The Simple Path to a Living Wage at @Walmart
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The Simple Path to a Living Wage at Walmart

In the past week, both a senior editor at Fortune magazine and the liberal think tank Demos have made similar proposals for how Walmart could greatly … Read…

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Pending approvalOriginal post by Hamilton Nolan on Gawker

The Simple Path to a Living Wage at Walmart

The Simple Path to a Living Wage at Walmart

In the past week, both a senior editor at Fortune magazine and the liberal think tank Demos have made similar proposals for how Walmart could greatly increase worker wages without harming its business prospects. What is this mysterious financial magic?

The two proposals differ a bit in the details, but they use roughly the same mechanism to reach the same goal, so we'll go with Demos's proposal (described in full here) for ease of explanation. Basically, the argument is this: Walmart throws off enough cash in profits each year that it could easily raise the wages of its workers by about 50%, so that they all made about $25K per year, which is what activists are seeking. Currently, the company just uses that cash for other purposes. Like what? Well, Demos points out that Walmart spent $7.6 billion last year buying back its own stock shares, a maneuver designed to buoy the stock price and dividend payments. From the report:

Walmart's share buybacks further consolidated ownership of the company in the hands of the heirs to company founder Sam Walton, increasing the Walton family stake in the corporation to above 50 percent. In addition, the buybacks increased the value of ownership among the Waltons and the other remaining shareholders. Yet buybacks did nothing to boost Walmart's productivity or bottom line and had no direct benefit for Walmart's customers or frontline employees. Despite the lack of productive benefit, massive share buybacks at Walmart have become a regular occurrence: according to data compiled by Bloomberg, Walmart has bought back about $36 billion in stock in its four previous years, while in June 2013 announced a new $15 billion share repurchasing program at its annual shareholder meeting.

Demos estimates that if Walmart had dedicated last year's share repurchasing money to worker wages, it could have ensured that all employees working 32 hours or more per week made at least $25K per year. (Something that is not unknown in the retail world.)

The key to this plan is simply a realistic look at which stakeholders benefit from which economic decision. Buying back shares can be popular on Wall Street, but it doesn't change Walmart's actual business operations one whit. The money, then could either provide a living wage to close to a million workers who currently do not make enough to provide for their families, or it could be used to vastly increase he personal wealth of the richest and greediest family in America. This is a real choice. Neither path will bankrupt Walmart.

Something to think about,Walmart shoppers.

[Photo: AP]

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