TULSA, Okla. —
During the recent Thanksgiving holiday, it was a little depressing to see workers picketing Wal-Mart stores in cities around the country complaining of unfair work hours and low wages.
Wal-Mart, with 1.4 million employees, is the largest private employer in the U.S., making it a bellwether for other employers who rely on minimum and below-minimum wage employees — other retailers, restaurants, hotels/motels, and the like.
There is no mystery here as to Wal-Mart’s motive for keeping wages low — profit maximization. After all, employee compensation is a significant cost for most companies. So lower employee compensation means higher profits and more cash for stockholders.
Indeed, profit maximization is the objective for most business establishments. And that objective is being met by most of them. The Commerce Department’s Bureau of Economic Analysis reports that after-tax corporate profits have increased 271 percent since the fourth quarter of 2008. In fact, those profits have reached record highs in four of the last five years.
Meanwhile, the federal minimum hourly wage of $7.25 has not changed since 2009.
It’s no wonder, then, that minimum wage earners, especially those with children, need public assistance. And public assistance comes largely from taxpayers — you and me.
Speaking of which — a congressional report released last May provides an estimate of the dollar value of welfare programs provided to Wal-Mart’s work force. They found that a single 300-person Wal-Mart Supercenter store in Wisconsin likely costs taxpayers more than $1.7 million per year for Medicaid, food stamps, WIC (Supplemental Nutrition Program for Women, Infants and Children), and other federal aid. That comes out to about $5,800 per Wal-Mart employee — and that’s just for one store!
Now multiply Wal-Mart’s 1.4 million employees by $5,800 per worker and the total is almost $8.2 billion annually that we taxpayers are, in effect, subsidizing that company. That $5,800 also means that taxpayers add about $2.79 per hour per employee for government assistance programs, bringing the minimum up to $10.04. In other words, taxpayers provide 28 percent of benefits to employees not covered by Wal-Mart.
Of course, the minimum wage concept has had its critics since it was adopted in 1937. For example, the conservative economist Milton Friedman declared: “The consequences of minimum wage laws have been almost wholly bad. ... In my opinion there is absolutely no positive objective achieved by minimum wages.” And Ronald Reagan piped in with, “The minimum wage has caused more misery and unemployment than anything since the Great Depression.” In 2004, David Brandon, the CEO of Domino’s Pizza, announced: “From our perspective, raising the minimum wage is a ‘job killer;’” a phrase often repeated by House Speaker John Boehner and other conservatives.
But such criticism is pure hogwash. None of the fears about the dire consequences of the minimum wage have come to pass. I submit that their comments are only meant to assuage concerns of the big business contributors to political campaigns, mostly Republicans, that wages are not going up on their watch.
In point of fact, raising the minimum wage is good for business and the overall economy. Why? Because when poor workers have more money to spend, they spend it, almost entirely in the local community, on basic necessities like housing, food, clothing and transportation. When consumer demand grows, businesses thrive, earn more profits, and create more jobs. Economists call this the “multiplier effect.”
To underscore that point, a March 13 study from the Economic Policy Institute shows that a hike in the minimum wage to the Senate-proposed $10.10 by 2015 would affect 30 million workers, increase their wages by $51.5 billion and add 140,000 net new jobs to the economy.
About 100 years ago, Henry Ford increased the wages of his factory workers from the going rate of $3 per day to $5. He did so to make sure his employees could afford the Model T Fords they were producing. That sizable increase in wages promoted morale, reduced employee turnover and the associated training costs, kept labor unions at bay, and expanded the markets for Ford Motor Co., which more than offset the increase in wages.
But these days businesses with minimum or below minimum wage workers can afford the employee turnover and training costs without much sacrifice in profits. Unemployment now being what it is, hiring is not a problem. Besides, they don’t have to worry about their employees’ financial stress. We taxpayers will help to take care of that.
Now if we could just get Wal-Mart to put us on its profit-sharing plan.
HERB VAN FLEET, a former Joplin resident, lives in Tulsa, Okla. Contact him at TheAbsurdityIndex.WordPress.com.