Harold Meyerson: To reduce handouts, get Wal-Mart to pay workers a living wage

Published: Thursday, Jul. 18, 2013 - 12:00 am | Page 11A

For Republicans who want to cut the number of food stamp recipients, here's a helpful suggestion: Support the ordinance passed last week by the D.C. Council, which required big-box stores like Wal-Mart to pay their employees at least $12.50 an hour.

On average, Wal-Mart pays its workers $12.67 an hour – which means that a huge number of its 1.4 million U.S. employees make a good deal less than that. By paying so little, the Bentonville, Ark., behemoth impels thousands of its employees to use food stamps to feed their families and Medicaid to pay their doctor bills. It compels taxpayers to pick up a tab that wouldn't even exist if the company paid its workers enough to get them out of poverty.

How many such workers go on the public rolls? Some states occasionally survey where those employees work, and Wal-Mart almost invariably tops their lists. An Ohio tally in 2009, for instance, found that 15,246 Wal-Mart workers were Medicaid recipients and 12,731 were on food stamps. (McDonald's came in second in each category.) Last week's vote by the D.C. Council was just the latest round in the ongoing battle over whether Wal-Mart can open stores in the nation's largest Northeastern and West Coast cities.

The chain has encountered fierce resistance as it has sought to move into New York, Los Angeles, Chicago, Boston, San Francisco and now the nation's capital. Elected officials in those cities have feared that America's largest low-wage employer would compel long-established local retailers – most particularly, unionized supermarkets – to lower their wages.

A study by the Center for Labor Research and Education at the University of California, Berkeley, found that the opening of just one Wal-Mart store in a county where there previously had been none lowered the wages of general merchandise employees in that county by 1 percent, and grocery employees by 1.5 percent. The counties surveyed did not include those that encompassed the largest East and West Coast cities, where the gap between Wal-Mart's wages and those of other supermarkets is greatest.

But just the possibility that Wal-Mart might receive the go-ahead to open stores in Los Angeles in 2004 compelled that city's supermarket employees union to accept a management demand to establish a markedly lower pay scale for new hires. When subsequent public opposition to Wal-Mart's entry kept the chain largely out of L.A., the lower pay scale was eliminated the next time the union's contract was renegotiated.

With Wal-Mart repeatedly failing to gain entry into the nation's largest and most lucrative consumer markets, its investors might wonder why the company insists on maintaining its one-size-fits-all pay scale. Sam Walton founded and built the business in the rural South, where both the cost of living and the average pay levels were the lowest in the nation. However, it has not significantly adjusted its pay levels to accommodate the higher costs of living that workers in the nation's priciest cities must bear. Twelve bucks an hour goes a lot farther in Bentonville than it does in Brooklyn.

The executives at Costco, Wal-Mart's closest competitor, know how to run a profitable discount chain that pays workers well: Its average hourly wage is just over $19. That's why there are Costco outlets in the cities where Wal-Mart is still on the outside looking in.

By one measure, Wal-Mart's insistence on bringing Southern wages north contradicts the spirit of Southern regionalism on which many of America's (and now, the world's) largest companies have come to rely. Knowing that both the cost of living and wage scales are lower in the South, and that Southern states' right-to-work laws effectively blocked workers' efforts to form unions, Northern manufacturers began opening plants there decades ago.

Wal-Mart's goal is to erase that North-South difference by making every place the South. It commands such a large share of the nation's retail sector that it has compelled its suppliers to lower their own pay scales all along its supply chain to provide lower-cost products.

So, high-wage manufacturers say they have to go south, while low-wage retailers say they have to go north. In aggregate, the corporate message to Northern workers is: Heads, I win; tails, you lose.

That's why last week's vote by the D.C. Council has more than just local importance. Requiring the District of Columbia's big-box stores to pay a living wage ensures that incomes in this high-cost city won't be dragged down to the level of those in the low-cost rural South. The council's vote isn't the final word: D.C. Mayor Vincent Gray still could veto the measure. But with working-class incomes everywhere spiraling downward, he might conclude that the Wal-Mart-ization of work – and income – must be stopped at the District of Columbia line.

Harold Meyerson is editor-at-large of The American Prospect.

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