Why Republicans should pressure Wal-Mart

By David Callahan
November 30, 2012

Some Republicans, like Bobby Jindal, the governor of Louisiana, are arguing that the GOP needs to move away from big business and become a more populist defender of the middle class. That is good advice, and one dramatic way for Jindal or other party leaders to turn over a new leaf would be to join the pressure campaign on Wal-Mart to raise wages for its 2.2 million workers – a campaign that led to protests at Wal-Mart stores nationwide on Black Friday. The protests were coordinated by a labor-backed group of Wal-Mart Associates that wants the company to pay a minimum of $13 an hour, among other demands.

Republican criticism of Wal-Mart is not as unthinkable as it might seem. While the right heaps praise on Wal-Mart for its cheap consumer goods, the company’s low-wage business model should be problematic for conservatives for several reasons.

First, when Republicans talk about the economic challenges facing ordinary Americans, they invariably argue for private-sector solutions like faster growth and rising wages – facilitated, of course, by lower taxes and less regulation. Yet even if this fantasy of a rising free market tide lifting all boats were ever to come true, it would bypass Wal-Mart workers. Thanks to a permanently weak labor market for non-college workers, Wal-Mart can get away with paying low wages even when the economy is booming. The same goes for the rest of the retail industry. According to the Bureau of Labor Statistics, the average annual salary of a full-time retail sales worker is $21,000, with cashiers making a good deal less. Those numbers haven’t fluctuated much over the past decade, through good times and bad.

The measly pay at stores like Wal-Mart and Target is noteworthy, given that the retail sector comprises 6 percent of GDP and employs 15 million workers. It’s also important given that, contrary to myth, most retail workers are full-time adult employees – not teenagers trying to earn gas money. In many places, retail jobs are the only game in town for workers without a college degree – or even with one. According to the National Retail Federation, nearly half of retail workers have some college education.

The fact that retail jobs stink and aren’t, in fact, a stepping stone to grander things shouldn’t sit well with conservatives who imagine American capitalism as an upward conveyor belt for anyone who works hard. If conservatives can face up to how the U.S. economy produces too many dead-end, near-poverty jobs, they can turn to formulating a private sector agenda for this problem – such as calling on industry leaders in low-wage sectors like retail to raise labor standards and improve career ladders. Such calls could be framed in terms of “self-regulation,” which Republicans often tout as superior to government oversight. Recent voluntary steps by corporations to improve labor conditions in their global supply chains suggest that some CEOs could be open to similar ideas in the domestic arena.

A second reason conservatives should worry about Wal-Mart’s low pay is that it is subsidized by taxpayers. Many Wal-Mart workers, earning wages not far above the poverty line, qualify for government aid via Medicaid, food stamps, and the Earned Income Tax Credit. So it is that a 2004 study by scholars at UC Berkeley found that “Reliance by Wal-Mart workers on public assistance programs in California comes at a cost to the taxpayers of an estimated $86 million annually; this is comprised of $32 million in health related expenses and $54 million in other assistance.”

That study was conducted when Wal-Mart employed just 44,000 workers in California. Multiply these findings based on a national labor force of 2.2 million and you get a sense of the huge cost of Wal-Mart’s low-wage model to the U.S. Treasury. Moreover, the Wal-Mart employees relying on government aid are clearly part of the “deserving” poor – people who are working and trying to get ahead. So whacking programs like the EITC that are designed to incentivize work is not the solution here.

Bobby Jindal and other conservatives argue that the GOP should fight subsidies to business both on free market principle and to show they are sticking up for Main Street. If these leaders can recognize that Wal-Mart is now one of the most heavily subsidized companies in America, it’s not a big leap to push Wal-Mart to pay its workers better so they can be more self-reliant and lean less on government help.

Jindal would also do well to channel the spirit of Henry Ford, who famously argued that capital had to share the wealth with labor if ordinary Americans were going to have enough purchasing power to buy stuff and stimulate growth. Earlier Republican leaders embraced this logic, and there is no reason why today’s GOP can’t as well.

Ford’s thinking is especially appealing now, with every political leader looking for ways to boost consumer spending. A study by Demos (where I’m a senior fellow) found that if the retail sector paid more – $25,000 per year for full-time workers – it would increase GDP between $11.8 billion and $15.2 billion over the next year and create 100,000 to 132,000 additional jobs. And, just as Ford argued, retailers themselves would do more business – between $4 billion and $5 billion in additional annual sales for the sector.

But what about those cheap consumer goods that are supposedly such a boon for low-income households? Well, it turns out that this is largely a false tradeoff. The Demos study found that even if retailers passed along 100 percent of the cost of higher wages to consumers – instead, say, of reaping lower profits – shoppers would see prices

increase by just 1 percent. One reason is that cheap offshore production, along with various efficiencies, mainly explains why prices on consumer goods are so low. Retailers like Costco and Trader Joe’s pay higher wages and still offer low prices.

