2013-07-12

Co.Exist

4 Bogus Claims About Why Walmart Can't Pay A Living Wage

The retail giant says that a prospective law raising the minimum wage in D.C. will force the company to drastically scale back its expansion plans in the area. Here’s why those economic arguments don’t hold up.

On July 9, Walmart bared its teeth against the living wage. Alex Barron, a Washington D.C. regional general manager took to the Washington Post, stating that Walmart would not pursue three planned D.C. stores if the city council’s living wage legislation—which would require major retailers to pay workers at least $12.50 per hour, instead of the current $8.25—passed. The Post then reported that a team of Walmart representatives and lobbyists presented the ultimatum to the council itself. The law passed anyway, though it’s unclear if the mayor will sign it.

"We have gone to great lengths to have thoughtful conversations with council members about why the LRAA would result in fewer jobs, higher prices and fewer total retail options," Barron wrote.

At the center of Walmart’s case are arguments that have been made pretty much any time any city tries to raise the wage standard for its workers: that higher wages are anti-business and negatively impact consumers. But really, much of Walmart’s historical fight against fair pay has been debunked. Below are four arguments against the living wage that just don’t make sense.

Higher wages mean fewer jobs

"Economic research has totally invalidated this," says Jack Temple, policy analyst at the National Employment Law Project. He points to how raising the minimum wage has impacted businesses in San Francisco, Santa Fe, and Washington D.C. In 2011, the Center for Economic Policy Research put out a finding that in contrast to claims that higher wages would mean fewer jobs, a higher minimum wage in these cities actually had next to no effect on employment at all—and possibly even a slightly positive one.

Image: Double Take, Craig Dugas via Flickr

Part of the reason why higher wages don’t mean fewer jobs is because higher wages offset high turnover, Temple says. Low-wage big box retailers like Walmart have high rates of turnover, which means they often have to go through the expensive time-wasting process of hiring new people. But when you pay people more, they tend to stick around, and that gets rid of costs in new hires and absenteeism. "Costco, for example, has strong financial performance—[higher wages are] part of their business model because of that turnover. Trader Joe’s is another example," Temple says.

Higher wages mean higher prices for consumers

In 2011, a Berkeley Center for Labor Research and Education study posed a hypothetical scenario: If Walmart were to raise its minimum wages to $12 an hour across the board, how would that affect workers and consumers? They found that, on average, the cost would be incredibly small—$0.46 per shopping trip, or $12.49 a year for the average shopper who spends more than a $1,000 there annually. Meanwhile, poor and low-income workers would make an additional $1,670 to $6,500 per employee in the family. "We found that price increases would be very small and spread out over large numbers of people," Ken Jacobs, one of the lead authors on the study and chair of the Center tells Co.Exist.

On the other side of the equation, a recent report prepared by Democratic legislators on the U.S. House Committee on Education and the Workforce showed that Walmart’s low wages actually cost taxpayers in terms of public benefit programs. As an example, legislators cited a Walmart supercenter in Wisconsin that cost taxpayers least $904,542 a year in Medicaid for employees who couldn’t afford health care.

So do higher wages mean higher prices for consumers? Yes, but a negligible amount, and that’s not taking into the externalized cost of low wages on the wider population.

Higher wages would raise prices and hurt low-income families and communities

"The notion that a higher wage is worse for business is absolutely untrue," says Amisha Patel, executive director of Chicago’s Grassroots Collaborative. In 2006, when the city tried passing a living wage for its major retailers, the Collaborative, a coalition of 11 community organizations, rallied for the cause in low-income neighborhoods across the city. "[Walmart] is playing on people’s fears in a climate where they’re really terrified and want to believe that any job is better than no job," she said.

Authors in the Berkeley study mentioned above also found that Walmart entering urban spaces without any kind of fair labor guarantees would be a "mixed blessing." "There is strong evidence that jobs created by Walmart in metropolitan areas pay less and are less likely to offer benefits than those they replace," the authors noted. The Berkeley researchers also found that Walmart workers were more likely to be poor than its shoppers, and that increasing wages would have a net positive impact.

