutting their profit margin from 3.7% to 2.3% would put them under a lot of financial pressure. It might even kill the company.


So what's the catch?
posted by ocschwar at 10:55 AM on April 7 [27 favorites]


Pricing is one of those insanely complicated parts of the retail industry that can't really be easily explained in a comment. At a basic level the assumption that the entire increase I cost could be passed onto the consumer is flawed. Think about it this way. If Walmart could charge a penny more on a box of Mac and Cheese why don't they and keep the money for themselves?
posted by humanfont at 10:55 AM on April 7 [4 favorites]


humanfont: "From Walmart's income statement I see that their margins are just about 3.7%. Walmart's ability to pass on the costs to customers is unclear. Some of the 1.4% increase would come from the profit margin. Cutting their profit margin from 3.7% to 2.3% would put them under a lot of financial pressure. It might even kill the company."

Target's is 2.42% and Costco's is 1.76%. They seem to be doing alright.
posted by Big_B at 11:00 AM on April 7 [33 favorites]


I think companies, who pay their workers so little that they qualify for welfare, should be billed by the government for the cost of providing those benefits.
posted by cosmic.osmo at 11:01 AM on April 7 [81 favorites]


It's definitely complicated and my Econ-101 level analysis is simplistic but once your marginal revenue reaches your marginal cost you stop raising prices. So that one cent might cause just enough reduced demand to make the overall revenue flat or less.
posted by Skorgu at 11:02 AM on April 7 [1 favorite]


> the increased revenue that would result in more customers, as higher wages will make customer service better.

Well, except that Walmart is basically a giant experiment demonstrating that you can make customer service as shitty as you want and customers will still shop there, as long as prices are low enough. They have very actively and consciously optimized themselves away from customer service and towards low prices as a strategy, and it's apparently been quite successful.

That said, I don't really believe this:

> Walmart's ability to pass on the costs to customers is unclear.

I can't think of a single company more able to pass along costs to its customers than Walmart, at present. That's probably not true as of a decade or so ago, when they were growing and driving all their competitors out of business, but now they have a giant slice of Middle America by the short-and-curlies. In many places, there's pretty much nowhere else left to go but Walmart. If they decided to raise prices across the board by 2% tomorrow, purchasing power in a lot of places would just go down by 2%, period.
posted by Kadin2048 at 11:02 AM on April 7 [13 favorites]



I can't think of a single company more able to pass along costs to its customers than Walmart, at present. That's probably not true as of a decade or so ago, when they were growing and driving all their competitors out of business, but now they have a giant slice of Middle America by the short-and-curlies.


I think you have the logic inverted there. They have a giant slice of Middle America by the short hairs. There is no way they are charging a penny less than is optimal for every product on their stores right now. (They do have a large data center in Arkansas to estimate demand and supply and figure it out.) That means if you force them to raise wages, that doesn't change the optimal price. Just means they keep less of it as profit now.
posted by ocschwar at 11:20 AM on April 7 [1 favorite]


That means if you force them to raise wages, that doesn't change the optimal price. Just means they keep less of it as profit now.

Why, the Waltons would be ruined!
posted by entropicamericana at 11:22 AM on April 7 [8 favorites]


now they have a giant slice of Middle America by the short-and-curlies. In many places, there's pretty much nowhere else left to go but Walmart. If they decided to raise prices across the board by 2% tomorrow, purchasing power in a lot of places would just go down by 2%, period.
posted by Kadin2048


Nope. 2% (or more, likely much more) less money would go to "luxury brands" (KD mac and cheese for example as opposed to store or value brands), Walmart would see lower margins because of an increase of purchase of lower margin items, and while prices would be higher, revenues and esp. profits would be lower.

