The Compelling Reason Why Walmart Won't Oppose a Minimum Wage Increase

You are absolutely right. That is not a picture of Sam Walton, Walmart's founding deity.

That is an entrepreneurial predecessor of 'Ol Sam's named Henry Ford. And Henry's experience is proving to be instructive as Walmart contemplates the global economy.

Henry recognized - as most people in business seem to know - that if your workers - or people like your workers - could not afford your product you would be unlikely to sell a whole bunch of it or them, thereby making it difficult for you to achieve what we now call scale. So Henry  paid his workforce the then unheard-of wage of $5 a day which is what his analysis told him would enable them to go out a buy one of his infernal machines.

Walmart does not sell anything nearly as expensive as a car. But even so, its own workers and their friends and relatives are finding it difficult to come up with the scratch to afford toilet paper and lamps and pillows and hammers and t-shirts and oh yeah, food. Even really cheap, unhealthy food. So its profits and stock price have been hurt as sales fall due to the fact that wages, including the ones it pays, have not kept up with inflation or the cost of living.

So Walmart is reluctantly, even resentfully refusing to oppose an increase in the minimum wage because a bunch of that new income will find its way into Walmart's coffers. Rest assured they're not happy about this compromise. But necessity has a way of doing this sort of thing to you. JL

David Callahan comments in Policy Shop:

"Just because we don't oppose it, doesn't mean we support it,"

Here's a piece of good news in the fight to raise the federal minimum wage to $10.10 an hour: Walmart's U.S. president, Bill Simon, said last week that the nation's largest employer, will not oppose such an increase.

This isn't really a surprise, in that Walmart spokespeople have been saying for a while that the company would be neutral in this fight. But it does feel counter-intuitive in the grand scheme of things. 

 

So why is Walmart standing down?

 

The reason Simon gave is that the company "is not a minimum wage payer," and that only about 5,000 of its employees actually make the minimum wage. That answer sounds like great PR, but is meaningless, since what really matters is how many of Walmart's workers are currently paid under $10.10 an hour. And the answer is: a lot, although hard numbers about Walmart pay are extremely hard to come by. (One market research group pegged the average pay for a Walmart associate at $8.81 an hour in 2011.)

 

Not only would a higher minimum wage raise pay for workers who make less than $10.10, it would also exert upward pressure on wages for many other workers at Walmart. So Walmart definitely does have a big economic stake here. 

 

But that stake may not be what it seems, and the giant retailer may benefit if all low-wage Americans -- its prime customer base -- sees wage increases. And Walmart seems to realize exactly that. As Bloomberg reported in February:

Wal-Mart is weighing the impact of additional payroll costs against possibly attracting more consumer dollars to its stores, David Tovar, a company spokesman, said today in a telephone interview. Increasing the minimum wage means that some of the 140 million people who shop at the chain weekly would “now have additional income,” Tovar said.

That's exactly the kind of argument the Demos made in its groundbreaking report on wages in the retail sector back in 2012. The report pointed out that better paid retail workers would turn around and spend some of their gains in the very stores where they worked. And if wages went up for all low-wage workers, that could mean big boost: Walmart's increased labor costs for hundreds of thousands of workers may be easily offset by more spending by tens of millions of flusher customers. 

 

Surely the other factor guiding Walmart on the minimum wage is public relations. Publicly opposing a minimum wage hike would add to the company's image as being anti-worker. Which is to say that the pressure on Walmart by pro-worker groups is having an effect.

 

A few other big employers are also changing behavior as the plight of low-wage workers is pulled into the spotlight. Gap Inc. said earlier this year that it would raise the minimum at its stores to $10 an hour.

 

One question, though, is about how these companies are acting within the business associations they belong to, like the U.S. Chamber of Commerce. Walmart's neutrality on the minimum wage is nice, but not if it's quietly bankrolling lobbying efforts to kill any increase in Congress. 

 

Since the Chamber doesn't disclose its donors, much less how specific funds are used, we don't know what's going on there.