Smart Republicans know that their party needs to begin standing with the bottom 47 percent, not snickering at them. Given just how many of these Americans work at Wal-Mart, or similar stores, pushing retail to pay more is a good way to start the GOP’s reinvention.

PHOTO: Protesters demonstrate outside a Walmart store in Chicago November 23, 2012. Black Friday, the day following the Thanksgiving Day holiday, has traditionally been the busiest shopping day in the United States. REUTERS/John Gress

14 comments

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While I agree with this author, I’m sitting shaking my head with wonder. Where was Jindal six months ago? Oh, yeah, he was waiting to see who won the Presidency before he came out in favor of anything that might actually help anyone other than corporations’ tax rates.

Am I the only one who sees this? Surely not. Where is the outrage for the American economy that was thrown under the bus for four years in favor of Republican politics and huge corporations? How many people went bankrupt, lost their jobs, their homes? And only NOW the GOP is willing to say:

“That the GOP should fight subsidies to business both on free market principle and to show they are sticking up for Main Street. ”

Personally, I won’t forget the pain the GOP has inflicted on at least half of the American people. Not for a long, long time.

Posted by JL4 | Report as abusive

The relationship between low paying jobs and the need for government subsidies to assist the low wage populace is brilliant.

There was a brief mention of purchasing goods from off-shore suppliers. Think of how much more money would flow into the US economy if Wal-Mart purchased primarily from US suppliers. I suspect the boon to the small and medium sized businesses,those that Republicans like to tout so much, would be far greater than what could be achieved via tweaks to income tax policy.

Posted by mcoleman | Report as abusive

Government’s heavy hand is like a sculptor with a chain saw or sledge hammer. It may or may not be good at massive projects depending on the knowledge, experience and skill of the controlling hand, but it is unsuited to fine detail and subtlety. It’s tax incentives and penalties are powerful tools that shape our society in many ways, some adverse to the preferences or best interests of “we, the people”.

Do we need more unskilled, unmotivated minorities and “underclass whites”? I don’t think so, but we pay these people to sit home and reproduce, paying them more and more “by the head” for each child in government benefits.

Do we need more unemployed? I don’t think so, but when “unemployment benefits” are such as to rival minimum wage in “take-home” pay why would low wage people go back to work when they can sit home and draw up to 99 weeks pay for nothing from the government? I really think our society would be better served if they had to do meaningful and productive work such as working eight hours a day in some capacity on our crumbling infrastructure, teacher aides, or cutting grass and/or cleaning up our highways.

It is present regulations that give businesses advantage to create part time instead of full time positions. It is not rocket science to change those incentives.

It is a changing world (globalization) in which “living standards are rising in third world countries at the “expense” of more developed societies. I’d much rather have billions of Chinese toiling away in factories producing stuff that I have use for and can buy at low cost than have those same people toiling to produce bombs, bullets, mines, etc. useful only for mischief in the Korea of 1950 and infinite other hell-holes the world over. We should not judge “good” and “bad” in the absolute, but from presently available alternatives. The perfect must not be the enemy of the good, or the better.

I love the goods, services, and example of sustainable success Walmart provides. They are considering offering basic medical services, which I would LOVE to see. Then even in rural areas medical assistance would be available at all hours outside of hospital emergency rooms. “We, the people” would benefit greatly from that and it would likely help alleviate the coming doctor shortages.

Walmart was the “500-lb. canary” that brought us the $4 prescription now so common. Critics are quick to ignore or dismiss such things. Personally, I would trust Walmart to manage Medicare Pt. D or even Obamacare wayyyy before I would have such things administered by those wonderful folds that have given us the economic efficiency of our current Post Office or FEMA or Homeland Security or the FAA.

Doctors have a caution…”First, do no harm”. Let’s give Walmart the benefit of any doubt because they do not create the bureaucratic environment in which they must find profit. In the overall, Walmart does not act, but reacts. If it ain’t broke (and it ain’t), don’t “fix it”.

Posted by OneOfTheSheep | Report as abusive

The biggest subsidy is our trade policies. Most of goods I buy in Walmart is made over seas. A nations selling us cheap are doing us a favor; we do not have buy more over seas goods than we can afford (the amount we goods with an payroll for American citizens we export).

Minerals and farm goods either have low labor content or are produced guest and illegal labor. Therefore they should not included in export column in determining how much we can afford to import.

Posted by Samrch | Report as abusive

No one forces anyone to work or shop at Wal-mart. You progressives make me sick

Posted by Crash866 | Report as abusive

Just what the republicans need is a liberal telling them that they need to tell a business that employs millions of americans how to run thier company. like the comment above NO one forces anyone to either work or buy from WalMart. This is typical liberal logic. If a liberal doesn’t like the way a company operates they try to get the Government to force it to run the way THEY think it should be run usually with disasterous results. If a conservative dosent like the way a company is run they just quit shopping there until market forces cause the company to change which allows the company to change in a way that allows the company to survive.