In markets where they are the only viable sizable competitor left, anything they do ultimately cannibalizes themselves. In many ways, it's easier to set pricing in response to a competitor rather than an arbitrary in house algorithm determined to maximize profits.
posted by Keith Talent at 11:30 AM on April 7


a rule that the highest paid employee (even ceo) could not make more than 15 times (or something) the lowest paid employee

I've heard of several companies with similar "CEO makes no more than X times the lowest paid employee" policies, but unfortunately it's fairly easy to game the stats:
a) Usually it only applies to CEO salary, which can be a laughably small portion of their compensation when compared to bonus, equity, and benefits. Some CEOs only make $1 annual salary, but have total compensation of over a million.
b) The other end of the comparison can be raised by making the lowest tier workers independent contractors, excluding them from the equation. Coincidentally this also lowers their total compensation, since they no longer get benefits. These companies end up having no non-managerial staff; but don't worry, they'll make no less than one fortieth of CEO salary!
posted by ceribus peribus at 11:34 AM on April 7 [3 favorites]


Wal-mart motto from Sam Walton in the 80s:

"Our people make the difference."

The current company motto from Walton's kids seems to be:

"Our people make no difference."
posted by GregorWill at 11:34 AM on April 7 [4 favorites]


This meme has always gotten in my craw for a very simple reason: by framing food stamps as something that benefits Wal-Mart and not poor people the likely result is to reduce the status of food stamps, not force changes on Wal-Mart.

And also, this seems like a reasonable critique.
posted by mikewebkist at 11:36 AM on April 7 [5 favorites]


Usually it only applies to CEO salary, which can be a laughably small portion of their compensation when compared to bonus, equity, and benefits. Some CEOs only make $1 annual salary, but have total compensation of over a million.

I'd be sort of surprised by that, since total comp is always disclosed (for public companies, anyways) and the gamesmanship would be readily apparent.
posted by jpe at 11:40 AM on April 7


On the one hand, I have a suspicion that SNAP lowers wages, in the sense that a person with SNAP benefits but no job can underbid a worker with similar skills but without SNAP. On the other hand, I'm not comfortable assuming that eliminating SNAP would necessarily lead to a raise in wages, so clearly the economics of it all aren't cut and dried.

I'm not entirely clear why Wal-mart gets the brunt of the impact; when I was younger, none of the retailers were particularly well paying. Do Target or Kroger really behave any better?
posted by pwnguin at 11:51 AM on April 7


"So what's the catch?" - I know it's fun to hate on wal mart, but like it or not they are a massive employer, a massive source of cheap food and staples for families, and a massive retailer that thousands of companies, manufacturers and tertiary businesses depend on.

Their absence from our economy would take a decade to sort out properly. Perhaps it would be for the better eventually, but that decade would suck.
posted by BlerpityBloop at 11:53 AM on April 7 [2 favorites]




"So what's the catch?" - I know it's fun to hate on wal mart, but like it or not they are a massive employer, a massive source of cheap food and staples for families, and a massive retailer that thousands of companies, manufacturers and tertiary businesses depend on.


The businesses they displaced are far more willing to employ people to work during slack time. Which mans the end of that company would result in its activities being carried out by a larger payroll.
posted by ocschwar at 11:55 AM on April 7


I think we should just give everyone food stamps in order to sever the tie between having a job and having enough to eat. This is especially important given increasing automation and an increasingly jobless recovery. We have enough wealth to do this.
Second, when food stamps are universal, people will not lose benefits as they make more money, which means they will not have any incentive to avoid doing so. The way food stamp benefits are currently computed, every $1 increase in monthly income causes you to lose $0.30 in monthly food stamp benefits until you reach the cutoff point and lose benefits altogether. This means food stamp recipients face a marginal tax rate of 30 percent! That is not good for anyone, and so we should just get rid of the means-testing altogether, which a universal food stamp program would do.
posted by melissam at 11:56 AM on April 7 [27 favorites]


On the one hand, I have a suspicion that SNAP lowers wages, in the sense that a person with SNAP benefits but no job can underbid a worker with similar skills but without SNAP. On the other hand, I'm not comfortable assuming that eliminating SNAP would necessarily lead to a raise in wages, so clearly the economics of it all aren't cut and dried.

