This is the second of five parts of my catch-all information dump about Walmart. Nothing is presented in order. There is no real daily theme because there is too much information.
Walmart is notorious for paying its workers barely enough to survive. Currently McDonalds is just as bad, perhaps even nastier. It is as though large corporations are involved in a war against their employees. There is something extremely wrong in a world where corporations like Walmart, who are bleeding us dry, are allowed to get away with what they do. They cost small communities a fortune, each year, while they try to make up for the low wages Walmart pays its employees.
“...Walmart is part of the problem. From its origins to today, the company remains intent on paying low wages. It’s part of the business model. Walmart notes that it employs 1.4 million people in the U.S. The company says the average hourly wage for its associates is about $13 an hour. You can find data on average wage for associates by state here.
Walmart doesn’t really pay its workers well enough so that they can afford to go spend more aggressively. And demographically speaking, many of Walmart’s shoppers look a lot like its associates – i.e. the working poor. Meanwhile, the company’s policies have a ripple effect. Walmart accounts for about 1.23 percent of all private sector jobs in the U.S., and about 9.3 percent of all retail and trade service workers in the country. In many areas, Walmart is a very significant employer. Thanks to its size, Walmart often sets the standard for retail and service wages in the areas in which it operates. Walmart’s wages are a benchmark off of which other employers set their own wages.
There’s a circular logic to this. Walmart has to clamp down on labor costs, because other costs are rising and sales in the U.S. aren’t really growing much. The more its sales stagnate, the more it has to hold the line on labor costs in order to keep boosting profits. But its success at keeping wages low, or at operating while letting jobs go unfilled, hurts the ability of its employees – and many of those in the direct area and in the service industry – to earn and spend more. And that’s bad for Walmart’s sales.
Imagine a thought experiment, in which Walmart agreed to pay marginally higher wages across the board. Not double. Maybe just five percent more for wages – $13.65 an hour instead of $13.00 an hour; $63,000 for a manager, instead of $60,000. Sure, Walmart’s profits short-term profits might take a hit. Or maybe not. It could find other ways to wring costs of its operations, like using less packaging or electricity. Or maybe it would use some of the $6 billion in cash it pays out each year in dividends to fund higher wages….”
“...As evidence, Ton offers up the examples of higher wage retailers including QuikTrip, Mercadona, Trader Joe’s and Costco. These retailers engage in what Ton calls the “virtuous cycle” of investment in high quality labor, better operational execution, and higher sales and profits.35 According to Ton, these retailers offer higher pay, more opportunities for advancement, and more accommodating work scheduling. In turn, they enjoy lower rates of employee turnover and higher rates of customer satisfaction. Full-time employee turnover at Trader Joe’s, Mercadona, and Costco is just 10 percent, 4 percent, and 5.5 percent respectively.
The University of Michigan’s American Customer Satisfaction Index consistently ranks the level of customer satisfaction at Costco higher than at Wal-Mart’s Sam’s Club.
Costco employees earn approximately 40 percent more than employees at its chief competitor: Wal-Mart’s Sam’s Club.38 According to Costco, its average employee’s wage is $21.96 per hour. More than 88 percent of Costco employees in the U.S. are eligible for employer-provided benefits and 98 percent of these eligible employees actually become enrollees.
The employee compensation disparities between Wal-Mart and Costco apparently have not hindered Costco’s ability to compete. In Costco’s most recent quarterly earnings report, the retailer reported an 8 percent growth rate in year-on- year sales and a 5 percent increase in same store sales. In addition, Costco membership fees increased from $459 million in the corresponding quarter of last year to $528 million this year….”
Remarks by Walmart’s Bill Simon, President & CEO, Walmart U.S. at the National Retail Federation 102nd Annual Convention & Expo, January 15, 2013. The speech was jokingly entitled “A Job to Do: Retail’s Role in an American Renewal.”
“...But what about the return to investors? Walmart is showing a dividend report of 1.04% while Costco is sporting 1.1%. Clearly the methodology behind the Wall Street approach of Walmart does not work. Yet, there remain those who would insist upon further reducing wages, who believe that, just because their policies have never worked, that does not mean they shouldn’t do more damage to the economy in the process of trying to disprove that fact. Even conservative studies have come to the conclusion that a dramatic increase in wages is the correct policy for the future. While Costco has had its sales continue growing, Walmart’s sales have been flat….”
“...Wal-Mart Stores (WMT) is the country’s biggest private employer. Its low wages have incited labor protests and congressional criticism, and have created a cottage industry of public policy research. The company has responded with facts and figures that sometimes raise as many questions as they answer.
Now Wal-Mart has provided some new and useful information: More than 475,000 of its 1 million hourly store employees earn at least $25,000 a year for full-time work. This figure comes from Bill Simon, the president and chief executive officer of Walmart U.S., who presented (PDF) it at Goldman Sachs’s (GS) Global Retailing Conference last month. The statistic, which was listed under the heading “Great job opportunities,” means as many as 525,000 full-time hourly employees earn less than $25,000 a year….”
The numbers are huge. They are staggering. In Massachusetts one quarter of all Walmart employees are on some sort of public assistance. Why isn’t the corporation held responsible for this. If they’re not willing to pay a living wage to their employees, they should be required to pay for the public assistance provided for them.
Part Three continues tomorrow.