Why Wal-Mart and Unions Should Learn to Get Along
In January, the hacktivist network Anonymous leaked internal Wal-Mart Stores Inc. (NYSE:WMT) documents pertaining to the company’s labor relations policies to the activist group Occupy Wall Street. The documents outline how Wal-Mart managers should approach labor organization and unionization, and specifically how managers should position themselves in relation to OUR Walmart, a quasi-union entity advocating for better pay and working conditions for Wal-Mart associates.
The documents outline a corporate philosophy that is decidedly anti-union, and while Wal-Mart managers are generally legally prohibited from actively discouraging employees from organizing, Wal-Mart corporate clearly fosters an adverse environment for employees, mostly associates, seeking to improve working conditions and increase their pay.
Case in point, the National Labor Relations Board, an independent agency within the U.S. government tasked with monitoring compliance with federal labor laws, filed a formal complaint against Wal-Mart in January, alleging that the mega retailer violated the National Labor Relations Act when it unlawfully threatened, disciplined, and terminated employees on three occasions. The consolidated complaint names more than 60 Wal-Mart supervisors and one corporate officer, and involves more than 60 employees, 19 of whom were allegedly discharged illegally.
The complaint evolved out of a series of protests that were held over the past few years, many of which were organized at least in part by OUR Walmart, aimed at getting Wal-Mart to address its labor issues. Protestors advocated for higher pay and better working conditions, arguing that Wal-Mart fails to pay workers enough to cover the basic costs of living.
The protests were part of a broader movement among low- and minimum-wage workers to increase the federally mandated minimum wage that employers are allowed to pay employees. At $7.25 per hour, the minimum wage in the U.S. is generally believed to yield a full-time income barely high enough for even a single adult to feasibly live on. This idea is supported by America’s relatively high poverty rate: the Census Bureau calculates that there are 46.5 million people living in poverty in the country, or 15 percent of the population. These are single adults with incomes below the federal poverty guideline of $11,490 per year, families of two that earn less than $15,510 per year, families of three that earn less than $19,530 per year, and so on.
Moreover, the Hamilton Project, an economic public policy initiative conducted by the Brookings Institute, a nonpartisan think tank, reports that as many as 30 percent of working-age families with children earn incomes between 100 percent and 250 percent of the federal poverty limit. This income band doesn’t preclude people from needing federal assistance. The Hamilton Project found that more than 20 percent of these families rely on the Supplemental Nutrition Assistance Program for assistance, and that more than 30 percent rely on some form of social assistance.
This band of low-wage workers includes many Wal-Mart associates who earned an average hourly wage of less than $13 per hour in 2013. This has created an environment where the taxpayers end up subsidizing Wal-Mart’s low wages.
One of the milestones in the debate surrounding Wal-Mart’s labor practices was a May 2013 report published by the Democratic staff of the U.S. House Committee on Education and the Workforce titled, “The Low-Wage Drag on our Economy: Wal-Mart’s low wages and their effect on taxpayers and economic growth.” Using demographic data from Wisconsin, the report estimates that a single 300-person Wal-Mart Supercenter store costs taxpayers between $904,542 and $1,744,590 per year.
Wal-Mart isn’t the only offender here. A 2013 report from the University of California Berkley titled, “Fast Food, Poverty Wages: The Public Cost of Low-Wage Jobs in the Fast Food Industry,” found that 52 percent of the families whose income-earners work in frontline fast food jobs (cashiers, cooks, etc.) are enrolled in one or more public assistance programs, a rate nearly double the national average. This enrollment figure is so high because “many of them work in jobs that pay wages so low that their paychecks do not generate enough income to provide for life’s basic necessities.”
UC Berkley estimates that the annual cost of this public assistance is $7 billion, mostly ($3.9 billion) in Medicaid and Children’s Health Insurance Program spending. Another $1.04 billion is spent on food stamps, and $1.91 billion in Earned Income Tax Credit payments.
