Why Republicans should pressure Wal-Mart
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 â€“ 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 companyâ€™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 â€“ 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 havenâ€™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. Itâ€™s also important given that, contrary to myth, most retail workers are full-time adult employees â€“ not teenagers trying to earn gas money. In many places, retail jobs are the only game in town for workers without a college degree â€“ 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 arenâ€™t, in fact, a stepping stone to grander things shouldnâ€™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 â€“ 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 â€śself-regulation,â€ť 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-Martâ€™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 â€śReliance 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.â€ť
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-Martâ€™s low-wage model to the U.S. Treasury. Moreover, the Wal-Mart employees relying on government aid are clearly part of the â€śdeservingâ€ť poor â€“ 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, itâ€™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 todayâ€™s GOP canâ€™t as well.
Fordâ€™s thinking is especially appealing now, with every political leader looking for ways to boost consumer spending. A study by Demos (where Iâ€™m a senior fellow) found that if the retail sector paid more â€“ $25,000 per year for full-time workers â€“ 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 â€“ 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 â€“ instead, say, of reaping lower profits â€“ 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 Joeâ€™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 GOPâ€™s reinvention.
PHOTO:Â 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