Michael Maiello's picture

    How WalMart Fooled The World

    By Michael Maiello on Sat, 02/21/2015 - 10:29am | Business

    Yesterday, The Daily Beast asked me for my take on WalMart's big "wage hike." WalMart raised its starting wage to $9 an hour across all locations, with the goal of getting all of its 1.4 million employees to $10 an hour next year.  The company handled the PR very well.  From the press I saw, you'd think WalMart had grown a heart, that economic conditions had improved for our lowest wage workers and that the system basically works.

    I hope the second day take is more skeptical.  A $9 an hour wage is actually below many state and city minimums.  The New York Times reported that only 6,000 Wal-Mart workers made the federal minimum wage ($7.25 an hour).  Those states and cities that mandate higher than federal minimum wages are probably the main reason that Wal-Mart pays the federal minimum in so few cases.  In many states and city's Wal-Mart's big raise will have no effect on employees because they have minimum wages set higher than $9.  Hopefully, some brave state will up the minimum wage to $12 or $15 so that we can all observe the non-apocalypse that will result.

    One thing I noticed that nobody did was to inflation adjust WalMart's wage.  I did my best, with the information available and it seems to me, based on WalMart's claims over the years that it has done nothing but make up for inflation since the Financial Crisis.  Official inflation hasn't been particularly high in those years but it has been persistent.  A dollar has lost about 10 percent of its purchasing power since 2009, which was the last time the federal government hiked the minimum wage.  

    Harder to compute, though, is the real inflation that affects the working poor.  What I mean is that it's very expensive to be poor.  For example, when you're poor and you have a sudden need for money, you either have to borrow on a high fee credit card (and then carry a balance) or go to a payday lender (where annual interest can top 300%). If you have more money, you have a lower fee credit card and maybe pay off the balance before you pay any interest at all. You don't even consider a payday lender.  If you're poor, you can't keep minimum bank balances and so banks charge you to store your money, eroding your ability to save. If you have money, the bank pays you a little something.  If you're poor and need to rent a place to live, landlords will pile on expensive demands like higher security deposits and last month's rent in advance.  If you're not poor, you can generally rent more cheaply. If you ever want to really waste money (spend for no personal benefit whatsoever) the two most reliable ways to do it are to 1) make a mistake on your income taxes that results in a penalty or 2) be poor.

    This is no triumph of the free market.  That it took WalMart so long to do so much less than the right thing is only proof that we need a much higher minimum wage everywhere in the country.

    Topics: 
    Business

    Comments

    Bravo, Michael. What a fine article

    And it is so important to focus on the penalties for not having money, e.g., the payday lending scourge which shackles so many people.

    I'm happy to say that a worker I hired from Walmart several years ago is now making at least twice what he was earning there.


    by Oxy Mora on Sat, 02/21/2015 - 1:54pm

    Thanks, Oxy.  I look out for your comments on these issues because you've actually taken the risks of running a business.  You're a real job creator and yet you seem to have very few, if any, of the complaints I'm told that the job creators have.

    I would say that one defense of WalMart that I'd buy is that some people work there for a little while, learn some skills and then move on and put those skills to use in greener pastures.  The problem with that model is that in states like Alabama (I believe) it is actually the largest employer.  It's hard for people to move on to other jobs because Wal-Mart has sucked up all the air.


    by Michael Maiello on Sat, 02/21/2015 - 4:29pm

    Thanks. Just a quick comment-- not many businesses large or small can move ahead by leaps---otherwise the business would be kaput and jobs most likely lost. That's why more fairness in employment needs to be accompanied by e.g., the community college proposals and transfer payments.


    by Oxy Mora on Sat, 02/21/2015 - 6:25pm

    Yeah but there is progress....so to speak.

    At least they left the seven bucks crap.

    Of course the Chinese are working for three bucks an hour so I can get cheap shoe laces!

    I saw you over at the Beast recently.

    I am proud.

    I liked that and do like it.

    Keep on keepin on.

    AND YOU HAD YOUR SHIRT ON!


    by Richard Day on Sat, 02/21/2015 - 3:39pm

    And a boa.


    by Michael Maiello on Sat, 02/21/2015 - 4:26pm

    Great article, Michael.  I've been trying to figure this out because it looked like so much nothing to me but I thought I must be missing something because everyone was making such a fuss about it.  i saw a TV interview inside a Walmart where one of the employees was soooo excited by it.  It looked like peanuts to me, and you've done the homework that says it's exactly that:  Peanuts.


    by Ramona on Sat, 02/21/2015 - 9:53pm

    You realize Ramona that it is all Lucy's fault.

    I mean she always cheats when Charlie attempts to kick the damn ball!

    hahaahah


    by Richard Day on Sat, 02/21/2015 - 10:05pm

    Okay, now it makes sense.  Why didn't I think of that?  frown


    by Ramona on Sun, 02/22/2015 - 5:29pm

    If you are one of those reported 6,000 workers getting an extra $1.75 per hour, it's a very big deal. It's an additional fifty-two dollars for a thirty hour work week - not enough to increase your payroll tax bracket, so the net pretty much equals the gross. That's approximately two hundred dollars a month, which can be a godsend for a struggling family. Especially when your food stamp money is gone, the electric bill is huge and due, the car battery just died and your child really needs shoes.

