by Gwen Moritz
Posted 11/25/2013 12:00 am
Updated 8 months ago
As a rule, I don’t like shopping at Walmart stores. I do it sometimes — Quicken tells me I’ve spent a little bit more than $100 with the Bentonville retailer so far this year, but the Christmas season is likely to up that total considerably. So it’s not that I boycott the company; I just don’t like feeling like a rat in a maze.
One need not be a fan of Walmart — or its parent company, the hyphenated Wal-Mart Stores Inc. — to feel a little sorry for its PR department. Just days after the company announced promotions (with actual raises) for 25,000 employees, a photo of a food collection for employees of a supercenter in Ohio went viral online. A sign attached to a bin in an employee-only area of the store read, “Please donate food items so associates in need can enjoy Thanksgiving dinner.”
Critics, and they are legion, who considered 25,000 promotions to be an unimpressive, cynical gesture leapt on this single sign as evidence that Wal-Mart employees (whom the company calls “associates”) are so underpaid as to need charity at Thanksgiving. And, of course, retail is not a high-wage industry, and Wal-Mart, from its earliest days, has had a history of trying to keep wages as low as possible.
Wal-Mart has successfully avoided unionization of its workers (except in China), and you can be certain that union interests are behind much of the successful effort to portray Wal-Mart as the embodiment of corporate greed. After all, the Walton family’s net worth is equal to that of the bottom 40 percent of Americans, therefore Wal-Mart can afford to pay a living wage and better benefits. Wal-Mart had $17 billion in profit last year and should surely pay its employees at least as well as Costco, where they average $19 an hour.
Reality, of course, is ever so much more nuanced and complex.
On the specific issue of a food drive in Canton, Ohio, the Cleveland Plain Dealer actually interviewed a beneficiary and reported thusly:
“Erica Reed, an associate at the Canton store, … said food drives have been going on at the store for a few years, so she questions why they are becoming an issue now. Reed said past food drives helped her cope with her own problems, not caused by low wages but because of losing $500 a month in child support when the father of her four children went to jail.”
Imagine that. Some Wal-Mart employees have financial problems completely unrelated to where they work. (Spreaders of the viral photo rarely note that other Wal-Mart employees must have enough excess income to be charitable to their co-workers.)
But that’s microeconomics. The macro question of whether Wal-Mart should pay employees more is only tangentially related to the Walton stock value — employees aren’t paid in stock, and the stock value is dependent on the profitability of the company. What’s more, the value of the stock would plummet if the Waltons suddenly decided to sell it all.
And while $17 billion is a big, big number, it’s not a big profit for a company with $469 billion in revenue. About 3.6 percent. I can tell you that my employer would not be satisfied with a margin that thin. (Apple Inc.’s margin bounces around 40 percent.)
Sometimes I wonder if Wal-Mart’s critics know that a profit is a good thing.
But let’s say Wal-Mart’s board of directors suddenly decided to be happy with half that profit margin — something like the 1.9 percent margin that Costco posted last year. That would certainly solve some of the Walton wealth problem, especially if it also reduced the dividend, but how much would $8 billion of foregone profit be when divvied up among Wal-Mart’s 2.2 million associates worldwide? About $300 a month, less than $2 more per hour for a full-time worker. A nice raise, no doubt, especially for the lowest-end workers and those in developing countries. But I daresay it wouldn’t change the fact that some Wal-Mart workers would still need help making ends meet when a dad goes to jail.
Nor would it put them at the same income level as Costco workers. To get there, Wal-Mart would need to lay off two-thirds of its employees, because Costco brings in about three times as much revenue per employee as Wal-Mart. (Any comparison between Wal-Mart and Costco is ridiculous anyway; they are simply two very different business models.)
Ultimately, the question of whether Wal-Mart workers should be paid more — as well as fast-food workers and everyone else at or near the minimum-wage level — comes down to this: Should the rest of us pay more for the stuff we buy? And as simple as that question sounds, it too is fraught with macroeconomic complications that defy simple answers or viral photos.
Gwen Moritz is editor of Arkansas Business. Email her at GMoritz@ABPG.com.