Yes. You cracked the code. You caught them. People are working as a cashier at Walmart for the $8/hr because the SNAP benefits they receive let them live like kings and queens! If only SNAP wasn't around then they would all go out and look for $20/hour jobs! They wouldn't go out and get a second job to work 80 fucking hours a week or anything to get by instead, nope. No siree, Bob. Not here in the glorious United States of America.
posted by Talez at 11:57 AM on April 7 [10 favorites]


Except that

* I have to drive 40 miles to get to home depot in the truck, at 10 MPG, plus and extra two hours of travel time ( 8 * $4 is $48, and if I billed an hour of work with the time saved I'd be ahead of the game)
* I'm buying this once, it's not a recurring thing


Another bullet point for that list: you're not subsidizing this asshole when you buy local vs. making the trek out to Home Depot.
posted by longdaysjourney at 12:00 PM on April 7 [3 favorites]


The businesses they displaced were displaced because they could be displaced. Wal mart grew over time, not overnight. The demand for cheap goods and supply of labor were there, and they grew with it.

Like I said, their demise might result in a better system, but it would take a decade, at least, to properly rebound. Distribution, manufacturing and fulfillment to get the same amount of supply in to significantly more retailers would result in significantly higher prices across the board. It's not just about the employees, the shelves need to be stocked somehow.
posted by BlerpityBloop at 12:02 PM on April 7


I am eleventy billion percent behind the idea that Wal-Mart can and should pay their workers a living wage. But I'm also super-duper-mega skeptical of trying to solve major financial issues with back of the napkin math from YouTube clips. I think realistic, important goals like pushing for a living wage are done a disservice by being glib like this.
posted by DirtyOldTown at 12:02 PM on April 7 [3 favorites]


I'm not entirely clear why Wal-mart gets the brunt of the impact

You do realize that Walmart is the largest private employer in the US, as well as the largest private employer in the world, full stop?^ Their 2.2M employees make them six times larger than Target or Kroger, who both have around 350K. (McDonald's or Yum! are slightly higher on the list, and I hope you're aware of the bad press McDonald's has gotten lately.) Seriously, only the Pentagon and the People's Liberation Army have more actual workers. They have the largest footprint by their own intention, so complaining that they are only ragged on because they're big is silly. They have the most corporate profits recycled into dividends (half of which, about $2.5B annually, go to members of the Walton clan), they have (among) the largest lobbying budget, and they have the most impact on thousands of US communities. Again, they wanted to be this big, so if they now present a bigger, uh, target than Target, well, welcome to the big leagues.
posted by dhartung at 12:16 PM on April 7 [35 favorites]


Videos like this won't change Walmart's behavior, but that's not the anticipated outcome. The idea is to change the conversation and kill a talking point.

If you can make it clearer to the general public that massive retailers paying living wages won't hurt those retailers or the public, and would in fact be better for everyone (reduced tax burden due to fewer SNAP payments; more money going through Walmart; etc.) it might somehow lead to the politics of the situation changing.

Granted, it probably won't, because the rhetoric the other direction is controlling the discourse for the foreseeable future, but fuck it, it can't hurt to try.
posted by Harvey Jerkwater at 12:16 PM on April 7 [3 favorites]


It was originally only 5 times (!), but it only held up until Ben retired and they could not find a CEO who was willing to accept that stipulation.

Is it any surprise that when you restrict your search to the professional management class, all you can find are professional managers? Would Ben Cohen have been qualified to be the CEO if he were applying for the job he was leaving? (Hint: No.)
posted by 1adam12 at 12:36 PM on April 7 [5 favorites]


I work in retailer pricing, and I can tell you right now that Walmart doesn't ever price based on necessity, they price based on maximizing ROI. The cost to Walmart of a box of Mac and Cheese may be around $.40, and they find that at $.98 maximizes profit. Above $0.98, consumers buy less than is made up by the increase in 2 cents. Below $0.98, Walmart loses money because the demand doesn't increase to cover losing a few cents to the consumer.

If Walmart raised prices 2% across the board, they would probably see an IMMEDIATE loss in profits. It wouldn't "Make up for anything", that's not how pricing and retail works. Sure, you can do the math on the average revenue that walmart has, and multiply it by the costs of worker wages, but this is different from how the prices actually effect demand.

