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New Study: Wal-Mart Wage Increase Would Not Affect Prices

The UC Berkeley Center for Labor Research and Education released today a new study showing that increasing wages at big box retailers would significantly impact the life quality of low-income workers. Not only that, but such a wage increase would minimally affect store prices. Paying less than 1% more each time you shopped at Wal-Mart would translate into a 10% raise for all store employees.

Wal-Mart consistently uses “low prices” as an excuse for everything from low wages to lax product standards. The fact that this report shows that higher wages would not significantly affect those “low prices” should bring people on BOTH sides of the Wal-Mart debate come together in favor of it.

Click here to download UC Berkeley’s full report.

Wal-Mart could increase its minimum wage to $10 per hour and greatly boost the well-being of its low-income workers with little financial impact on most shoppers, says a study released today by the University of California at Berkeley’s Center for Labor Research and Education.

Campus labor center researchers report that a “big box living wage” ordinance would provide significant and concentrated benefits to workers, mostly members of low-income families, while consumers across the income spectrum would share the costs in small increments.

In 2006, the Chicago City Council passed an ordinance that would have required retailers such as Wal-Mart to pay a $10 per hour minimum wage, but the ordinance was vetoed. Researchers estimate that starting wages for most Wal-Mart positions range from $7 to $8 an hour.

The labor center study, “Living Wage Policies and Wal-Mart: How a Higher Wage Standard Would Impact Wal-Mart Workers and Shoppers,” concludes that if Wal-Mart hiked its minimum wage to $10 per hour and in the extreme case, passed on costs fully to consumers, the average impact on a Wal-Mart shopper would be higher product prices of 0.9 percent.

The study finds that close to half of the wage income gain, some 46.3 percent, would accrue to workers living below 200 percent of the federal poverty level. Less than one-third, or 29.3 percent, of the impact of the price increase would be borne by shoppers with incomes below 200 percent of the federal poverty level.

“Big box living wage laws can serve to mitigate the negative impacts on workers of the Wal-Mart model, at only a small cost to consumers,” said Ken Jacobs, chair of the labor center.

Other key findings include:

Increasing Wal-Mart’s minimum wage wages to $10 per hour would contribute to a payroll of $2.38 billion a year, a 9.3 percent increase over the retailers’ current payroll.

Poor and low-income Wal-Mart workers could expect to earn an additional $1,020 to $4,640 a year in pre-tax income, depending on what they earn now and whether they work part-time or full-time.

If Wal-Mart shoppers were asked to absorb all of the wage increase, the average impact would be a price increase equivalent to 36 cents per shopping trip or $9.70 per year, for the store’s average consumer, who spends $1,088 per year at Wal-Mart.

High-spending Wal-Mart shoppers, (the 12.5 percent of store customers who account for 54 percent of all Wal-Mart sales and average expenditures of $9,775 per year) would see an additional cost of $1.47 per shopping trip, or up to $87.98 a year. The study estimates that 3.4 percent of Wal-Mart shoppers are both high-spending and low-income.

The study uses data from statistician Richard Drogin’s analysis of Wal-Mart payroll data, the March 2005 U.S. Current Population Survey, ACNielsen’s U.S. Homescan Consumer Panel data about consumer attitudes and loyalty, and Wal-Mart’s own data on U.S. sales and customers.

The report’s authors include Jacobs, researchers Arindrajit Dube and Dave Graham-Squire of the UC Berkeley Labor Center, and Stephanie Luce, an associate professor and research director at the University of Massachusetts, Amherst Labor Center.

The UC Berkeley Labor Center today also released a second study, in which researchers Dube and Bill Lester found that Wal-Mart store openings lead to the replacement of better paying jobs with jobs that pay less and are less likely to provide health benefits. Wal-Mart’s entry also drives wages and benefits down for workers in competing industry segments, such as grocery stores, their report says.

To download the reports, go to http://laborcenter.berkeley.edu.

###

Posted by Alex Goldschmidt on Wednesday, December 05, 2007

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COMMENTS

Walmart likes to make economic arguments for stiffing its employees and suppliers, but it’s really all about control.

I don’t know if Sam Walton was mean to his kids or not, but they certainly have developed into petty tyrants. Their opposition to unions isn’t economic it’s personal.

That this is so can be seen in the actions in Canada where profitable stores were closed just to avoid having to deal with organized labor. Paying a living wage would imply that some other group has some input to how their firm is run. This they won’t grant without a fight.

Henry Ford learned this lesson the hard way, but it seems that it needs to be relearned again every few generations.

robertdfeinman in Long Island, NY
Thursday, December 06 at 02:12 PM

robertdfeinman:I had made reference in several of my earlier posts to the University of Pennsylvania,2004 study on poverty rates in counties gaining a WalMart.Now Berkeley has come out with a second study(another thread) with similar findings. I would be curious if you have any thoughts,that you would care to share, about the implications re:WalMart should Huckabee get either the GOP nomination,or the presidency??(I go read the” Writing on the Wal” everyday,now.)

ddrb in
Thursday, December 06 at 02:49 PM

P.S.:May I ask,have you ever read “In Sam We Trust” ,by Bob Ortega,yet? Reams of documented info on genesis of company,through Sam’s death.Terrific financial read by the former WSJ reporter,Ortega.

ddrb in
Thursday, December 06 at 02:53 PM

...petty tyrants...

