How Could Companies Like Wal-Mart EVER Pay What People Call A "Living Wage"?

A common theme I hear is that the U.S. should increase the minimum wage to the range of 12 dollars and hour.

Could a company like Wal-Mart ever afford to pay wages on that scale? Keeping in mind that even 12 dollars an hour is not a living wage for the smallest of families.

By my calculations based on the information from the following websites:

http://www.pbs.org/wgbh/pages/frontline/shows/walmart/secrets/stats.html

http://www.statisticbrain.com/wal-mart-company-statistics/



Wal-Mart had 2012 profits of 18.3 billion dollars give or take.

To raise their beginning employees pay to 12 dollars an hour (even allowing for part time employees) and the subsequent bumps in pay down the line would cost Wal-Mart a minimum of 6 billion dollars minimum.

It is reasonable for a company to cut its profits by fully ONE THIRD?

Yes.

They'll make it up in increased sales, as their own employees will be able to buy more merchandise.

Is there a basis for that calculation? Wouldn't employees have to purchase more than 60 billion in merchandise extra from Wal-Mart in order that the profit margins from the merchandise make up for the extra payroll expenses?

How is it remotely possible that Wal-Mart employees are going to take their extra 6 billion dollars in pay and purchase even as little as 10 billion dollars in extra merchandise?

I didn't say they'd make it up entirely.


The answer is still yes.

Walmart could begin by asking Costco and the dozens of other retail companies which ALREADY pay their workers a living wage with good benefits. Some how all of those dozens of companies, in the exact same field, manage to do it all while keeping prices virtually the same and having better customer service.

I've looked at the numbers and I do not see how increased sales to their own employees would come remotely close to making up for the increased payroll expenses.

At best Wal-Mart is looking at a multi billion dollar ANNUAL reduction in profits. Now they could raise all their prices across the board to make up for those increased payroll costs, but then that is simply transferring money from Wal-Mart customers who do not work for them (many low income) to the employees there.

And once again, 12 dollars an hour is still not a living wage. I supposed if you have two household members working full time at Wal-Mart that might be a living wage for a family but even then it isn't really much extra.

there would be a marginal gain from the employee spending, since we get a discount and are more inclined to shop where we work, but not that much.

More would be gained by rebuilding their reputation as a quality company by having those employees on the clock enough to serve customers, stock freight, and check out purchases. THAT is what builds foot traffic and sales.

that said, it's not at all necessary to START employees at $12 an hour. it's perfectly reasonable to do something more like this:

Starting - $8
90 days - $8.50
6 months - $9
1 year - $10
2 years - $11
3 years - $12
4 years -- $13
5 years - $15
10 years - $18


the high turnover rate in retail ensures that MOST of your employees will make $10 or less per hour, while the high quality people that you invest in - and who invest in you - will be suitably compensated.


and THAT said - when the ownership of your company makes up 40% of the top 10 richest Americans, while the taxpayer like you subsidies my wages - damn skippy they can be expected to take a dramatic hit to their profit margin.

http://www.bloomberg.com/news/2013-08-27/why-walmart-will-never-pay-like-costco.html

I don't really see it as being possible without raising prices in return. I've worked in retail management for several years, granted this was at least 14 years ago but I don't think much has changed. The one biggest cost we were always having to deal with and meet was always labor. We were constantly pressured to cut down on labor costs that often to meet the costs, we would have to watch labor costs almost every hour and send people on breaks or home to meet labor costs. Every other cost couldn't be adjusted for since those were already set costs that wouldn't change if were busy or slow.

A "living wage"? No. but increase my income by 50% per hour and I'm gonna be a lot better off than i am now. And you will too, as a part of the aggregate of taxpayers. If my income goes up by ~$650 a month, the hit against the taxpayer goes down something like $250-$300 a month. As a conservative, how can you not be enthusiastic about billionaires compensating my justly for actual work rather than you and your fellow taxpayers subsidizing my existence so that they don't have to?


Ultimately, if you are a champion of the free market, then you should want Walmart (and that's how the spell it now, and have for the last couple of years - no dash) and McDonalds and the rest to pay fair market rates for labor, and let the rest of the market adjust accordingly. when the government artificially subsidies the cost of labor, the pay rate is not a free market rate.

