Why Walmart Can Afford to Pay Its Workers Much More

Two new analyses show the retail giant can afford to stop shortchanging its workers.

By SHARE
WideModern_WalMartProtest_091813.jpg
Nawal Elmilliax joins the protest against Wal-Mart in Boynton Beach, Fla., Friday, Nov 23, 2012. Wal-Mart employees and union supporters are taking part in today's nationwide demonstration for better pay and benefits A union-backed group called OUR Walmart, which includes former and current workers, was staging the demonstrations and walkouts at hundreds of stores on Black Friday, the day when retailers traditionally turn a profit for the year.

Come Black Friday (which for many big retailers has become a two-day affair starting on Thanksgiving), Walmart will again be facing strikes and protests from workers upset with the corporation's low pay. Even Ashton Kutcher has gotten on the company's case for paying wages that often leave its workers below the poverty line and depending on federal benefits simply to get by.

But can Walmart actually afford to pay its workers more? According to a couple of recent analyses, the answer is an unambiguous "yes."

First, Fortune's Stephen Gandel crunched the numbers and found that Walmart could afford to give its workers a 50 percent raise, resulting in an average pay of more than $33,000, without doing harm to its investors or stock price. (Right now, most of Walmart's workers make less than $25,000, per the Huffington Post's Dave Jamieson.)

[See a collection of political cartoons on the economy.]

A new report from Demos' Catherine Ruetschlin and Amy Traub, meanwhile, finds that simply foregoing the stock buybacks in which Walmart has been engaging in recent years would enable it to pay its workers $5.83 more per hour, a hike that would bring the average hourly wage for a Walmart worker up near $15. "If we assume Walmart's typical hourly worker making below the $25,000 per year threshold earns $9.06 an hour, the industry median for low-wage employees of large retailers, then this would hike pay to $14.89 an hour," Reutschilin and Traub note. "At this rate, any workers placed on the schedule for more than 32 hours a week would be able to bring home $25,000 a year."

Of course, Walmart is under no obligation to pay its workers more if it wants to keep lining the pockets of the Walton family (who, incidentally, hold as much wealth as the bottom 40 percent of Americans combined). But Ruetschlin and Traub argue that eschewing share buybacks in favor of increased pay will help the company improve its productivity, reduce employee turnover and better the customer experience, ultimately leading to more sales, all without forcing the company to raise prices. 

"These share repurchases benefit an increasingly narrow group of people, including the six Walton family heirs," said Ruetschlin, in a statement. "But buybacks do not improve the fundamentals of the firm. If the funds were used to raise the pay of the 825,000 low paid workers, it would not harm Walmart's competitive ability and would add no cost to the consumer."

[See a collection of political cartoons on the budget and deficit.]

For a company whose sales have been dropping for several quarters now – one executive even recently asked "Where are all the customers? And where's their money?" – that looks like a pretty good deal. In a way, Walmart's own pursuit of basement-level wages is akin to cutting off its nose to spite its face, as more purchasing power from low-income workers would boost the economy – and likely increase sales at Walmart.

Of course, Walmart is by no means the only company making huge profits while leaving its workers to piece together funds from various federal programs. McDonald's even advises its workers to apply for food stamps, while big box retailers and fast food restaurants alike are notorious for doing all they can to prevent their workers from organizing, and perhaps making a collective push for better pay. But due to Walmart's position as the largest private employer in the country, it has the unique ability to drag other companies along behind it. And again, more purchasing power for low-income workers likely means more sales for Walmart.

Now, Congress could just do the sensible thing and raise the minimum wage – and even peg it to inflation, like New Jersey just did – which would render this discussion largely moot. President Obama recently threw his support behind a bill that would increase the minimum wage to $10.10, even higher than the $9 he had called for previously. Such a move would finally get the wage back to where it was in the 1960s, ending decades of declines in its purchasing power.

Barring that, however, there's a compelling case that Walmart would be doing itself a favor by boosting its pay, which is a move it can afford anyway. Perhaps then it could even stop holding food drives for its own employees.

  • Read Bran Bannon: 50 Years After JFK, Millennials Offer Hope for America's Future
  • Read Peter Roff: Why Trey Radel Must Resign After Pleading Guilty to Cocaine Charge
  • Check out U.S. News Weekly, now available on iPad