I'm not saying that Walmart should keep the wages low. I'm just saying that increasing prices wouldn't help Walmart's bottom line at all. They would have to take the money from somewhere else.
posted by bbqturtle at 12:58 PM on April 7 [7 favorites]


To continue a point from earlier in the thread, I've always been curious about what seems to me like a missing voice in the SNAP debate: why aren't associations of grocery retailers and the like a part of the conversation? I'd love some insight into why trade associations around supermarkets, corner stores, and other grocery-related industries aren't more vocal about the effect that SNAP cuts have on their bottom lines.
posted by youarenothere at 12:58 PM on April 7


I am perhaps a bit slow these days,so bear with me. Do I have this right?
Some places, Walmart an example, pay lousy wages.Their help, in order to get by, need food stamps etc., that come from the govt., and that money therefore comes from taxpayers, so that means we are subsidizing such firms (like govt subsidies for farmers), and so no company will willingly raise wages in order to take the tax burden off taxpayers. Why would they willingly want to change when they hold a winning hand and Congress seems unwilling to raise minimum wage?
posted by Postroad at 1:06 PM on April 7 [1 favorite]


Why would they willingly want to change when they hold a winning hand and Congress seems unwilling to raise minimum wage?

Walmart continus to run expensive PR campaigns to fight the image their company is getting from issues like this.

If they fight a PR battle, it means they want to win it. Which in turn means they think they will have to change if they lose it.
posted by ocschwar at 1:10 PM on April 7


Yes. You cracked the code. You caught them. People are working as a cashier at Walmart for the $8/hr because the SNAP benefits they receive let them live like kings and queens!

To be fair, I don't think that's what he meant. There's a floor on the price of labor - the minimum you can pay someone and they'll work for you. Food stamps do lower that floor, since Walmart can can pay people less than they need to sustain themselves and have the government pick up the difference.

Eliminating SNAP probably would raise the floor on wages, but also probably not as much as the actual value of the benefits. I'd bet the difference would be made up with people working more hours. And of course, SNAP benefits are also there because not everyone can work, so on balance SNAP is almost certainly a helpful thing.
posted by heathkit at 1:38 PM on April 7 [3 favorites]


There's a floor on the price of labor - the minimum you can pay someone and they'll work for you

Actually, what minimum wage means is "I'd pay you less, but the Government won't let me."
posted by pjern at 1:48 PM on April 7 [5 favorites]


Actually, what minimum wage means is "I'd pay you less, but the Government won't let me."

And below that thre's "I'd pay you less but then you'd die of exposure and not show up."
posted by ocschwar at 1:52 PM on April 7 [3 favorites]


The minimum wage also means, "I'd be willing to hire a person, but at that price I might as well just buy a few extra microwaves."
posted by mikewebkist at 1:59 PM on April 7


The problem is not that walmart pays to little, but that the minimum wage is too low. No one, no matter who they work for, should earn less than is needed to sustain a dignified life. That doesn't mean that (some or all) people at minimum wags shouldn't be getting public assistance, just that the problem is in no way a walmart problem. It's an American problem, and on thus issue we've let down millions of workers.
posted by Dip Flash at 2:27 PM on April 7 [10 favorites]


To be fair, I don't think that's what he meant. There's a floor on the price of labor - the minimum you can pay someone and they'll work for you.

Historically, this floor has at times been below the level to guarantee basic nutrition.

There really isn't a floor, not an absolute one. If you have other options - government support, family to support you, savings - then you can have a personal floor. I've had the freedom to hold out for higher wages because I've always had family and/or savings to feed and house me.

But if you don't have that, your floor disappears. If you don't have any food, and no way to get food (no food bank, no homeless shelters), you'd find yourself working for pennies an hour because it's either that or starve. Around the world, people really do work for pennies - and not just $0.01 USD that buys a lot locally, but for wages that buy what pennies would buy in the USA.
posted by jb at 2:29 PM on April 7 [1 favorite]


Cutting their profit margin from 3.7% to 2.3% would put them under a lot of financial pressure. It might even kill the company.