From the afore mentioned link:

What do you see? Costco has a tiny number of SKUs in a huge store -- and consequently, has half as many employees per square foot of store. Their model is less labor intensive, which is to say, it has higher labor productivity. Which makes it unsurprising that they pay their employees more.
But what about QuikTrip and Trader Joe’s? I’m going to leave QuikTrip out of it, for two reasons: first, because they’re a private company without that much data, and second, because I’m not so sure about that statistic. QuikTrip’s website indicates a starting salary for a part-time clerk in Atlanta of $8.50 an hour, which is not all that different from what Wal-Mart pays its workforce. That $40,000 figure is for an assistant manager, and seems to include mandatory overtime. To this let’s add a third reason: QuikTrip is a convenience store, a business that bears minimal resemblance to a department store, the category into which Wal-Mart falls. I mean, yes, you can buy candy at both places, but you can also buy a candy bar at the movie theater, and I still wouldn’t head to my local Wal-Mart for a 3:30 p.m. showing of "The Butler."
Trader Joe’s is also private, but we do know some stuff about it, like its revenue per-square foot (about $1,750, or 75 percent higher than Wal-Mart’s), the number of SKUs it carries (about 4,000, or the same as Costco, with 80 percent of its products being private label Trader Joe’s brand), and its demographics (college-educated, affluent, and older). “Within a 15–minute driving radius of a potential site,” one expert told a forlorn Savannah journalist, “there must be at least 36,000 people with four–year college degrees who have a median age of 44 and earn a combined household income of $64K a year.” Costco is similar, but with an even higher household income -- the average Costco household makes more than $80,000 a year.
In other words, Trader Joe’s and Costco are the specialty grocer and warehouse club for an affluent, educated college demographic. They woo this crowd with a stripped-down array of high quality stock-keeping units, and high-quality customer service. The high wages produce the high levels of customer service, and the small number of products are what allow them to pay the high wages. Fewer products to handle (and restock) lowers the labor intensity of your operation. In the case of Trader Joe’s, it also dramatically decreases the amount of space you need for your supermarket ... which in turn is why their revenue per square foot is so high. (Costco solves this problem by leaving the stuff on pallets, so that you can be your own stockboy).
Both these strategies work in part because very few people expect to do all their shopping at Trader Joe’s, and no one expects to do all their shopping at Costco. They don’t need to be comprehensive. Supermarkets, and Wal-Mart, have to devote a lot of shelf space, and labor, to products that don’t turn over that often.
Wal-Mart’s customers expect a very broad array of goods, because they’re a department store, not a specialty retailer; lots of people rely on Wal-Mart for their regular weekly shopping. The retailer has tried to cut the number of SKUs it carries, but ended up having to put them back, because it cost them in complaints, and sales. That means more labor, and lower profits per square foot. It also means that when you ask a clerk where something is, he’s likely to have no idea, because no person could master 108,000 SKUs. Even if Wal-Mart did pay a higher wage, you wouldn’t get the kind of easy, effortless service that you do at Trader Joe’s because the business models are just too different. If your business model inherently requires a lot of low-skill labor, efficiency wages don’t necessarily make financial sense.
That’s not the only reason that the Trader Joe’s/Costco model wouldn’t work for Wal-Mart. For one thing, it’s no accident that the high-wage favorites cited by activists tend to serve the affluent; lower income households can’t afford to pay extra for top-notch service. If it really matters to you whether you pay 50 cents a loaf less for generic bread, you’re not going to go to the specialty store where the organic produce is super-cheap and the clerk gave a cookie to your kid. Every time I write about Wal-Mart (or McDonald's, or [insert store here]), several people will e-mail, or tweet, or come into the comments to say they’d be happy to pay 25 percent more for their Big Mac or their Wal-Mart goods if it means that the workers are well paid. I have taken to asking them how often they go to Wal-Mart or McDonald's. So far, no one has reported going as often as once a week; the modal answer is a sudden disappearance from the conversation. If I had to guess, I’d estimate that most of the people making such statements go to Wal-Mart or McDonald's only on road trips.
However, there are people for whom the McDonald's Dollar Menu is a bit of a splurge, and Wal-Mart’s prices mean an extra pair of shoes for the kids. Those people might theoretically favor high wages, but they do not act on those beliefs -- just witness last Thanksgiving’s union action against Wal-Mart, which featured indifferent crowds streaming past a handful of activists, most of whom did not actually work for Wal-Mart.
If you want Wal-Mart to have a labor force like Trader Joe’s and Costco, you probably want them to have a business model like Trader Joe’s and Costco -- which is to say that you want them to have a customer demographic like Trader Joe’s and Costco. Obviously if you belong to that demographic -- which is to say, if you’re a policy analyst, or a magazine writer -- then this sounds like a splendid idea. To Wal-Mart’s actual customer base, however, it might sound like “take your business somewhere else.”
This is not actually just a piece on how Wal-Mart can only pay low wages -- I don’t know how much more they could afford to pay before they started to lose customers (or the board kicked the CEO out), and neither does anyone else writing about this. I’m actually interested in the larger point: the way that things most people rarely think about -- like the number of products that a store carries -- have far-reaching effects on everything from labor, to location, to customer service and demographics. We tend to look at the most politically salient features of the stores where we shop: their size, their location, the wages that we pay. But these operations are not so simple. They are incredibly complex machines, and you can no more change one simple feature than you can

Sounds much, much more complex than "Costco good, Wal-Mart bad"

Then their profit margins are reduced.

