Living Wage Policies and Wal-Mart: How a Higher Wage Standard Would Impact Wal-Mart Workers and Shoppers

Transcription

1 Living Wage Policies and Wal-Mart: How a Higher Wage Standard Would Impact Wal-Mart Workers and Shoppers Ken Jacobs UC Berkeley Center for Labor Research and Education May, 2008

2 Authors Arindrajit Dube UC Berkeley Institute for Research on Labor and Employment Dave Graham-Squire UC Berkeley Center for Labor Research and Education Ken Jacobs UC Berkeley Center for Labor Research and Education Stephanie Luce UMass Amherst Labor Relations and Research Center

3 Mayor vetoes Chicago's 'living wage' ordinance aimed at big retailers -- 9/11/2006 NNam Y. Huh, AP am Y. Huh, AP

4 Wal-Mart impact on Workers Wages and Benefits Wal-Mart workers earn an estimated 12.4% less than retail workers as a whole; 14.5% less than workers in large retail. Every 10 Wal-Marts in a state reduce retail wages 2%, employer sponsored health-insurance 1%. Average Wal-Marts per state: 50. Total reduction in retail workers earnings due to Wal-Mart presence in 2000: $4.5 Billion. Estimated Cost of Wal-Mart Workers use of public safety net programs in California in 2004: $86 million. Source: Arindrajit Dube, Graham-Squire, et al, 2007; Ken Jacobs, Arindrajit Dube 2004.

5 Impact on Consumer Prices Wal-Mart food prices 7% to 23% percent lower than competitors. Wal-Mart supercenters result in a price decrease of 6 to 7 percent for national brands at conventional supermarkets located within a five-mile radius. Jason Furman: Wal-Mart a Progressive Success Story. Lavoie and Volpe, 2008; Furman 2005

6 Hourly Workers by Wage Level Wage Level Workers % of Workers Under $ , % $8.00-$ , % Above $ , % Total 1,372, % Dube, Graham-Squire, Jacobs and Luce 2007

7 Impact of raise on low-wage Wal-Mart workers Earning under $10 hr Avg. Wage (2006) Avg. Annual Increase Part-Time 240,000 $8.18 $1,900 Full-Time 530,000 $8.35 $3,300 Total 770,000 $8.32 $2,800 Dube, Graham-Squire, Jacobs and Luce 2007

8 Nearly half of the payroll increase would go to workers in poor and low-income families Family Income Share of payroll increase Below 200% FPL 46.3% Over 200% FPL 53.7% Dube, Graham-Squire, Jacobs and Luce 2007

9 Increase necessary for a $10 minimum wage for Wal-Mart hourly employees. Increase in Wal-Mart s hourly payroll as a percent of total payroll Total cost to Wal-Mart 9.3% $2.38 billion Dube, Graham-Squire, Jacobs and Luce 2007

10 Annual Cost for Average Shopper (Assumes 100% pass through to prices) Total cost of raises $2,380,000 Total U.S. sales, 2006 $266,900,000 Raise as % of sales 0.9% Average customers per day 18,143,000 Average sale per customer $40.30 Cost Average Shopping Trip $0.36 Annual Cost Avg. Customer $9.70 Dube, Graham-Squire, Jacobs and Luce 2007

11 Wal-Mart Shoppers by Household Income Annual Household Income All Wal-Mart Shoppers Top tier of Wal- Mart Shoppers $70,000 or more 18% 23% $50,000 to $69,999 17% 23% $40,000 to $49,999 13% 14% $30,000 to $39,999 15% 15% $20,000 to $29,999 19% 9% All 100% 100% Top 6.25% of shoppers account for more than one-third of sales. Source: Hale 2004

12 Impact on Shoppers Percent of wage increase borne by 29.3% shoppers below 200% FPL Estimated additional annual cost/shopper $9.70 Cost to top-tier shoppers (highest spending 6.25%) Share of Wal-Mart shoppers, low-income and top-tier $ % Dube, Graham-Squire, Jacobs and Luce 2007

13 Comparative Impact Workers: Percent of wage increase going to workers 46.3% below 200% FPL Average Annual Increase in Earnings $2,800 Shoppers: Percent of wage increase borne by 29.3% shoppers below 200% FPL Estimated additional annual cost/shopper $9.70 Dube, Graham-Squire, Jacobs and Luce 2007

14 Impact of a higher wage standard on viability of big box retailers Living wage law = level playing field. Analysis of impact of minimum wage laws across contiguous counties or metro areas found no employment impact. Bank of America: after tax impact of a $0.50 per worker wage increase would be a decrease of $0.013 earnings per share. Wal-Mart 2007 earnings per share: $2.89. Reputation impact. Sources: Strasser and Lyon 2007; Engardio 2007; Dube, Lester, Reich 2007

15 Conclusions Big box living wage ordinance is unlikely to have a negative impact on retailers or the local economy. Big box laws provide a means of capturing the positive benefits to consumers of the big box retail model, while mitigating the negative impacts on workers.