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If Walmart Paid its 1.4 Million U.S. Workers a Living Wage, it Would Result in Almost No Pain for the Average Customer

The average Walmart customer would pay just 46 cents more per shopping trip, or around $12 extra dollars each year.
 
 
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A study released this week found that if the nation's largest low-wage employer, Walmart, were to pay its 1.4 million U.S. workers a living wage of at least $12 per hour and pass every single penny of the costs onto consumers, the average Walmart customer would pay just 46 cents more per shopping trip, or around $12 extra dollars each year.

Consider that the next time you hear some corporate mouthpiece warning of massive job losses if some minimally progressive policy were enacted. You never see them arguing on the cable news shows that increasing the minimum wage will hurt Walmart’s or McDonald's bottom lines; it’s always about the jobs that will be destroyed. According to the ubiquitous spin, large corporations, the embodiments of American-style capitalism, are so vulnerable to the meddling of no-nothing bureaucrats that any government intervention into the “free market” drives corporations away to sunnier locales or threatens their very existence. However well intentioned, it all ends up costing workers their jobs.

But the new study, conducted by Ken Jacobs and Dave Graham-Squire at the UC Berkeley Center for Labor Research and Education and Stephanie Luce at CUNY's Murphy Institute for Worker Education and Labor Studies, suggests that low-wage employers could pay their workers a wage that would afford them a dignified existence without threatening their profitability.

Paying a fair wage would only result in a price hike of around 1 percent for Walmart shoppers. The researchers note that the increase would be “well below Walmart's estimated savings to consumers” – in other words, the big-box retailer could continue to offer “low prices” without impoverishing their workers. The study's authors noted that the 1 percent price hike was the “most extreme estimate, as portions of the raise could be absorbed through other mechanisms, including increased productivity or lower profit margins.”

While it would have a very minor impact on shoppers, it would have a profound effect on the economic security of Wal-Mart's workforce. More than 40 percent of the additional income would go to the working poor. “These poor and low-income workers could expect to earn an additional $1,670 to $6,500 a year in income for each Walmart employee in the family, before taxes,” write the authors. Meanwhile, while Walmart's customers are not exactly rich, those “who spend the most at the store are somewhat less likely to come from poor and low-income families.” As a result, only 28 percent of the additional costs would be paid by the poor and the near-poor.

Walmart and other low-wage employers are poster-children for free-market hypocrisy, claiming that the “market” dictates they pay poverty wages while shifting some of their labor costs onto the taxpayer. A 2004 study by the House Committee on Education and the Workforce estimated that just one Walmart store with 200 “associates” costs taxpayers over $420,000 per year in government assistance to the poor.

The study squares with earlier research that found minimum wage increases to have little or no impact on unemployment. According to the Economic Policy Institute, studies have shown that “there is no evidence of job loss from previous minimum wage increases,” because “employers may be able to absorb some of the costs of a wage increase through higher productivity, lower recruiting and training costs, decreased absenteeism, and increased worker morale.”

Yet the idea that paying a decent wage kills jobs persists, as does the claim, made by the corporate right every single day, that high corporate taxes are driving jobs overseas. As I noted last month, he kernel of truth is that, at 35 percent, we do have one of the highest statutory corporate rates in the world – that is, the rate that's written down in the tax code.

What US companies actually pay in taxes is among the lowest figures in the developed world. As the non-partisan Center for Budget and Policy Priorities (CBPP) explained, the 35 percent rate the corporate mouthpieces on CNBC are always whining about “does not take into account the generous depreciation rules, exemptions, deductions, and credits (some of which are sometimes termed 'loopholes') that corporations may be eligible for.”

Looking at the big picture, the U.S. ranked 28th out of 30 countries in the Organization for Economic Cooperation and Development (OECD) (which includes most of the world’s leading economies) in terms of the share of our economic activity that corporations pay in income taxes. At 1.8 percent, our government actually collects around half of the OECD average of 3.4 percent (PDF). 

Or consider what Republicans refer to as “job-killing regulations.” The costs of protecting human health, workers' safety and the environment is supposedly too onerous to the private sector, but the Office of Management and Budget (OMB) studied the economic impact of 106 major regulations between 2001 and 2010 and found that they cost the economy between $44 and $62 billion (in 2001 dollars), but yielded far more in economic benefits, adding $136 billion to $651 billion to the U.S. economy (PDF).

Now consider this: during the 2000s, under President Bush, we had a model of the low-wage, low-tax, lightly regulated economy that conservatives insist businesses require in order to employ people. Bush slashed taxes for corporations and high earners, cut rates on investment income, threatened to veto (or did veto) nine minimum wage increases and had a dismal record of regulating corporate activities.

That climate did lead to robust job growth by big U.S.-based multinationals, but not in this country. According to Commerce Department data cited by the Wall Street Journal, big “companies cut their work forces in the U.S. by 2.9 million during the 2000s while increasing employment overseas by 2.4 million.” How did that performance stack up against the Clinton years, with slightly higher taxes on wealth and modestly stronger corporate regulation? The Journal notes that the last decade saw “a big switch from the 1990s, when [big business] added jobs everywhere: 4.4 million in the U.S. and 2.7 million abroad.”

It's not that companies don't seek more “business-friendly” climes where there is less regulation and wages are lower. It's that the process has been facilitated by trade agreements allowing multinationals to offshore production for our domestic market without any barriers whatsoever. As economist Dean Baker put it, “we carefully structured these trade agreements -- we put great effort into it -- to put our manufacturing workers into competition with manufacturing workers in developing nations.”

That meant going to these places and asking: What kind of problems does General Motors face if they want to set up a manufacturing plant in Mexico or Malaysia or China? What can we do to make it as easy as possible? That means that they know they can set up their factory and not have it nationalized, not have restrictions on repatriating profits, etc. Then they need to be able to import the goods back into the United States, and that means not only making sure there are no tariffs or quotas, but also that there's no safety or environmental restrictions that might keep the goods out.

And big, multinational companies are increasingly investing in overseas operations because the middle class in this countryis being squeezed so hard – and consumer demand is so deep in the trough – that foreign shores are where the customers are. They've come a long way from Henry Ford's novel idea of paying his workers enough to afford to buy the products they were making.

 

 
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