My reaction to this is to think back on various articles and documentaries I've seen that have talked about Wallmart's cutthroat negotiation processes for their supply chain. I'm pretty certain they have more than one supplier that has stated "if we give you it for the price you're demanding, we'll go out of business" to which Wallmart... Doesn't care.

If your business model is exploitation, don't expect for me to go to bat for you if your business model becomes jeopardized.
posted by el io at 3:02 PM on April 7 [11 favorites]


humanfont: "Cutting their profit margin from 3.7% to 2.3% would put them under a lot of financial pressure. It might even kill the company."

Let's see 2.2 million employees... let's assume they all make $8.81... let's bump them all to Obama's $10.10... that's an additional $1.29 per head... hey, let's just make it $2 to cover any costs associated with the wage increase... that'll add up to a total of $4.4m. OK, let's take the amount out of the Walton's annual $2.5b dividend check... that would reduce their cut to... let's see... hey, it's still $2.5b! It's literally a rounding error.

Fuck them. Seriously.
posted by Hairy Lobster at 3:18 PM on April 7 [5 favorites]


$4.4m
Well, that is only raising the wage for one hour per employee. You have to multiply it by the number of employee hours they pay out each year.
posted by soelo at 3:24 PM on April 7 [5 favorites]


I think companies, who pay their workers so little that they qualify for welfare, should be billed by the government for the cost of providing those benefits.

Qualification for 'welfare' is based on household size and income. (Among eleventy billion other things)

This rule would make it far more expensive to hire someone with kids than someone without, or someone taking a job to support their family vs. a teenager looking for spending money.
posted by Hatashran at 3:35 PM on April 7


Uh, yeah, sorry, got carried away and made an angry calculation :/

You're right.

Regardless there's enough money there to pay everybody something resembling a decent wage.
posted by Hairy Lobster at 3:45 PM on April 7


It's an American problem

Not just American. In Toronto, welfare ('Ontario Works') pays out something like $570 monthly to a single person. That's split into 'housing' (around 380 if memory serves) and 'support' (the rest).

By the time you've paid rent (on a room in a shared place, mind) and bills, and a cellphone (because you need to be reachable), you're lucky if you have more than $40 left over for food, transportation, etc.

It's sickening.
posted by feckless fecal fear mongering at 3:55 PM on April 7 [2 favorites]


Oh, and disability I can give you more specific numbers:

Basic needs: 607.00
Shelter: 479.00

For a grand total of 1086.00

After I've paid my rent and my cellphone bill I have $90 to live on for the month. That's food, transportation, bills (hahahaha, oh god my Hydro bill...) The only places cheaper to live (it would be bad for my mental health, and theirs, for me to have roommates) are so far the fuck away from anything downtown that I'd be even more of a hermit than I am.

To say nothing of the utterly dehumanizing process that is getting ODSP in the first place. If I want to talk to my worker, can't do it on the phone. I have to go in person. And I have to meet my worker in a tiny little room with a desk three feet wide that spans from wall to wall and is, I strongly suspect, bolted down.

The welfare system, in both countries, is designed to punish you for being poor and/or disabled. It is designed to make you feel worthless. Less than human. An animal scrounging for scraps.

That there are companies that rely on this dignity-shredding, dehumanizing, painful process just so they can pay their employees less makes my blood boil.

Or, rather, it would if I had any leftover energy to deal with anything.
posted by feckless fecal fear mongering at 4:02 PM on April 7 [10 favorites]


Here's some people who've crunched the numbers a little more:

Why Wal-Mart can afford to give its workers a 50% raise

Wal-Mart could give every US employee a $5000 raise

I recently went to see a talk given by Lynn Stout, who wrote The Shareholder Value Myth. The book's thesis was very interesting in itself, but an idea she floated that I hadn't heard before and liked was to cap CEO pay at 100 times the minimum wage.

I'm just saying that increasing prices wouldn't help Walmart's bottom line at all. They would have to take the money from somewhere else.

