WASHINGTON — A report released by the staff of a group of House Democratic lawmakers on Thursday contends the low wages and benefits that Wal-Mart Stores Inc. pays its employees may be costing taxpayers millions of dollars because the retail giant’s workers and dependents are forced to rely more on public-assistance programs.
This story first appeared in the May 31, 2013 issue of WWD. Subscribe Today.
“Wal-Mart plays a leading role in this story [of income inequality and wage stagnation threatening the middle class],” the report said. “Its business model has long relied upon strictly controlled labor costs: low wages, inconsiderable benefits and aggressive avoidance of collective bargaining with its employees.”
The 20-page report, titled “The Low-Wage Drag on Our Economy: Wal-Mart’s Low Wages and Their Effect on Taxpayers and Economic Growth,” draws from new demographic data released by Wisconsin’s Medicaid program and was prepared by the Democratic staff of the House Committee on Education and the Workforce. As the largest private-sector employer in the U.S., the report stated that Wal-Mart’s business model “exerts considerable downward pressure on wages throughout the retail sector and the broader economy.
“Taxpayer-funded public benefit programs make up the difference between Wal-Mart’s low wages and the costs of subsistence,” said the report, which found that “a single 300-employee Wal-Mart Supercenter in Wisconsin may cost taxpayers anywhere from $904,542 to nearly $1.75 million per year, or about $5,815 per employee.”
Wal-Mart operates 100 stores in Wisconsin, 75 of which are Wal-Mart Supercenters, according to the report.
“Wal-Mart is the nation’s largest private-sector employer, yet they pay such low wages that many of its workers are unable to provide their families with the necessities of life,” said Rep. George Miller (D., Calif.), senior Democrat on the committee. “The labor policies of Wal-Mart and those of companies that emulate its low-road approach end up leaving taxpayers holding the bag.”
Miller has sponsored a bill in the House that would raise the federal minimum wage to $10 an hour from the current $7.25 in three steps and index it to inflation. He argues that more than 30 million Americans would see a raise from this legislation and an estimated 18 million children would also benefit.
Low-wage compensation programs lead to higher costs associated with programs such as housing assistance, food stamp programs, child-care subsidies, energy assistance and reduced school meals, according to the report, which outlines the negative impact low-wage compensation policies like that of Wal-Mart have on the economy. It also recommends policies to address the issue, including efforts to strengthen worker’s rights, increase the minimum wage and narrow the gender pay gap.
“Workers with more money in their pockets also need less public assistance,” the report concluded. “In this way, increased wages in the retail sector can lead to a virtuous cycle that promotes economic growth while reducing the deficit through a larger tax base and less need for public assistance.”
Wal-Mart did not respond to a request for comment on the report.