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Just for the sake of stirring debate, here’s a defense of employee pay scales at Walmart

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I’m not saying I agree with the conclusions in THIS PIECE (or in the comments that follow it), but I thought you might find it interesting:

Per store, Walmart makes around $1.4 million/year…

Walmart’s stores are staffed on average by about 300 people who make on average $12.67 or ~$25k/year if they work full-time and take two weeks of unpaid vacation. $1.4mn profit per store /300 workers = ~$4,500. So that’s how much surplus value Walmart is “extracting” from labor, if you don’t factor in anything else like retaining earnings, paying shareholders, investing in new stores/products, etc. That’s a lot of trouble to make a measly $1.4mn! The only way it makes sense (for shareholders) is if volume is HUGE. Which it is.

Anyway, $3k or so is the upper limit of how much more each worker could earn under the current business model. Say it’s the difference between $25k and $30k. That’s certainly not nothing, but it does not represent such a qualitative difference in standard of living that anyone would consider Walmart employees to be well-paid if they all got the full $4,500.

So what else could be done other to increase that $4,500/year? Walmart could claw back some of their producer surplus from consumers by raising prices and using the proceeds to raise wages, which would constitute a simple redistribution from customers to employees assuming no money taken by management/ownership and completely inelastic consumer demand. Both assumptions are pretty heroic in this case. That would basically just shuffle cash from some poor people (Walmart’s customers) to other poor people (Walmart’s employees). Or they could reduce margins even further, but 3% is already pretty thin. Or they could raise margins by paying their suppliers (e.g. poor Chinese workers) even less, and give the extra profits to their American workers. They could redistribute salaries from management — their CEO makes $20 million to manage a company with $450 billion in revenues — but Walmart employs over 2 million people… we’re talking 10 bucks per worker per year if the CEO was paid nothing at all.

So any redistributionary choice that would fundamentally change the situation would seem to involve deciding which group of poor people are made worse off: Walmart’s customers, its employees, or its suppliers. The political equilibrium right now is a mix of employees and suppliers. Changing policy — say, by raising the minimum wage — involves changing two of those variables: one goes up, one goes down. There’s just not enough cash which can be taken from management to make all that much of a difference on a per worker basis, even if you reduced managements’ salaries to $0 and retained no profits for future investments or any other purpose. And per-worker profit is so low that there’s a pretty firm limit on how much more they can be paid.

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7 Comments

  1. Steverino

    Just off hand how much does the part time elderly gestapo greeter at Walmart make?

  2. Where I live Walmart has done away with the greeters. So 2 greeters at $6 an hour times 24 hours means they save $288 per day. The Walton family probably needs the money.

  3. Ted Biondo

    How many jobs have either of you created Steverino or Tex? Thanks for presenting the facts about the profit margin of Walmart, Pat, versus the wages.

  4. Brian Opsahl

    Ted, How many job’s and communitys got wipped out by walmart taking there American supported jobs overseas…?

    I can rememeber the adds that walmart used to run about how they saved this community and that one because of textile workers and shovel makers…now they buy all of there cheap crap from sweetshops and places that make 11 year olds work 16 hour days for little or no pay…TED…!! Thats who your supporting and glorifying as a business model….really Ted…!!

    Do you even care one bit about the Americans they screww over on a daily basis and the FACT that they pay so little they HELP there employees fillout the paperwork for food stamps and housing assistance….your ok with that…?

  5. Yeager

    Ted: Consumers create jobs. Businesses just meet the demand by creating the positions. It’s very simple economics: if we don’t buy things, there’s no need to hire people to make/sell those things. Businesses don’t just create positions because they get warm fuzzies from doing it. Businesses create positions because the market (read: consumers) demand it.

    So, to answer your smarmy and petty question: they’ve created lots of jobs. We all have.

    How many jobs have you created on the county board, Ted? According to your logic, none; since government can’t create jobs. But keep relying on your sound bite logic rather than absorbing any information, Ted. That approach is really serving you well.

  6. I probably created more jobs than you, Beyondo. Contrary to what you think, Liberals also create jobs. Probably better paying also. I worked for 47 years and had my own business for many of those years.

    By the way, in what branch of the military did you serve your country, or do you just slurp at the trough of freedom?

  7. Steverino

    Ted – Perhaps you should become a greeter at Walmart. You could demand to see the receipts of all the dead beat liberals and minorities that you loathe.

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