LISSA'S: The Living Wage Ordinance Rears Its Head

LISSA’S: The Living Wage Ordinance Rears Its Head
By: Brian White

A "Black Sheep" when it comes to Wal-Mart's employee pay policy -- the "Living Wage," as it's been called.

This is the wage that would significantly up the amount of pay many Wal-Mart employees would see in their pockets while not affecting pricing very much from the consumer standpoint. Sounds like an oxymoron, doesn't it? Any slight upward movement in pricing would be seen by Wal-Mart's price-savvy customers, yet the retailer is constantly bombarded by accusations of low pay. How can it mesh the two for a solution?

Wal-Mart's pay scale could be improved, right?

One of Wal-Mart's largest public relations nightmares in the past ten years or so has been the lower pay and substandard benefits it provides the majority of its workers. Wal-Mart, though, is not alone here -- many retailers pay at the same level as Wal-Mart and most likely provide comparable benefit levels. But. Wal-Mart is the most visible retailer in the world -- and as such, it is the largest target by far. Just like Microsoft in the computer industry, the largest elephant in the room always attracts the most arrows.

But, could Wal-Mart really raise wages for many employees -- taking its own "minimum wage" to no less than $10 per hour -- and not cause any price increases for its customer base? That is the ticket -- Wal-Mart's customer base is the most price sensitive of any other retailer in any industry. Raise prices by a few cents on many items and many customers will recognize. Or, will they?

In a study by the University of California at Berkeley, the university's center for Labor Research and Education concluded that the world's largest retailer could increase its minimum wage to $10 per hour and greatly boost the well-being of its low-income workers with little financial impact on most shoppers. Sounds like a win-win solution, doesn't it?

What the research is:

The UoC's research, the implementation of a "big box living wage" ordinance would give many Wal-Mart workers a significant upgrade in pay and benefits (raising their standard of living) by spreading costs to the Wal-Mart customer base in such a way that consumer segments in multiple income spectra would share those costs in small, incremental ways. It's akin to implementing a small fee on your home phone bill somewhere in the call detail, but without affecting most home phone subscribers more than pocket change.

That may be a bad analogy, but it's appropriate. Would you notice if your home phone bill went up by $0.28 ever month? Probably not. Now, multiply that amount by over a hundred million home phone subscribers and what do you get? If you do the math, you'll get the idea pretty fast.
But then again, a Chicago city ordinance last year suggested and implemented what it called the "living wage ordinance" that would have required big-box retailers such as Wal-Mart to pay a $10 per hour minimum wage. The ordinance was eventually vetoed and was not put into effect after complaints from just about every big-box retailer (including Target). Going from an estimated average of $7 to $8 per hour for a basic Wal-Mart wage to at least $10 would have surely bankrupted the retail giant, right? Not quite.

What the research concluded:

In the UoC's labor center study, the overall conclusion was that Wal-Mart could indeed raise its own minimum wage to $10 per hour by passing on those overall costs fully to its consumer base. Want a number figure? The researchers suggested that the overall shopping bill increase most Wal-Mart customers would see would be in the area of 0.9%. As an example, you buy $250 worth of groceries, and your applicable increase based on that level would be $2.25. Would you notice such a small increase? Here's another: Buy a $1,300 flat-screen TV and you'd see $11.70 tacked on. Make a large difference to you?

Here are some facts released in the study:

*Increasing Wal-Mart's minimum wage wages to $10 per hour would contribute to a payroll of $2.38 billion a year, a 9.3 percent increase over the retailers' current payroll.

*Poor and low-income Wal-Mart workers could expect to earn an additional $1,020 to $4,640 a year in pre-tax income, depending on what they earn now and whether they work part-time or full-time.

*If Wal-Mart shoppers were asked to absorb all of the wage increase, the average impact would be a price increase equivalent to 36 cents per shopping trip or $9.70 per year, for the store's average consumer, who spends $1,088 per year at Wal-Mart.

*High-spending Wal-Mart shoppers, (the 12.5 percent of store customers who account for 54 percent of all Wal-Mart sales and average expenditures of $9,775 per year) would see an additional cost of $1.47 per shopping trip, or up to $87.98 a year. The study estimates that 3.4 percent of Wal-Mart shoppers are both high-spending and low-income.

The study also found that close to half of the wage income gain by Wal-Mart implementing a $10 per hour minimum wage -- or 46.3% -- would accrue to workers living below 200% of the federal poverty level. In other words, customer price increased would be used to basically subsidize living for those living at or near the poverty line. At least, an argument can be made for that point of view.

But then again, workers at Wal-Mart choose to work there and are choosing to accept the lower pay amounts the retailer gives. It's a free country where any worker can apply to and work for any company he or she chooses. The antithesis of that statement comes from liberal types, who argue that low-income and near-poverty workers have no choice than to work for Wal-Mart (or another low-paying company), and therefore that company should be required to pay a wage that brings a majority of workers out of living in or close to poverty.

Does government fiddling with private industry seem appropriate in a capitalistic society? According to conservative types, absolutely not.