If Washington, D.C. raises its living wage, Walmart will be forced to compete somewhere else

"Walmart and people who make a similar argument say business will leave and prefer to go to Maryland or Virginia, where wage requirements wouldn’t be as high," Temple says. "[But] when you have service-based jobs like this, you can’t move across state lines because you’d be giving up your consumer base. It’s not a question of competitiveness with fellow cities—Walmart was interested in moving to D.C. in the first place because it wanted contact with that base."

Jacobs, one of the authors of the Berkeley study, also notes out that Walmart’s decision to keep its wages low carries another kind of opportunity cost by effectively keeping its business out of cities. He also doesn’t think Walmart’s threat to lock itself out of D.C. is truly about just D.C., but instead echoes the company’s fear of living wage initiatives across the country. "I think from Walmart’s perspective they’re not thinking about this as a D.C. issue. Could they compete in D.C. with higher wages? Absolutely. They’re looking at if Chicago tries again, if New York tries, and all these other areas. I think from a business standpoint, Walmart would be better off if it came to some kind of agreement with these cities," he said.

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32 Comments

  • Tigerclaw1

    Stupid people with websites.... You just say whatever makes you feel cathartic about being unloved as a child (and now as a big child)...

  • mstimson

    Well, if all this was true, then another big box store would come in and do just what Walmart is doing but pay their employees a living wage.  Heck, if labor costs don't have any effect, or even have a "slightly positive one" then Walmart would be replaced by the better retailer.  So, instead of having the government force these changes, just let capitalism do its job.  All you people, who believe this nonsense, why don't you just Co.operate and start your own Co.owned big box store and pay your people $15.00 or more per hour and reap the supposed benefits that you spoke about in this article and put Walmart out of business. (of course, Walmart is so dumb that they don't want to be more profitable, they just want to be mean to people and keep their wages low.)  What this really is about are Unions who are trying to destroy Walmart and force unionized labor.

  • sandrajeanford

    Destroy Walmart?  Hyperbole much?  What's wrong with a company paying a living wage?  The Walton family's wealth is equal to the bottom 40% of ALL Americans' wealth.  They put greed to shame.  Why can't they enjoy their obscene wealth and have their stores unionized?

  • mhensgen

    What a leftist "almost rant"...  

    You say "living wage"....hmmm, what happened to "minimum wage"? It's a Leftist talking point term. Do you know anyone who tries to LIVE solely on this "living wage"?

    And referencing anything from the National Employment Law Project means you are either lazy or economically unknowledgeable.

    I see a continuing leftward tilt in the FC editorial content, and realize there is still much to recommend its reading, but even with its wide-eyed and hopeful primary audience, wonder if there isn't a leak in audience coming.

    Mike Hensgen

  • DJB

    Keep in mind, the DC law was written to only apply to "big box stores." The law is discriminatory against Wal-mart, and not equal to all employers in the District.

    In this case yes, higher wages will mean fewer jobs because Wal-Mart will abandon its expansion plan in the District thus effectively limiting the availability of potential jobs.

    And they are doing something about it. They've said that if this becomes law they will cut their expansion plans. End of story. The city council has created a lose-lose situation for all parties involved. But, that is not surprising for the DC city council. Remember folks, we just had to vote for a law that said that city council members could be kicked out of office for having a felony record! Let's not defend this corrupt city, please.

  • sandrajeanford

    Those jobs don't exist so no, it doesn't mean fewer jobs - and maybe, just maybe cities and states are getting tired of the costs imposed upon them in foodstamps, medicaid, Section 8 Housing, and Earned Income Tax Credits by one of the largest and wealthiest corporations in the world.

    Sure, all employers should be required to pay the same wage but you gotta start somewhere and if people see Walmart absorb the wage with no ill-effects, maybe it will go over much better with the rest of companies.

