Middle Class Salaries are Needed for a Better Life

Back in November Demos released a study titled RETAIL’S HIDDEN POTENTIAL: HOW RAISING WAGES WOULD BENEFIT WORKERS, THE INDUSTRY AND THE OVERALL ECONOMY It is a long widen title…indeed. But the message of the study was very significant. The business model of the retail sector is not sustainable long term.

Demos embraced the concept of raising the pay at Walmart, for example, from where it is right now, to $15.00 base. In the executive summary they wrote:

Given the vital role retail plays in our economy, the question of whether employees in the sector are compensated at a level that promotes American prosperity is of national importance. According to the Bureau of Labor Statistics, the typical retail sales person earns just $21,000 per year. Cashiers earn even less, bringing home an annual income of just $18,500.2

The continued dominance of low wages in this sector weakens our nation’s capacity to boost living standards and economic growth. Retail’s low-wage employment means that even Americans who work full-time fail to make ends meet, and growth slows because too few families have enough remaining in each paycheck to contribute to the broader economy.

They also covered the fact that many (most) employees in this sector rely on public assistance for both health care and food. In effect, we the taxpayers are subsidizing this business model.

And now we have the Institute for self Reliance echo Demos. They are relying on a study authored by the UC Berkeley Labor Research and Education center. The Institute gets right to the meat of the issue, Walmart could afford to pay $12.00/hour.

Bringing these employees up to a minimum of $12 an hour would boost their annual income by $1,670 to $6,500 (depending on whether they are full- or part-time and their current pay rate). That amounts to a 37 percent increase on average for those earning less than $9, and a 14-16 percent increase on average for those making $9-12 an hour.

The study found that 41 percent of this additional income would flow to families at or below 200 percent of the federal poverty line.

Setting a $12 minimum wage at Wal-Mart would increase the company’s payroll costs by $3.2 billion a year. Some of this would likely be offset by increased labor productivity due to higher morale, lower turnover, and lower absenteeism. The rest could be absorbed through reduced profits. Wal-Mart posted a profit of $16.4 billion in 2010.

Now, we have the first report from The Nation that we have the first long term strike at Walmart. It’s staged by Our Walmart and their allies. So what we are starting to see is that not just intellectuals are seeing the need to increase this pay, but workers themselves are organizing to get it.

It matters little if we are talking of fast food workers, or Walmart, or Target. The fact is the model relies on low pay and subsidies from the taxpayer. There are outliers to this model, COSTCO, which is doing well, has low turnover and pays living wages. That should be the future model of retail in the United States. It will only happen, I fear, after strikes force legislation. What is a reality is that we are just at the beginning of that struggle.

Alas Labor is starting to wake up from more than a generational struggle.

Categories: economics, labor practices

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