Thursday, November 14, 2013

Walmart suffers the Walmart effect

The Washington Post’s Wonkblog posted an article Thursday on America’s bifurcated economy and retailers’ holiday prospects. It seems Macy’s, which caters to fairly affluent folks, expects a solid Christmas, whereas Walmart “decreased its earnings projections for the holiday season, citing the poor financial state of its core demographic.”

The article included this extraordinary statistic: 18 percent of all food stamp disbursements are spent at Walmart! I was curious to know where that figure came from; according to the Wall Street Journal, it comes from Walmart itself:

Walmart estimates it rakes in about 18% of total U.S. outlays on food stamps. That would mean it pulled in $14 billion of the $80 billion the USDA says was appropriated for food stamps in the year ended in September 2012.

It would be interesting to know how much of that $14 billion is being spent by Walmart associates. The company has long been criticized for paying its workers so meagerly that they must seek government assistance. To take one example, Ohio disburses about $2 million in food stamps to nearly 15,000 Walmart employees and family members in a typical month, according to a newspaper investigation. (There are roughly 50,000 Walmart associates in the state.)

Moreover, Walmart gargantuan influence drives down wages at other retailers. Every Walmart that opens in a county decreases wages in the “general merchandise” sector by 1 percent, according to this study (PDF).

The company's defenders insist this is just good old-fashioned capitalism at work. Yet Walmart could increase its workers wages by 50 percent without shortchanging stockholders, according to CNN Money/Fortune senior editor Stephen Gandel. And he’s not just handwaving; he did the math. Read his article: His figures indicate average salaries could rise from $22,000 to $33,000 and still leave investors with a 20 percent ROE.

So let’s review. Walmart’s sales are hurting because low-income Americans are strapped. Walmart is a big part of the reason they are strapped. Walmart could raise its workers’ salaries significantly without harming its financial performance. States could then save millions of dollars they are now spending on food stamps and Medicaid. Other retailers might be able to pay their workers a bit more. Folks might use their raises to buy more stuff at Walmart.

There seems to be a moral here, but darned if I can figure out what it is. 

1 comment:

  1. Maybe Walmart lowered its projections in part because of the cut in SNAP funding, and further projected cuts.
    Considering that, I've been getting an ironic chuckle out of the recent frequently run Walmart TV ad in which smiling employees rave about what a wonderful company they work for.
    That also comes on the heels of Walmart announcing it is going to try to get the jump on all other retailers with Thanksgiving Day openings -- and reports that employees don't have any option about whether to work the holiday hours.