My first glimpse under the Wal-Mart smiley mask revealed an astonishng belligerence all the way up the corporate ladder. A belligerence that in many cases was in direct opposition to good business practices.

If Wal-Mart shoppers were asked to absorb all of the wage increase, the average impact would be a price increase equivalent to 36 cents per shopping trip or $9.70 per year,

Would that mean that Wal-Mart would only ‘save’ us $2,490.30 per year?

Ken V in Texas
Thursday, December 06 at 03:25 PM

ddrb:
We are all flattered that you read TWOTW. Why don’t you comment on the site?

As to the candidates, I mostly ignore the whole race. Too much of it is devoted to personalities and speculations about what candidates will do compared with what they say they will do. If anyone still needs to be convinced that the two don’t have much connection one only has to look at the record of the current incumbent.

To state my position, I think any of the Dems will be better for more people than any of the Repubs. I also don’t think that any of the front runners will pursue policies much different from the others. There is just too much institutional inertia for anyone to make big changes.

By this I mean that both parties owe their souls to big business. It is how they finance their campaigns. The Dems will probably throw some bones to the poor and labor interests, but that’s about it.

The wave of new idealists that have been brought on board by the blogosphere will be disappointed if they expect to see radical change. Some are already expressing unhappiness with the modest changes that a Dem congress has made so far. I hope they won’t get turned of by the lack of progress and continue to push for change.

robertdfeinman in Long Island, NY
Thursday, December 06 at 04:50 PM

robertfeinman: That’s more than gracious of you ,Robert,and thank you for the invitation.It is troubling to me that we have seemingly become a nation of consumers,rather than citizens,first. Accordingly,and sadly,it would follow that being slaves to consumption(conspicuous or otherwise) it is logical we would also have corporate masters in positions of authority. AS long as we define ourselves by what we have instead of what we are and aspire to be,I don’t see an immediate impetus for an epiphany,either.I am curious though as to the impact of the subprime meltdown in the coming year,and if a new perspective on priorities might emerge nationally.

ddrb in
Thursday, December 06 at 06:54 PM

BTW: The Bob Ortega book is no longer in print,but can be obtained at Amazon and is well worth th effort.(I believe he is now a Professor,teaching in Canada now.)

ddrb in
Thursday, December 06 at 06:58 PM

you guys and morons actually buy all this govt and other bs studies with no merit?these govt funded places lie all the time and their stats can be easily debunked,.

matthew vantress in gresham oregon
Thursday, December 06 at 07:11 PM

Ken,

“If Wal-Mart shoppers were asked to absorb all of the wage increase, the average impact would be a price increase equivalent to 36 cents per shopping trip or $9.70 per year,”

Wouldn’t the amount of price increase, be dependant upon how much the wage increase is? If SDV’s Costco wage of $17.00 an hour average is used, that would require a $7.00 an hour wage raise, therefore, the amount of price increase might be a little bit higher than claimed in your statement.

Tommy in
Thursday, December 06 at 10:13 PM

only the filthy spoiled rich can afford to shop at costco regularly with all their assinine prices.them import dam near all their stuff from china and overseas as well.

matthew vantress in gresham oregon
Friday, December 07 at 03:31 AM

Ok I call for all anti WM posters on WMW to boycott Matthew. I say we also boycott WMW unless they boot Matthew from the site. Strength in numbers, lets get this done. Nobody acknowledge the existence of Matthew Vantress and everyone refuse to post unless Matthew is banned from WMW. We can do this people.

Sick of WM in
Friday, December 07 at 09:18 AM

...claimed in your statement.

It wasn’t my statement. It was taken out of the body of the report.

Ken V in Texas
Friday, December 07 at 09:33 AM

Ken,

It may not have been YOUR statement, but YOU used it to make YOUR point. What is your comment to MY point?

Tommy in
Friday, December 07 at 11:51 AM

.. MY point?

What point? If Wal-Mart paid as much as Costco it would cost Wal-Mart more. I’ll give you that point.

Ken V in Texas
Friday, December 07 at 12:55 PM

“you guys and morons actually buy all this govt and other bs studies with no merit?these govt funded places lie all the time and their stats can be easily debunked,.’

matthew vantress in gresham oregon
Thursday, December 06 at 07:11 PM

O.K. vantress. How’s this for unmerited bs from Sam Walton himself-

Wal-Mart founder Sam Walton once said, “I pay low wages. I can take advantage of that. We’re going to be successful, but the basis is a very low-wage, low-benefit model of employment.”
http://en.wikipedia.org/wiki/Criticism_of_Wal-Mart#_note-
iswalmartgood

“Is Wal-Mart Good for America?” PBS. November 16, 2004. Retrieved on February 24, 2007.

WalMart- We are a poverty engine with the slight of hand to fool vantress types.

“Few things are harder to put up with than the annoyance of a good example”
Mark Twain

SanDiegoView in
Tuesday, December 11 at 02:51 AM

come up with something new and truthful sdv.not the same old tired and untrue propaganda you always post on here.big deal what walton said.you in the media always twist what people say.

matthew vantress in gresham oregon
Tuesday, December 11 at 06:24 AM

“same old tired post thats not getting you anywhere.”

matthew vantress in gresham oregon
Saturday, December 08 at 06:17 AM

Mirror on the Wall in Reality Central
Tuesday, December 11 at 08:53 AM

matthew

Are you calling Sam Walton a liar or just disavowing his business practices?

Soupy Sales in
Thursday, December 13 at 04:09 AM

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