By Frederick Reese
Mint Press News, February 10, 2014
… Per the Huffington Post, half of Wal-Mart’s hourly associates in the U.S. make less than $10 per hour, with most who make more having been noted for extraordinary service.
“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,” Sam Walton, the founder of Wal-Mart once said. ...
MintPress conducted a study in an attempt to find evidence that would support a base increase in salary for the nation’s largest retailers. The study focused on Wal-Mart, Target and Sears Holdings – the parent company of K-Mart and Sears. As a control, the study also included Costco – which is known for paying its employees above industry standards. Reviewing Securities and Exchange Commission filings, court records and investors’ statements, MintPress attempted to ascertain in definitive terms if these retailers can pay higher wages, and if they can, what may be the reason not to.
The study concluded that while the major employers can raise the minimum wages of their employees, there are business decisions in play, mostly concerning the companies’ stock market position, that make concessions to employees’ needs and demands unfeasible, undesirable or of low priority.
Running lean
It is easy to point at Wal-Mart and see the perceived injustices of half of the company’s associates making less than $10 per hour. Wal-Mart – the largest private employer in the U.S. – earned nearly $500 billion in sales worldwide in 2013. The company posted an estimated five-dollar increase in its common share value and reported approximately $15 billion in net profit last year, according to the company’s 10-Q filing.
Despite this, Wal-Mart – in at least 21 states – has the largest number of employees on publicly-funded health insurance than any other company, per Making Change at Wal-Mart, a pro-Wal-Mart employee advocacy group. It is estimated that Wal-Mart employees cost taxpayers nationwide more than $1 billion per year in subsidized benefits.
Wal-Mart and Target both also offer the highest CEO compensation of any Fortune 500 companies. Target CEO Gregg W. Steinhafel currently has a compensation package of $19 million, with a base salary of $1.5 million, while Wal-Mart’s Michael Duke – who will be replaced by C. Douglas McMillion on Feb. 1 – has a compensation package exceeding $20 million. In contrast, Costco’s W. Craig Jelinek has a compensation package of $2.2 million, based on a salary of $350,000, and Sears Holdings’ Edward Lampert has an annual salary of one dollar, with an incentive package that can reach as much as $6.5 million.
Looking deeper at Wal-Mart and the other “big-box” retailers, however, reveals interesting facts. In order to compare the four companies – which use different accounting measures – more simply, MintPress used a per-week average calculation of the companies’ October/November SEC reporting in its analysis. ...
... Costco – the nation’s second-largest retailer – manages to run its business with an efficiency at least twice that of Wal-Mart or Target – the third-largest retailer. ...
Costco – by just about every measure – is atypical from other “big-box” stores. During a time where “big-box” sales were stagnant or in decline, Costco saw 39 percent growth and a doubling of its stock price over the last year. During a time where the major retailers are increasingly seeing strikes and labor shortages, Costco has never experienced a significant labor issue. While the average sales associate hourly wage for Wal-Mart and Target is $8.88 and $8.37, respectively, it’s $12.08 for Costco.
Despite this, a look at Walmart’s and Target’s stock price histories does not reflect a significant reflection of these realities. While Wal-Mart’s total receipts only increased 1.5 percent from 2012 to 2013, the company’s common stock price grew 6.5 percent. In fact, Wal-Mart’s stock price has been bullish since 2010 – despite the fact that revenue dropped in 2011.
A large part of this discrepancy is the fact that Wal-Mart is aggressively manipulating its stock price. In June, Wal-Mart authorized a new $15 billion share buyback program, which is the latest in a string of buybacks that saw the company buying roughly $36 billion of its own stock over the last four years. Doing this has lent the company the image of health at a time where online companies such as Amazon.com are stealing away formerly faithful Walmart customers daily, and where the company is floundering in setting roots in the emerging markets. …
While not offering a buyback may tarnish investors’ confidence, the investment into the companies’ employees would lower employee turnover. With a retail industry average of 24-percent turnover for full-time employees and 67 percent for part-time employees, a reduction can lead to happier, more productive workers and a healthier bottom-line. As a point-of-reference, Costco has a full-time turnover rate of 6 percent and a part-time turnover rate of 22 percent. …
Costco’s example is a reflection of its guiding philosophy.
“At Costco, we know good wages are good business,” said Jeff Long, senior vice president. “Our employees are a big reason why our sales per square foot is almost double that of our nearest competitor. Instead of minimizing wages, we know it’s a lot more profitable for the long term to minimize employee turnover and maximize productivity and commitment, product value, customer service and company reputation.” ...
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