  • Mrwassman

    "Wal-Mart takes 3 local jobs for every 2 they create." If this statistic is true than you may want to reconsider which is the real lose-lose situation.  

  • Grazel

    Of course Walmart could also cover the costs of increased wages by lowering their CEO's annual salary by 1% and have money left over. Raising the minimum wage doesn't hurt the company, it hurts the executives who are making 100x or more what the average employee of their company is making.

  • jagiela

    Why are members of unions such bad workers that they don't qualify for the living wage?

    Why does the City Council want to starve union workers?

    Why can't unions deliver anything for their members?

    Why can't the poor shop at walmart and get cheap goods?

    Why do you hate the poor?

    Inquiring minds would like to kow

  • LAX_2015

    If Walmart doesn't like the law then Walmart doesn't have to live with it. Local government regulates all kinds of things for businesses operating within its jurisdictions. Go dine out at a restaurant. How it prepares food, holds food, serves food, etc. is all regulated. Zoning? That's one way local government decides what kind of businesses it wants in its own backyard.

    Local governments are made up of elected officials representing the will and the wishes of their constituents. So, if the people of Washington, D.C. are behind this law then why is it bad for them to say what kind of businesses they want in their community? Why is it bad for them to tell Walmart that if Walmart wants to be a part of the community then this is what it will take?

    Walmart isn't going to build roads, widen streets, install traffic signals, build out water and power to supply the new stores. Washington, D.C. will incur some costs in opening the new stores so why shouldn't D.C. have a voice as a partner in this?

    And, let's not forget, Walmart can always vote with its feet. Don't like the laws in D.C.? Then don't go to D.C. If this proves detrimental to D.C.'s economy then the people of D.C. can vote out their elected officials and vote in new ones that repeal the law.

  • Granddan1

    If the rate of wages are $12 plus for the below average employee what would Walmart have to pay for average and above average employees? Has the writer of the article ever run a business or have stock holders holding them accountable for their results. Is Berkeley close to San Fran where you can rent an apartment for $3,000 a month for 360 sq feet?

    I don't object to more more money for employees. The objective in running a business is keep expenses low, pay good employees in incentives and grow the economy.

  • bảo.thiên.ngô

    I think the argument is starting to fall into who is responsible for helping the employees make a decent living, businesses or taxpayer-funded government programs?

  • Djjerry97

    Walmart should Annie Up its Min.wage like the rest of the Employer's if it's the LAW then abide by it Wal Mart don't run this Country,just the truth that they care about Workers or Customer's.only the Profits! Lower prices and lower wages every day!

  • NormallyCharles

    You haven't been paying attention, have you.  This higher minimum wage will only apply to Wal Mart.

  • Seoulite

    One of the main reasons our economy is still on the slow track to recovery is that wages are not growing in response to the increase in productivity of our workers.  US workers are some of the most productive in the world and corporations are sitting on historically large amounts of cash created by that superior productivity.  Meanwhile, they are not re-investing that money to expand capacity because they claim there is no demand for their products.  Well, if the consumer has no cash leftover from paying bills and buying food for the family...the necessities, who's going buy all those nice-to-have things that create demand and cause the growth that fires up the economy?
      Walmart is being smart and protecting their interests in the short term, but if they pay a decent wage, their employees will be able to buy more not only in Walmart but throughout the community, which spurs economic growth from second and third order demand.  And that, I suggest would benefit Walmart in the long term.
      As far as the threat that they won't build more stores in the DC area, that's just plain BS.  If there's a business opportunity and they can make even one dollar in profit, then there's a case to put in the store. If they don't Target or K-Mart will do it and they'll lose that business opportunity.

  • Marija Peci

    I think better way to say it: Walmart prefers to invest not into employment, but into other bussiness expanding opportunities, like building new stores. I don't know if their tactic is wrong or good, but from what you've said, perhaps it's true that for these companies, the income has risen to whole new levels, but employees are still living on low wages. Moreover, other companies, who pay higher wages didn't encouter such negative impact on their bussiness as Walmart says it would, right?