Why we know Walmart isn’t paying $12.40/hour

Why we know Walmart isn’t paying $12.40/hour July 1, 2013

Here’s how we know that Walmart’s claim to be paying an “average” wage of $12.40/hour is hogwash: The retail giant is not lobbying aggressively in support of a minimum-wage increase.

If you’re a retailer with millions of employees all making several dollars more than the minimum wage, then seeing that wage raised from $7.25/hour to, say, $9.50/hour doesn’t cost you anything when it comes to your own payroll. But it would mean a great deal to the people your company can’t live without: your customers. About 74 million Americans are paid minimum wage — with nearly half of those being adult women. If those 74 million Americans were to get a raise of  another $2.25/hour, they would spend that money. And they wouldn’t spend it at Macy’s. They would spend it at Walmart. A minimum-wage increase would be a huge revenue windfall, a sales bonanza for Walmart.

Granted, it gets more complicated when you factor in Walmart’s supply chain. Many of the goods they sell are cheaper because they’re made by companies paying the lowest legal wages possible, so a minimum-wage increase wouldn’t be entirely cost-free for the chain. (Calculating stuff like this is another reason businesses need to hire economists, not just accountants.)

But if Walmart were honestly paying an average wage of $12.40/hour, then they ought to support a minimum-wage increase. They do not support such an increase, and so I have to conclude they are not honest when they claim to be paying that.

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  • Steve Morrison

    My mother did that! She was from Kentucky, though (but she did have cousins in Michigan; I wonder if that’s where she got the locution).

  • Cathy W

    Aha, I was wrong on the details – from Wikipedia:
    On January 12, 2006, the Maryland legislature enacted a law requiring that all corporations with more than 10,000 employees in the state spend at least eight percent of their payroll on employee benefits, or pay into a state fund for the uninsured. Walmart, with about 17,000 employees in Maryland, was the only known company to not meet this requirement before the bill passed. On July 7, 2006, the Maryland law was overturned in federal court by a U.S. District judge.
    The benefits law did seem to be based on the same basic premise as what smrnda was talking about, though – billing the employer for an outsized impact on public health care funding.

  • Cathy W

    Or it might have traveled the other way – a lot of Appalachian folks came up to Michigan to work in the auto plants when that became a better gig than coal mining.

  • Why pay in cards rather than cash? …Does the banks pay the corporations to pay in pre-paid cards?

    Yes. There’s an indirect “payment” in that the banks charge the corporations less for the cards than they would for payroll checks, but sometimes there’s also a direct payment to the company for each new “cardholder” they sign up.

  • It might NEVER pass, but it NEEDS to pass, so what Congress is incapable of doing isn’t really my metric.

  • quinnthebrain

    In my family (in Oregon) we’d usually call is Freddie’s.

  • LL

    I’m no expert, but they probably are paying the average they claim. Average their highest paid employees with the lowest paid, it probably does come out to what they say. That’s why averages are not the greatest way to measure stuff like income. Plus, large numbers skew the average upwards more than small number skew it down, apparently. But they’re easy to calculate and stupid people don’t usually look further to see what the number is obscuring, which is usually quite a lot.

    If low-wage employees made more at Walmart, the executives couldn’t make as much. Duh. How hard is that to figure out? Plus, shareholder value and all that. Why do you hate American free enterprise, Fred?

  • Lori

    I was talking strictly about the fact that it’s never going to cost Walmart any money and therefore is not actually a reason for them to oppose an increase in the minimum wage.

    Walmart does oppose an increase in the minimum wage and the only reason for that is that they pay most of their employees less than the proposed new rate.

  • FearlessSon
  • Lori

    I don’t know if the pay cards were left out of the anti-fees legislation on purpose, or by accident. I tend to think it was an accident helped along by industry lobbyists. How many of the people writing legislation have ever been paid on a pay card or had someone close to them who was? My guess is none. If you haven’t experienced it you’re not necessarily going to know that there’s a problem with it. It can easily be framed as a good thing (lower costs, convenient for people who don’t have bank accounts, cheaper than check cashing services) and the banks are certainly not going to admit in advance that they’re salivating over the loophole.

    My hope is that now that the problem is getting some attention the loophole will be closed. Of course, I have no idea how long that will take since these days Congress pretty literally can’t do anything but pass forced-birth legislation.

  • My sarcasm-meter is displaying a 1.7 out of 10-too little to call “sarcasm” for certain, too much to give a serious answer (which is, currently, “no”). Thus, I’m not sure how to respond to your comment.

  • The peasant population in the U.S. is too low for the peasants to do anything. Also, the U.S. doesn’t have the youth bulge characteristic of societies undergoing a revolution. You are right that things must get much worse before any sort of real change can take place in Congress.

  • I have noticed that there is an inverse relationship between pay and job
    security, and how easy the company thinks you are to replace.

    -It’s called supply&demand.

