The (Not So) Hidden Potential of Raising Wages

An in-depth study by Demos, out today, reveals what the economy, retail industry, and well-being of retail workers would look like if one thing changed: what if wages for workers were increased?

According to the report, a lot could happen.  This is because the retail sector boasts employment to more than 15 million workers, and has significant leverage over workplace standards across the entire supply chain. That enables retail to have a lot of influence on our economy, and the American standard of living.

The Demos Report- Retail’s Hidden Potential: How Rasing Wages Would Benefit Workers, the Industry and the Overall Economy

The Demos study proposes that, if a new wage floor for the lowest-paid retail workers was raised to $25,000 a year, up from $18,500 (the amount most cashiers make), then 700,000 American workers would be lifted out of poverty.  Raising these workers out of poverty would also help the 50% of workers in poverty who support their families to provide better lives for their kids and spouses as well.  And with this 27% pay raise, many who’s economic standing hovers just above the poverty line, would increase to above 150% over the poverty level.  That’s a lot of Americans raised out of poverty.

Not only would many people be lifted out of poverty, but more than 100,000 jobs would be added. The added number of jobs would raise the country’s Gross Domestic Product between $11.8 and $15.2 billion in a year. This is because families in poverty spend virtually 100% of income meeting basic needs.  Added dollars of income can be spent on extras, that in turn pump more money into the economy.

Oftentimes, the argument against raising wages, is of course that it would be too expensive for the company.  But the data by Demos shows that the raised wages would only cost a small fraction of total sales, around 1%.  And the cost to customers?  Just cents more- totaling about less than $30 more a year.

However, the sad truth is that the trend of deflated wages and retail workers struggling to make ends meet, will not end unless big retailers take action.  Retail is one of the nation’s leading industries, and accounts for about 6% of our GDP.  They have to the power to do so.

America’s largest retailer, Walmart, should be the leader in this movement. If Walmart were to make the standard hourly rate $12.25 an hour ( a number that they claim to be average for their associates, yet tends to be closer to $9) thousands of workers would enjoy poverty free lives, and many otherpeople would benefit indirectly.

Walmart employs 1.4 million workers and is the America’s largest private employer of any kind. The report cites the way in which Walmart has dominated the retail industry:

So far, Walmart has used this power to lower wages, cut hours, and deny benefits to its workforce, reducing the quality of retail jobs as a whole. The company’s history of using extreme methods to push down the cost of labor stretches back at least to the 1960s, when founder Sam Walton set up shell companies to dodge federal minimum wage laws that would have forced him to pay employees $1.15 an hour.30 While Walton was ultimately forced by federal courts to drop the scheme, Walmart’s continued practice of paying poverty-level wages and operating at the limits of the law to discourage unemployment and workers’ compensation claims and deter employees from working overtime has been well documented.31

The fact is, these huge corporations, including other big boxers like Target, can afford to pay their employees more, and they will benefit by doing so.  We think that its about time these retailers started investing in the millions of people who make their companies run.  Without them, they wouldn’t exist.