“One in five families with a member holding a fast food job has an income below the poverty line,” finds the report, “and 43 percent have an income two times the federal poverty level or less.”
If the conclusion is accurate, then it’s easy to see why Wal-Mart and other companies tied up in the living-wage debate want to keep union out of their hair. Companies can get away with paying low wages because the state will make up the difference. As the lowest cost retailer in most neighborhoods, Wal-Mart stands to profit from its own employees who can’t afford to shop elsewhere. Many fast food companies occupy the same niche.
This is a perverted kind of logic, though, and even from the perspective of Wal-Mart corporate it seems backwards. Low wages and a welfare state don’t do anyone any good, and in the past Wal-Mart itself appeared to recognize this. Big business has infamously stood against increases to the minimum wage, claiming that increasing the cost of labor would make the cost of doing business prohibitively high and, at minimum, freeze hiring. However, Wal-Mart — which is the biggest private employer in the United States — actually endorsed a minimum wage increase in 2007.
H. Lee Scott Jr., who was CEO of the retailer at the time, argued that, “The U.S. minimum wage of $5.15 an hour has not been raised in nearly a decade, and we believe it is out of date with the times … Our customers simply don’t have the money to buy basic necessities between paychecks.”
The data suggest that Wal-Mart is facing some of the same headwinds it was back in 2007; its customers don’t have the kind of discretionary income that Wal-Mart would like to see. The retailer missed top-line growth estimates in the fourth-quarter, under performance, which is indicative of a couple of things. As the world’s largest retailer, not just in terms of volume but in terms of the diversity of its inventory, Wal-Mart is pretty much a barometer for the economy.
The company’s business tends to rise and fall with the ebb and flow of the macroeconomic tide. So, generally speaking, Wal-Mart’s business is sensitive to exogenous factors such as unemployment and wage stagnation. It’s not secret that payroll growth has been low and that long-term unemployment remains an enormous problem, so it’s likely that these factors had an impact on Wal-Mart’s performance. The other side of this coin is that when the economy is healthy and consumers have discretionary income, Wal-Mart is healthy and earns more money.
But the economy is far from healthy, as pretty much anybody on Main Street can tell you, and one of the reasons why could be the decline of the kind of organized labor that Wal-Mart has fought so hard against. Consider the chart at the top of this page that has been floating around, courtesy of the left-leaning Center for American Progress.
A 2013 report from the University of California Berkley lends evidence to the idea that that the incomes of would-be Wal-Mart shoppers has stagnated over the past few years. The report, titled “Striking it Richer,” found that incomes at the top 1 percent of earners increased 31.4 percent between 2009 and 2012, compared to just 0.4 percent among the bottom 99 percent (this factoid was surely a slogan of the Occupy movement.) As much as 95 percent of all income gains made from 2009 to 2012 were made at the top 1 percent of the earning population.
Moreover, low-wage industries such as food services, retail, administrative support, and waste management services constituted 43 percent of net job growth during the recovery, according to the National Employment Law Project. Within these industries, 76 percent of job growth has occurred at the low-end of the scale. The organization showed that while low-wage occupations accounted for 21 percent of recession-era job losses, they accounted for 58 percent of recovery job gains — and while mid-wage occupations accounted for 60 percent of recession losses, they accounted for just 22 percent of recovery growth.
So how can unions and labor organizers help? The argument is this: the employees that unions ostensibly represent are only as economically secure as the companies they work for. Where corporations have an incentive to reduce costs in order to remain competitive and profitable, unions have an incentive to make sure their members are earning a livable wage. Employers and unions naturally push against each other, but this exercise should leave them both healthier at the end of the day.
In theory, unions establish the wage floor below what is unreasonable for an employee to work, while the business establishes the wage ceiling above what it can’t feasibly pay employees. If an employer can’t afford to pay a wage at or above the wage floor — that is, if an employer can’t afford to pay a living wage to employees and requires a government subsidy to make up the difference — then there is probably a flaw in the design of that business.