Walmart a multi billion dollar corporation, you stupid son of a bitch.

the takeaway from that article to me?

Walmart annual profit margin: 3.5%
Costco annual profit margin: 1.7%

Strip away all the other arguments in the article, many of which are perfectly valid, and it still doesn't explain away THAT reality. Walmart's profit margin is more than DOUBLE Costco's, yet the latter is considered a highly successful business.

So take fully 1/2 of Walmart's profits, they will still have a slightly higher profit margin, and they can redirect $7.8 billion annually into higher wages and more hours for employees. Assuming even distribution that would be $3,714 per employee but of course distribution wouldn't be even.

This. /thread

At any rate the last site I referenced above has a good point. I would not doubt that literally MILLIONS of Americans utilize Wal-Mart as their one stop shopping. So paying an extra quarter for each item adds up hard and fast. While the majority of Wal-Mart critics (along with McDonalds) are occasional shoppers there at best and don't see what the big deal is paying a dollar here and there.

Which would amount to a "raise" for the average Wal-Mart full time employee of about $1.75 an hour.

Sure its better, but it is still far, far, far below any reasonable living wage. And what about the impact on stock value? Millions of Americans own Wal-Mart stock (including a huge number of their employees. If stock value is diminished that amounts to a transfer of wealth from the stockholders to the employees.

While it might seem trivial, remember that lots of Wal-Mart employees that choose to stay for a long time do so in part thanks to the stock value they build up over time.

Why Wal-Mart can afford to give its workers a 50% raise
The world's largest retailer is under fire for its low wages. But the numbers show it can easily pay more without tanking its stock.

Ah, so Dayton doesn't care about Wal-Mart employees making a more liveable wage, but at least he's deeply concerned about how much the shareholders are earning.


Shareholders apparently deserve that money more than the people that actually work at Wal-Mart.

Because the Queen sent the Soldiers out of the hive to... oh, right. Wal-Mart has employees. Ant colonies have workers.

You know what, though? Here's one for ya:

Wal-Mart employees are free to not be Wal-Mart employees.

Dayton's bible is missing the page with Matthew 19:24.

A "living wage". What a joke. You know what a "living wage" is? $3.29 per hour. It is possible to live on $3.29 an hour in the United States.

That is provided, of course, that you don't fuck like a stray dog out of high school and end up with 63 chiddrenz by fo uh figh baybeh-mama that you have to feed on an eighth grade ejmucayshium.

The fact is that in life, and particularly in the workplace, you get what you earn. You don't get to demand more; all you get is the opportunity to raise a stink until you get your greedy, entitled ass thrown the fuck out on the street and replaced.

Funny Stuff Castle. Just a reminder: The Improv (8162 Melrose Blvd., L.A., [323] 651-2583), hosts an open mike night beginning at 5 p.m. Tuesdays, with sign-ups beginning at 4:15 p.m. (If Bud is in, tell 'im Chardman sent you.)

you can get a roof over your head and basic nutritional requirements for under 500/month?

Absolutely, you can.

Again - you can't assume even distribution.

GOOD!!!!!

if that's on their mind, they can always plow their extra pay back into the stock plan.

I actually read your link. The ultimate conclusion was that if Wal-Mart gave its employees a huge raise that their stock MIGHT NOT TANK (emphasis mine).

Seems to me that a "might not" is a thin reed to hang a major corporate decision on.

And I assume you realize that in the U.S. corporate boards of directors are LEGALLY OBLIGATED to make their decisions in the best interests of the stockholders IIRC.

Why is wealth redistribution EVER considered a good thing? Ultimately it is taking from those who have and give it to those who don't.

No.

Unless by "roof" you mean the underside of a bridge.

I live in one of the lowest cost-of-living areas in the country, and the absolute bottom line for rent is $300 a month. You might shave a little off that if you share the rent with someone equally destitute.

so say you manage to get the "roof" for $250 for your share...your share of the electric bill is also going to be $50-75 and then there's water, maybe gas. You put gas in your vehicle to get to the place where you earn the money to pay the rent (to say nothing of buying the groceries) and you can easily spend $100 a month (my gas costs me ~$35 a week just to go to work and come home) so you are easily at $450 of that $500 gone before you eat your first bite of food.

In this case, the wealth is already being "redistributed." Some folks are investing money into Wal-Mart, while others are investing their time. Why shouldn't the ones investing their time (which is far more finite than some peoples money) not be able to negotiate a slightly higher return on their investment?