    I don't think anyone is naive enough to believe that Wal-Mart made this decision out of the goodness of its corporate heart. And no, on a large scale it solves very little. The needs are huge - but before we denounce this as just so much worthless PR, let's spare a thought for the mom who can breathe alittle easier because of it.


    by barefooted on Sun, 02/22/2015 - 6:22pm

    ...but before we denounce this as just so much worthless PR, let's spare a thought for the mom who can breathe a little easier because of it."

    Absolutely, Barefooted.  But the problem is... WalMart has been paying the federal minimum where ever it could and the federal minimum has been stagnant for almost six years.  In a practical sense, that extra money is going to improve lives but, inflation-adjusted, it actually buys... almost to the penny what it bought in 2009.  Catching up has got to feel good and to be a relief, but it's still just catching up, not getting ahead.


    by Michael Maiello on Sun, 02/22/2015 - 6:36pm

    If they could hire illegals they would. Bring in another 11 million workers, all competing for the available jobs and see how responsive to the needs of the workers these modern day slave masters would be.


    by Resistance on Sun, 02/22/2015 - 6:54pm

    Michael, no government mandated minimum wage will ever be enough to get ahead. That was not the intent behind the original legislation, especially on the federal level. Even if Congress passed a hike to $15.00 an hour, by the time it was phased in over a period of years it would already be too little. The minimum wage plays catch up, too, though by its very nature it never will.

    I suppose earning 2009 dollars in 2015 isn't an earth-shattering accomplishment. But I stand by my point that having more of them, no matter the year, is a step in the right direction.


    by barefooted on Sun, 02/22/2015 - 7:42pm

    If wages go higher, the greedy bastards will just relocate overseas and import their sweat shop goods here to America; with Government of and for the privileged,  blessings.

    They'll find the slaves they need to enrich themselves. 


    by Resistance on Sun, 02/22/2015 - 8:17pm

    Actually China is looking to bring some of those shops here.  Wages have gone up around the coastal regions and they don't have the infrastructure going into the interior to ship goods and take advantage of cheaper labor. So when you figure over seas shipping, it is cheaper to make it here and sell it. Climate changes and rising water is effecting South East Asia. Climate and Geography is in play here not only cheap labor. 

    The Republicans carried on and stamped their feet over the Climate agreement with China. This is something to watch for in the near future. Pox on MSM for not covering this better.


    by trkingmomoe on Mon, 02/23/2015 - 10:03am

    This was a business decision. They are not doing to well these days and had a bad year. CBS came out with this story just before Walmart made their announcement of pay raises. 

    http://www.cbsnews.com/news/meet-americas-most-hated-retailer/

    The retailing behemoth dropped several ratings points in the American Customer Satisfaction Index, an independent national benchmark of consumer experiences of products and services sold to U.S. consumers. After a tough year that included inroads from rivals and weaker sales, the retailer landed at the bottom of several of the survey's rankings, making it the worst-rated department, discount and grocery store.

    For Walmart, the dip in its customer satisfaction ratings could spell more trouble ahead. Retailers, after all, are at the whim of the consumer, who is typically looking for a mix of good prices, selection and customer service. If a retailer starts to fail on those fronts, it can end up in what ACSI director David VanAmburg calls "a deadly cycle." On top of that, Walmart's well-publicized struggles with calls from employees for higher pay and benefits may be taking a toll.

    They know their business model needs to change. It is common to walk into a Walmart and find the shelf that used to have the item you were looking for empty.  In the past 15 years Walmart merchandising has left a lot to desire. There is less choices and sizes.  It was hard to locate a clerk to help you get a bike down off the rack or something from the top shelf. Cutting costs on payroll has reached a diminishing return. Customers have moved on to other retailers and on-line shopping. Their growth has stopped and investors have started to look else where. They have to make the choice to please investors or do they please their customers also and stay in business. 

    For many, shopping is their only entertainment and a chance to get out.  I walk through Public's Grocery once of month when I go to the bank next door.  I can't afford their food prices but I love to window shop there and maybe find a few things to put in my cart. I dread going to Walmart because of the long lines and the size of the store.  I don't really enjoy Walmart as much as I do other places.  

    edit to add:

    Walmart has been criticized heavily by Wall Street investors for the last few years for not improving their service and merchandising.   Employee dissatisfaction and protests has also drawn attention of the investors.  The depression is still going on the bottom half of the economy and Walmart can't afford to ignore this.  They have kept their profit up but the sales and traffic in the stores have dropped. 

    The PR is just the start they have a lot to fix.   


    by trkingmomoe on Mon, 02/23/2015 - 10:20am

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