Idea: maybe they could cut the money that the execs and the Waltons take home each year? Wal-Mart makes $15 billion in pure profit each year. I have a very hard time believing that the only choices they face if they raise employee pay is significantly jacking up prices and/or killing the company.

And also, this seems like a reasonable critique.

It's a critique, but I don't agree that it's reasonable. It really just sounds like a rehash of the old libertarian cry of why should the job-creators be the ones to suffer?? My thought on this is that companies like Wal-Mart (and others) benefit in innumerable, non-quantifiable ways from operating in one of the most highly-functioning societies in the world. They benefit from good infrastructure systems, good safety support services, a relatively healthy and educated workforce and have as their market millions of people who also benefit from all of this and as a result have tons of disposable income (in aggregate) that can be spent at Wal-Mart. I think, instead of asking why the businesses have to be responsible to bring people to a certain standard of living, we could just as easily ask- why should the business owners be the only beneficiaries (and by an increasingly large margin) of such a highly-functioning society?

Here's a better roundup of commentary on increasing the minimum wage (both pro and con).
posted by triggerfinger at 4:55 PM on April 7 [10 favorites]


From Walmart's income statement I see that their margins are just about 3.7%. Walmart's ability to pass on the costs to customers is unclear. Some of the 1.4% increase would come from the profit margin. Cutting their profit margin from 3.7% to 2.3% would put them under a lot of financial pressure. It might even kill the company.

Companies that cannot afford to pay their workers a living wage don't deserve to survive. Their survival makes it harder for those companies that do pay.

Companies don't exist in a vacuum. If Walmart went out of business, it would open up a huge niche for other companies to move in and fill, companies that would have less problem paying workers something they could actually live on. Life would go on, in the long run the only people really harmed would be Walmart stockholders.

Pricing is one of those insanely complicated parts of the retail industry that can't really be easily explained in a comment. At a basic level the assumption that the entire increase I cost could be passed onto the consumer is flawed. Think about it this way. If Walmart could charge a penny more on a box of Mac and Cheese why don't they and keep the money for themselves?

They do. I'm no economist, but I can easily see that what Walmart pricing people do is seek to find a solution to the problem of sales vs. costs that gives the company maximum value. There are many variables to that formula, many ways to cut costs and increase revenue. If they were forced to incur greater cost, they would have to shift other things. I have no doubt a company with the resources of fucking Walmart couldn't find a way to make it work, if it were forced to. The thing is, no one is forcing them to.
posted by JHarris at 7:15 PM on April 7 [9 favorites]


My only thought is: if Walmart actually paid its employees a Living Wage, they would most likely do a lot LESS of their shopping at Walmart. That may be what Walmart is TRULY afraid of.
posted by oneswellfoop at 7:54 PM on April 7 [3 favorites]


by framing food stamps as something that benefits Wal-Mart and not poor people the likely result is to reduce the status of food stamps, not force changes on Wal-Mart.

For the record, this was not at all my intent: Food Stamps are critical to the survival of too many people I know (and very possibly myself before too long as well), to be speaking ill of the program. I tried not to editorialize the post too much, but considering the topic, there wasn't much room for anything other than Walmart=bad.

But in my personal experience, this is a fairly common practice. When I worked for Time Warner Cable, about half my department, and these people were highly technical full time employees, who were probably paid better than almost anyone else in phone support, and they were on some sort of food support program to survive.

That's what really rankles me; these are companies with billion dollar profits, and they (at least TWC was in the leadership meetings) was well aware that they weren't paying a living wage, and viewed the government programs as a perfectly reasonable solution to them underpaying their staff.

It just pissed me off that they accepted, and so did we by staying there, that taxpayers subsidizing the corporate office underpaying their Milwaukee Metro office, was both okay and unremarkable.

posted by quin at 8:05 PM on April 7


Walmart...It might even kill the company.