Posted by br333 | Report as abusive

Conservatives should show concern. But it is the wealthy Republicans who are in charge of the Republican Party, and manipulate the Tea Party wing, that are perfectly pleased with all the wealth flowing to the top. And corporate welfare is the welfare they approve of.

The Wal-Marts and Targets and others manipulate the market to get tax breaks and make for an unlevel playing field.

Consumers may get lower prices, but when Wal-Mart employees cannot afford to buy at Wal-Mart, all suffer.

Posted by pavoter1946 | Report as abusive

Agree with Crash866. Who is forcing people to work and shop at Wal-Mart? And the author supports entitlements for the “deserving” but shakes his finger at the “taxpayer subsidy” of Wal Mart employees? What about taxpayer subsidies of people who don’t want to work at all? Furthermore, why do you think the economy produces so many service sector jobs that “stink”? Here’s why: liberals like this author scream their heads off for aggregate demand to “stimulate” the economy, fueled by the Federal Reserve and fractional reserve system. Final point: when did America begin operating under a model of capitalism? The reason I ask is because our country currently operates under fascism (perhaps more appropriately termed corporatism) now. Dear author, please do some research. Virtually none of our markets are free. Housing, capital, energy, farming, currency, and yes even the service sector…. It’s all distorted by the state for the special interests who are closest.

Posted by settheline | Report as abusive

Your economic ignorance is jaw-dropping. Where do I start? First of all, there is never a level playing field and THERE SHOULDN’T BE. Competition among employees for salary and promotions is what produces innovations and productivity gains. It separates the weak from the strong. In that same vein, where did you ever read that a free market tide will lift all boats? The whole point of a free market is that here will be winners and losers but nobody is stuck where there are, economically, at any given moment. Second, as a consumer, what do I get for that extra 1% that I would have to pay in order for workers to average $25,000 instead of $21,000? Why should I have to spend more of the money that I work hard to earn? Are Walmart associates going to be more helpful or friendly? Doubtful. If it really would increase GDP by 11.8 billon, why not make it $50 an hour? Why not $100/hour? The answer is because the $11.8 billion increase is false. I guarantee the sudy was a “static” study, not a “dynamic” study. The higher salary would be nothing more than a transfer of wealth from my pocket into somebody else’s. Also, is $25,000 that much better a wage that it would lessen dependence on government? Again, doubtful. And why are you suggesting that Republicans are in bed with big business? Democrats are not? GM? Solera? I can go on but do not want to bore any other readers with things such as facts. Look, I’ve been dealing with Walmart for many years as a vendor and I’m not a fan. You liberals and your republican cohorts just have to learn to stay the hell out of business all together and let our country do what it does best – innovate and produce wealth.

Posted by urukhai2 | Report as abusive

Republicans should back away from politics and let Democrats run it all. Look at the great job they have done in California, New Jersey, and Michigan.

Posted by 54100 | Report as abusive

I don’t think most of you who have posted here understand the point of the article. Or, you’re unwilling to admit that there is likely some truth to what the author is saying.

Here’s the point in its simplest version. It makes sense to pay 1% more in goods to Walmart, and 2% less in taxes that currently goes to pay Walmart’s, and other large corporation’s, employees’ healthcare and food bills.

If you just wanna hate on Democrats for sport, go ahead. Obviously, considering the outcome of the elections, we can take it.

Posted by JL4 | Report as abusive

@JL4,

I’ve got a better idea. It makes sense to fire everyone in Washingtom and send all current tax revenue to Walmart. Their management will not only “get the job done” with what we send them, but taxpayers will likely then get refunds every year just like the rural co-op!.

Posted by OneOfTheSheep | Report as abusive

Wal-Mart does not pay less on average than most retailers. In any event, retail has always been on the lower end of the pay scale- even in the glory days of the middle class. Sure, wages for this type of work could be artificially inflated by government fiat – and the claim that this would lead to a mere 1% rise in the price of consumer goods is more a result of ideological wishful thinking than scientific study. Same is true for similar businesses like Mcdonalds – wages there could be doubled- but it would no longer be McDonalds where a working family could “go out” for dinner.

Posted by SayHey | Report as abusive

@JL4 – why are policy disagreements “hating on Democrats”? This is becoming a recurring theme – whoever disagrees with the latest progressive fad is engaging in “hate”. BTW, it is a fantasy to claim that a 1% price increase at WalMart will lead to a 2% tax reduction – there never are enough tax increases for the progressives and proposing tax reductions is not in their lexicon. We would wind up with both higher prices at WalMart and higher taxes.

Posted by SayHey | Report as abusive