Two to GO!: The “Republicanization” of America: Depressed Wages, or How Walmart is Screwing Us All

Repost: Previously posted on January 30, 2014


What can you say about a major political party that thinks handing $9 billion in subsidies to oil companies and cutting taxes to near zero for rich people who will never spend everything they have, anyway, is good for this consumer-driven economy, while raising wages on those who have to spend every dollar they have is somehow bad for it? The first phrase that comes to mind can’t be “fiscally responsible.”

The current incarnation of the GOP is not your father’s Republican Party. These people are not fiscally responsible, and certainly not conservative. They’re really not that bright when it comes to economics.  For some reason, they have convinced themselves that low wages are necessary for most companies to survive, and that is just insane. If it’s necessary to survive, then consider the example of Costco. They makes a higher profit per store than Walmart, and have for many years. Here’s another: the Washington, DC City Council proposed a minimum wage of $12.50 last year, and Walmart killed plans for three stores. There was no mass exodus of companies from the District; just Walmart. (By the way, they settled on $11.50, and there is still no mass exodus.) If low wages are so necessary to compete, why do so few companies pay the minimum wage? Fewer than 15 percent of all workers make less than $10 per hour, and small businesses that pay the minimum wage or less are actually at higher risk of failure. Most companies that pay at or around minimum wage are in the discount retail and fast food industries. Yet supermarket chains, which have a much higher union membership and pay higher wages against a much tighter profit margin, seem to do quite well.

One of the dumbest arguments possible with regard to the minimum wage has to do with the notion that raising it will cause major inflation and severely increased unemployment and sink the economy. This is the major argument posed by the Republican Party. Read this Senate Republican Policy Committee (RPC) Policy Paper from last year, just before the party killed the last proposal to raise the minimum wage to $9 per hour. It’s declared “bad economic policy,” and then they note the reasons, which are incredibly disingenuousIt’s “Harmful to Young Workers” and “Harmful to all workers.” They posit that teens will have a hard time finding their first job, and that there will be a harmful uptick in unemployment, as companies slash workers by the millions.

In order to believe this malarkey, you would have to believe that businesses that pay minimum wage hire far more workers than they need. which is silly. In fact, Walmart itself is trying to cut the number of workers it uses now, and its sales are suffering as a result. How many discount retailers and fast food outlets are teeming with so many employees that you have to turn away those who want to help you? More likely, you have to steal something and make the sensors by the door go off to get them to notice you’re there, and even then, the odds are 50-50. Cheapskates who pay the minimum wage hire only what they need, because they only care about their profits. What they don’t realize is, if your business isn’t flush enough to handle a $3 an hour increase in the minimum wage for the minimal number of employees you’ve hired, you’ll probably be out of business soon, anyway.

The other problem with this “argument” is that it’s never happened before, and the economics of such a thing makes it unlikely to ever happen. I dare anyone to cite one time in the 75 years since the first minimum wage law passed, when an increase led to a spike in unemployment. You can’t, because it’s never happened. And it doesn’t happen because basic economics makes such a thing unlikely, if not impossible. As of 2012, there were about 3.6 million hourly workers making the federal minimum wage or less, which amounts to about two percent of all workers. Even if you believe in the “ripple effect” that many right wingers claim, how far could two percent of all workers ripple, really?

This is a consumer-driven economy, in any case. How will raising the wages of the lowest paid workers — people who have no choice but to spend every dollar they get, going to be anything but a boost to the economy? There are limits, of course. If you were talking about raising the minimum from its current $7.25 to $30 per hour, a case could reasonably be made for massive inflation, because that would affect more than half of all workers in the economy. But no one is talking about that sort of increase. The minimum would have to increase to $10.50 per hour to be roughly equivalent in buying power to the $1.60 minimum in 1968.  That means an increase to $10.10 would just cover the inflation we’ve already dealt with.

Years ago, a friend who owned a fast food franchise was practically apoplectic about the minimum wage increasing from $4.75 to $5.15 in 1997. He was a good guy, but he had little to no business sense. No matter how much advice he was given, he never took it. The main piece of advice he was given was to stop paying minimum wage. His turnover was constant; at one point, he had a staff of 37, and only two had worked there for more than three months. He told me he was going to raise the price of nearly everything on the menu to cover the increased cost if the 40-cent minimum wage increase. I told him he was crazy, and explained why.

His 37 employees worked many different shifts. During his busiest hours, he had 15 workers on duty at a time, including 11 who were making minimum wage, That meant his cost for those hours would go up about $5, including increased taxes. If he gave everyone else a 40¢ per hour raise, as well, his costs would increase $7 on those hours, which meant his sales would only have to increase about $10 in those hours to break even. Most other hours, the increase in costs would have to be less than $3, which would mean he’d need about $5 more in sales during those hours to break even. On the other hand, we lived in a city with a large service economy, which meant thousands of potential customers now had more disposable income and were more likely to come in for something to eat. And that’s the point. When wages rise, it stimulates the economy and lifts all boats. We understood this when Democrats ran the country, but with the GOP in charge, we seem to have forgotten.

Another thing; people don’t buy cheap Chinese-made crap because they want to, but because they have to. If working people made more money, they could afford more American-made goods, which would stimulate the economy even more, leading to a lot more jobs at decent wages. And though Republicans want you to forget this, more jobs and higher wages also means a lower deficit, with less pressure to raise taxes. If more people are paying taxes, we can pay down the debt and keep tax rates lower, which is supposedly what Republicans want. What is actually putting the pressure on to raise taxes is the lack of job creation and economic investment. All of those cuts affect real people, and actually increase the deficit.

Raising the minimum wage is also about basic fairness, not just to workers, but also to businesses that actually value their workers enough to pay a decent wage, which is most of them. Only a greedy subset of businesses refuses to pay a fair wage, and they create severe pressure on those companies who choose to play fair. There is simply no excuse for a business to record billions in profits, at the same time they are paying their employees so little as to need government assistance. Walmart made a gross profit of $120 billion in 2012, and paid shareholders $76 billion, with at least $38 billion to the Walton family. For ONE YEAR! They could have given their 1 million of their 1.2 million employees a $10,000 increase in compensation, and the Walton family still would have taken $32 billion. (Source)

How is it fair that one company like Costco can pay its employees a decent wage and provide them with health benefits, while one like Walmart can get away with paying theirs so little that they have to instruct them to apply for welfare and Medicaid? Why is one company’s bottom line more important than another’s?  Companies like Walmart have been allowed to drive down wages and drain taxpayers long enough. Yet, at the same time Republicans claim to care so deeply about the deficit, they champion companies who pay wages so low that taxpayers have to subsidize their employees.

This is another example of the “can’t do” attitude that has become part of the culture these days, because it’s been nurtured by today’s Republican Party. Back in the post-war era, when we became the greatest nation on the planet, we almost didn’t need a minimum wage. Most people who worked made enough money to live on, and our economy thrived, including large companies. Now, because of warped Republican economic policies, we watched the economy implode, mount record debt, and we’re told that companies that rake in billions in profits can’t afford to pay employees enough to keep them off welfare.

Still think these companies can’t afford to pay more? Think again.

Become a “Can Do” nation again. Vote Democratic.

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