If there were anything that would take Walmart down, I'd be willing to climb up on its foul substance and finish beating it to death with a monkey wrench.
posted by BlueHorse at 9:06 PM on April 7 [1 favorite]


The way food stamp benefits are currently computed, every $1 increase in monthly income causes you to lose $0.30 in monthly food stamp benefits until you reach the cutoff point and lose benefits altogether. This means food stamp recipients face a marginal tax rate of 30 percent! That is not good for anyone, and so we should just get rid of the means-testing altogether, which a universal food stamp program would do.

It makes sense to say this in a situation where universal food stamps are on the table, but in a world where they're not (that is, the US), it's actually by far and away the best way to do this.

See, there's basically three ways to handle this aspect of benefits.

First, the government can take away benefits as soon as your income rises above a certain cutoff point. This is stupid and counter-productive because it disincentivizes increasing your income past the cutoff. If you're going to lose all your benefits once your income hits the cutoff, only a really well-paying job is going to tempt you past the cutoff, a job that probably is not open to you.

The second way to do this is to decrease benefits by a dollar for every dollar the you past the cutoff. This also disincentivizes increasing your income, because it basically requires you to work for what you otherwise would not have to work for. And that's not in any way saying that poor people are lazy- that's saying that it would be completely irrational for a person to volunteer for more work in exchange for what they're already receiving. The economics of it don't work.

The best way (and again, that's in situations, like the real world, where the best solution of the four, universal food stamps, are off the table) is to reduce benefits by part of a dollar for every dollar you make. This way making better wages is always to your benefit, and the cutoff point is no longer incentivizing your having lower wages.

It's not perfect, but it's something we've come to after long experience with the other ways of going about things.
posted by Pope Guilty at 5:44 AM on April 8 [2 favorites]


maxwelton: To bring this back to walmart, their employees are also their customer base. I would suspect if you raised the wages to "living wages" a good huge percentage of that money would be spent right in the store again.

EmpressCallipygos: Holy shit, that makes it sound like Walmart is a company store.

Well, when you're the cheapest store in town and employees are making less than living wages, and there's a discount card for Walmart employees and their spouses to buy Walmart goods, it's pretty easy to keep all that money flowing back in.


oneswellfoop: My only thought is: if Walmart actually paid its employees a Living Wage, they would most likely do a lot LESS of their shopping at Walmart. That may be what Walmart is TRULY afraid of.

I don't think they'd shop elsewhere if Walmart is still the cheapest place in town.

From the video, a cheap box of mac'n'cheese costs $0.68, and if Walmart's minimum wage was bumped up to a living wage, that box of mac'n'cheese would now cost $0.69. The sky did not fall, and the cost to buyers did not skyrocket. Also, this would save the U.S. Government millions each year in the costs of foodstamps for the Walmart employees. In other words, making minimum wage a living wage would save the government money and have a minimal impact on companies that most abuse the current system.

See also:
The Magical World Where McDonald's Pays $15 an Hour? It's Australia



BlerpityBloop: Their absence from our economy would take a decade to sort out properly. Perhaps it would be for the better eventually, but that decade would suck.

Walmart doesn't need to disappear, we just need to realize how much "saving" money is costing everyone, and raise the minimum wage accordingly.

Screw the jerks who say "minimum wage is supposed to be entry-level wage," unless they propose some way to ensure minimum wage is only given to teen-agers in their first jobs, and not applied to a broad swath of people who are well beyond their teen-age years.
posted by filthy light thief at 7:39 AM on April 8 [1 favorite]


I don't intend to defend Walmart at all, because I don't like their business practices. But when I was in college, looking for my first job, in ~2000, most other retail stores in my area were offering minimum wage, $5.15 at the time, or little better. Walmart started me out at $6.75 as a cashier and I got a quarter raise after 90 days. Perhaps not a living wage even back then, but it's just strange to me that it was the highest-paying retail store in my area.
posted by IndigoRain at 8:42 AM on April 8


It's almost like they used predatory business tactics to get a stranglehold in the market and then put the screws to everyone as soon as their competitors were crushed.
posted by entropicamericana at 9:03 AM on April 8 [6 favorites]


It's amazing to see people struggle to find way to defend Wal-Mart here.
posted by JHarris at 4:04 PM on April 9


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