  • Lori

    Perceived supply & demand, but not actual supply & demand.

  • Can you elaborate? What’s not actual about the perceived supply and demand?

  • There is the Russian word uravnilovka, but even the Soviets never quite got to levelling wages out THAT much.

    -I’m pretty sure they did.

  • Lori

    The peasant population in the US is getting bigger all the time. The middle class that has kept us stable for decades is shrinking and what’s left is insecure. We don’t have a large youth population, but we do have a high youth unemployment rate that’s not likely to get better any time soon.

    I still think things will have to get a lot worse before there’s any real uprising here, but I think other factors are more critical for that calculation.

  • You’re right on your last sentence. I consider interest rates and the amount and distribution of debt among the population to be one of those “more critical” factors.

  • Lori

    The skills of the CEOs making hundreds of times what their workers make aren’t actually good or rare enough to justify the money they’re paid. Good “low skill” workers are harder to come by than their tiny paychecks would indicate.

    The current wage situation in the US isn’t due to real supply & demand. It’s due to the self-serving illusion created by people raking in the big bucks.

  • Lori

    I think that’s probably true, especially the debt issue. Once enough people come to the conclusion that their situation is truly hopeless things will go bad very quickly.

  • Good “low skill” workers are harder to come by than their tiny paychecks would indicate.

    Especially because businesses have shifted toward an employee model wherein as few employees as possible do as much work as possible, thus the lowest paid employees do as much work as several people would years ago.

    When I was first starting out, I applied to be a stocking worker at the grocery store. Nowadays, there’s only “floor workers” who, depending on the circumstances, work the counters, clean the floors, stock the shelves, unload orders, price items, answer phones, evaluate refunds and redeem tickets…

    What’s gone from a very small skill set is now a rather large skill set, and it’s the lowest paid position.

  • Lori

    I’m not a fan of most reality TV, but one thing that I’ll give to the show “Undercover Boss” is that it clearly demonstrated that those “low skill” jobs aren’t necessarily easy to do. More than one of those CEOs has found himself unable to manage and there was at least one guy whose manager said straight up that he would have been fired soon.

    I’ve been doing low paid, “low skill” blue collar work for the last year. I know plenty of people who are smarter than I am, but I do OK. I have a BA, most of 2nd BA, and 3/4 of a Master’s and that hasn’t meant that those blue collar jobs have been a snap. The last one frankly I was never going to get the hang of. Doing it well required a kind of spacial relations skill that I don’t have. And anyone who thinks office politics only happen, or only matter, in offices has never worked a factory floor.

    The ability to run a company well is a rarer skill set than a good low-level employee, and I have no problem with paying CEOs more. They just aren’t worth nearly as much more as we currently pay them and the lower skilled workers don’t deserve to be treated as disposable.

  • Ethics Gradient

    Just to correct something, Fred – that link says 74 million Americans are paid at an hourly rate. 3.8 million are paid at or below minimum wage (1.7m at exactly minimum wage and 2.2m below).

  • I’m not a fan of most reality TV, but one thing that I’ll give to the
    show “Undercover Boss” is that it clearly demonstrated that those “low
    skill” jobs aren’t necessarily reason to do.

    -I have trouble understanding the emboldened part of this sentence.

  • Lori

    It was a typo, which I have now fixed. (There tends to be a disconnect between my brain and my fingers when I’m tired, such that I will sometimes type an entirely different word than I was thinking and not notice it until after I’ve hit post.)

  • I have that same problem sometimes-when I’m not looking at the screen, I sometimes type a homophone instead of an intended word.

  • Lori

    I do that too, but if I’m really tired I sometimes just type random words. When I was in grad school there was a point where I actually wondered if I had had a small stroke & mistaken it for a migraine because 3 letter words were just random. The odds were pretty good that if I was thinking a 3 letter word I’d type some totally different 3 letter word. And of course spellcheck can’t catch that because the word was spelled correctly. Fortunately that cleared up once I got back to getting consistent sleep, but it was weird while it was happening.

  • The upside of paying in cards, especially card where there is a penalty for converting the cards into cash, is that the money that has been “paid” to the employees remains under the control of the bank for perhaps as long as a month after they’ve spent it. All the time the money is on that card in the employee’s pocket, the bank still controls sthat money. They can loan it out (or just invest it) and they get to keep the interest. And even when they do spend it at a store, depending on how the transaction is done, the bank doesn’t actually have to pay the vendor for a certain amount of time (It’s quite a long time if it’s a credit transaction. Debit transactions are slightly different, but even then, there’s a lot of wiggle room because of the way liquidity works). If the vendor’s account is with the same bank (And this is nearly always the case, otherwise they’d find a way to add an extra fee), then At no point ever does the bank not get the benefit of having that money.

  • Oh, that’s a familiar feeling. My big one now is that I type a word that starts with the first few syllables or letters by mistake. If you’ve ever heard the stand-up comedy skit about ordering a chicken situation? That’s me in a nutshell in any text medium. The word is spelled correctly, and some readers will glaze right over it and read the correct word by context alone, but it’s so not what I intended.

