Current Issue
This Month's Print Issue

Follow Fast Company

We’ll come to you.

4 minute read

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.

The Fast Company Innovation Festival