Why Walmart's bait and switch matters

If the man sitting in the Oval Office honestly admitted he made his fortune from exploiting thousands of people, he'd...

Posted: Jan 14, 2018 11:24 AM
Updated: Jan 14, 2018 11:24 AM

If the man sitting in the Oval Office honestly admitted he made his fortune from exploiting thousands of people, he'd likely be enraged when people pointed out he's small-time compared to the Walton family. Year after year, the Walmart heirs prove no one comes close to their brand of exploitation, which they wrap in public relations fluff and deception.

This week was no exception. With much fanfare, Walmart announced it was raising its minimum starting wage to $11 an hour (from $10) and giving eligible workers a $1,000 bonus, tying its munificence to the recent Republican tax cut. The business media covered the story.

Yet that wasn't the only news Walmart made public.

On the same day, Walmart, with far less fanfare, also announced it would close dozens of Sam's Club wholesale stores, laying off thousands.

But there's a lot more to the story.

A number of companies, principally in the retail sector, are raising wages not because of their corporate generosity but simply because they need to compete for workers. With the unemployment rate relatively low (even as lots of people are still out of the labor force compared to pre-recession), basic economics dictates that workers will usually have more choices to look for higher pay.

Target, for example, announced it was raising its starting wage to $11 per hour in September 2017, and says it will raise it to $15 an hour by end of 2020. That was a move taken long before the tax cut was even in final draft form. So, Walmart's contention that the wage hike move is an outcome of the tax cut doesn't wash.

There is also a heavy dose of self-congratulation here, as if by doling out money, Walmart should earn a medal. But, let's look closely at the reality. If you worked 40 hours a week, 52 weeks a year at $11 per hour, with not a shred of time off, you would earn $22,880. The federal poverty rate for a family of four is $24,600 -- and the formula for the official poverty rate understates the difficulty of surviving at that income level.

And about that $1,000 bonus. Aside from the one-time nature of the payout that does nothing to boost workers' basic pay, a worker only qualifies for the full amount of that bonus after 20 years at the company. Walmart's high turnover rate means a very tiny percentage of its 1.5 million US workers will ever see the money. It's simply an almost cost-free PR stunt.

The Walmart heirs, a handful of people, were collectively worth in November 2017 well over $150 billion. For context, the federal minimum wage should be $19 per hour based on productivity over the last four decades. In fairness, the underpayment of workers compared to how productive they have been, and the shamefully low level of the federal minimum wage at $7.25 per hour, is a scandal engaged in by the government and sustained by thousands of companies, not just Walmart.

But, to top it off, while it trumpeted the piddling wage increase, the company was stabbing its Sam's Club workers in the back.

This entire approach is consistent with a company that is accused of hushing up bribery and is the target of a broad class-action suit on gender discrimination.

It has been the defendant in scores of cases, including class actions, or group suits, accusing the company of wage-law violations. Unlike other retailers, it would not sign on to a safety code in Bangladesh after the horrific 2012 fire at a facility where 55% of the product was destined for Walmart shelves. And, finally, taxpayers effectively underwrite the company through subsidies and Walmart workers' reliance on food stamps, health care and other support because their paychecks don't cover basic needs.

As the country's largest private employer, Walmart is often pointed to as the trendsetter. That is probably true, but perhaps not in the manufactured, rosy image its corporate executives and some in the Republican Party try to project. Walmart makes its profit by exploiting poverty -- the poverty of its workers and the communities where Walmart stores are often the only option. It's a business model that has steadily robbed workers and undermined the country's long-term prosperity.

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