  • floodslayer

    If I’m reading the BLS article (http://www.bls.gov/cps/minwage2011.htm) correctly, it doesn’t say that 74 million Americans earn minimum wage, it says 74 million Americas are payed some sort of hourly wage. Rather, 3.8 million make at or below the federal minimum wage. A rather important distinction.

    The correct isn’t meant to disparage the point of the article, I still agree with you, but it’s important to get the facts right.

  • themunck

    I know. My point was that I couldn’t see what was in it for the companies that pay in cards. The interest of the banks are fairly clear to see in this, if only because of all the fees.

  • David S.

    I see at least one statement in that article that’s close to being a lie. Nina Das, a Citigroup spokeswoman, said that “someone cashing a payroll check for $500 would end up paying $15 at a 3 percent check-cashing fee.” That may be literally true, but Walmart will cash them for $3 up to $500, and for $6 up to $1000. (They would do checks of their employee for free.) Poking around, the local price at checking cashing / payday loans places is 1.99% (or 1.9% + a dollar). It’s possible that people end up paying $15–poverty often doesn’t come with the time and transportation to shop around–but I think most people are doing better. (Not that it doesn’t suck having to pay to cash a paycheck.)

  • Lori

    I was just reading that the average company with 500 employees saves about $21,000/year by switching to the cards. And now I’m even more pissed off. For a company that size $21k is chicken feed. If it was $210k/year it would still be wrong, but it would at least be understandable. They’re totally screwing their workers for what is for the company a trivial amount of money. That is so shitty.

  • The statistic is technically that full-time employees make, on average, $12.40 per hour. Since Walmart all but stopped hiring full-time employees sometime around 2009, that means that the people who are making, on average, $12.40 per hour have been working at Walmart for, on average*, at least four years.

    *There are some outliers who were able to take full-time positions after less than four years. I know a couple of lower-level managers who started after 2009 and are now working full-time.

  • David S.

    From what I’ve read, the Soviets were pretty good about rewarding their managers. The wages didn’t tell the whole story; higher positions would let you buy better products at cheaper prices then the proles could. Or get access to products that weren’t available to the proles; I read about a new book being published, and a line outside the bookstore for it, a line that a secretary got to skip and buy a copy for everyone in her office at the local bureaucracy.

  • Wednesday

    I don’t understand the vertical axis on that chart at all, nor how productivity is measured. Do you have a link to the original MJ article?

  • Yep. Meijer’s, Kroger’s, even Kmart’s. Though I never heard “Target’s”, but then, pretty much everyone I knew called it “Tar-jhey” to joke about how it was an “upscale” big box store.

  • One of my instructors in college had apparently done a research project on the workers who lost their jobs when factories started closing in Michigan, following up on how many of them had entered the fast food industry — and had immediately quit because there was no way they could keep up with the pace, the stress, the organization and the employee treatment. Apparently the number was “easily nine out of ten, and closer to ten.”

    Yet fast food is still regarded as grunt work, the kind of thing you send someone for the first job purely so they have work experience.

  • Fanraeth

    I’ve worked at Walmart as a cashier for six years now so that I could afford to go to school. I make a few dimes under ten dollars an hour. I would need to work there another seven years to reach their claimed average pay.

  • BaseDeltaZero

    The vertical axis is the percentage increase of that value in 1979 (so around 2008, the top 1%’s income was 240% more than it was in 1979.

    ‘Productivity’ is typically measured by tasks completed per unit time divided by wages/salaries (per the same unit time). So, part of the reason productivity is increasing at all is that wages are going down relative to the prices of the product, whatever that might be.

  • stationary

    According to the BLS link, about 74 million Americans are paid hourly, but 3.8 million are paid at or below minimum wage. It doesn’t really affect the argument of this post much, but we still expect better from you, Fred.

  • Cathy W

    Just doing the math: that is $42/employee. Less than a dollar per week per employee. Appalling.

  • CharityB

    I bet it’s $7.25.

  • reynard61
  • Chowder

    I reckon it’s the word “average” there that’s the trick; I’d be willing to bet they’re including all the top executives in their math. Supposedly Wal-Mart’s CEO makes something like $35 million a year, which works out to over $16000 an hour. So if you stretch the definition of “employee” to include “the people at the top signing the checks” you can throw in a couple of really high numbers that fuck up the curve. So they’re paying their employees $12.40/hour on AVERAGE, but most of that average floats to the top, like pond scum.

  • Alex

    Yea wall mart pays so little for the plastic ex lets buy some action army men well wall mart uses cheap plastic and sell it like 10$ but really it’s 3$ so u are fitting fold so next time u go to wall mart remember what u are paying for I’m in middle school nellies bend beavers and I’m in 6th grade and I know this so guys remember this all ways