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The Road from Minimum Wage to Maximum Subsidies

By: Jason Staloski
Blog Category: Minimum Wage & the Economy

Domestically, Wal-Mart employs 1.3 million people and grosses 17 billion in annual profits.  This makes them the largest private employer in the United States, and therefore, they set the standard for employee wages at other large retail chains across the country.[1] Over 800,000 of current full time employees at Wal-Mart are paid less than $25,000 a year, which equates to approximately $9.06 an hour.[2] Notwithstanding the billions in profit Wal-Mart continues to make annually, they have been unwilling to provide a sustainable salary to a majority of their employees.

Wal-Mart has devoted a large portion of profits to a share-buyback program. A share-buyback benefits a small group of investors and occurs when a company purchases their own public shares available on the exchange. This action consolidates the amount of owners in the company. Ergo, the same amounts of dividends are distributed over less people. The profit gained from this investment is not predicated on how the company performs. In 2012, Wal-Mart devoted 7.6 billion in buy backs.[3] While buybacks are advantageous for the primary investors of Wal-Mart, predominantly the Walton family, there is no evidence that these buy backs are beneficial to Wal-Mart as a retailer. The buy back program has been expanded over the past four years, and over that four-year period there has been no indication of increases in productivity or a net gain in earnings at Wal-Mart retail locations.

If Wal-Mart would repurpose this 7.6 billion from the buy back program into their workforce, they would be able to provide each employee making under $25,000 a $5.83 raise. This would take the average Wal-Mart employee from a rate of $9.06 an hour to $14.89 an hour. This raise would not only help the individual employee, it would benefit the American taxpayer. The low wage paid to Wal-Mart employee’s costs taxpayers between $900,00 and 1.74 million dollars per store.[4] These subsidies stem from employees not earning a livable wage. Wal-Mart employees rely on government programs for food, health coverage, housing, and transportation, in addition to their salary from the retail conglomerate.

If Wal-Mart would refocus their financial commitments to their front line employees, they would not only benefit their corporation and staff, but the American taxpayer as a whole.

The opinions expressed herein are strictly those of the author and do not necessarily reflect the opinions of the Widener Journal of Law, Economics & Race. 

[1] Ken Jacobs, David Graham-Squire and Stephanie Luce, “Living Wage Policies and Big Box Retail,” University at California Berkeley, Center for Labor Research and Education (April 2011), available at http://laborcenter.berkeley.edu/retail /bigbox_livingwage_policies11.pdf.

[2] Bill Simon, “Goldman Sachs 2013 Annual Global Retailing Conference,” Walmart presentation (September 11, 2013), available at http://az204679.vo.msecnd.net/media.documents/bill-simon-goldman-sachs-2013-presentation_130233858314846907.pdf.

[3] Renee Dudley, “Wal-Mart Approves New $15 Billion Share-Buyback Program,” Bloomberg  (June 7, 2013).

[4] Nick Hananuer, Testimony before the Subcommittee on Economic Policy, Senate Committee on Banking, Housing, and Urban Affairs (June 5, 2013).

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