On February 20, 2015, Jim Puzzanghera, Shan Li and Sarah Parvenu write in the Los Angeles Times:
Wal-Mart’s advertising slogan is “Save money, live better,” but for years the world’s largest retailer has been criticized for not paying its workers enough to do that.
Now, facing rising minimum wages in California and other states, competition for employees and a poor corporate image, Wal-Mart Stores Inc. said Thursday it would raise the minimum pay to $9 an hour for nearly 40% of its U.S. workforce.
The action is a major milestone in the growing movement to lift the pay of the nation’s lowest-paid workers as the gap between rich and poor has widened. It’s also a nod to a strengthening economic recovery in which the labor market has expanded by more than 200,000 jobs every month, giving workers more choices.
Advocates for low-wage workers cheered the news after years of pressuring the company to raise wages. But they said the pay increases fell short of what workers need and demonstrated that the federal minimum wage needs to be raised.
Starting in April, about 500,000 Wal-Mart employees will get a raise to the new level — $1.75 an hour more than the federal minimum wage — as part of major changes to the company’s hiring, training, scheduling and compensation programs. Next February, current employees will receive another raise, to at least $10 an hour.
“We’re always trying to do the right thing and build a stronger business,” Chief Executive Doug McMillon said in a letter to employees. “We frequently get it right, but sometimes we don’t. When we don’t, we adjust.”
The changes will bump up the average hourly wage for a full-time worker to $13 an hour from $12.85, the company said. In addition, the company said it is raising the caps on pay ranges for jobs, giving hope to those in states such as California where the minimum wage already is $9 an hour.
Juanita Cason, 24, for instance, makes $9.40 an hour at the Baldwin Hills Wal-Mart, and a bump to at least $10 would help the single mother provide for her infant daughter, Zah’Mya.
Moreover, Cason said as she arranged pink scooters near the store’s toy area, “it would make it worth it to be here.”
Wal-Mart said the pay raises will cost the company more than $1 billion this fiscal year, which began Feb. 1. Wall Street balked: Shares fell $2.77, or 3.2%, to $83.52.
But higher wages for low-income workers lead to greater productivity, said Justin Wolfers, a senior fellow at the Peterson Institute for International Economics.
“You know the old saying ‘Pay peanuts, get monkeys’? If you want better than monkeys, you’ve got to pay a little bit more,” he said. “Paying above the minimum wage is by no means a radical step.”
The pay raises make sense for Wal-Mart, which will save money by not having to train new employees continually because of turnover, said Craig Johnson, president of Customer Growth Partners.
“You can never go wrong in retail by treating both customers and employees well, because your shareholders get treated well too,” he said. “If you need proof, look no further than Costco.”
Costco Wholesale Corp. has been praised by President Obama and others for starting workers at $11.50 an hour. It’s one of many companies, including Trader Joe’s and the Gap, that pay well above the federal minimum wage of $7.25.
Wal-Mart’s move could pressure low-wage competitors to increase wages too, Johnson said. But the effects could be limited.
“Target may be affected because their pay scale is more similar to Wal-Mart,” he said.
“But I don’t think people will leave good jobs at Safeway or Kroger to jump over to Wal-Mart.”
Wal-Mart, which has 1.3 million U.S. employees, has been under intense pressure from organized labor groups to raise its starting hourly wages and provide workers with more consistent hours. Employees held rallies and marches nationwide last year, highlighting the low pay.
The company’s image has taken a hit. Its rating fell 4% last year and ranked last among department and discount stores, according to the American Customer Satisfaction Index results released this week.
“We are so proud that by standing together we won raises for 500,000 Wal-Mart workers, whose families desperately need better pay and regular hours from the company we make billions for,” said Emily Wells, a leader of Organization United for Respect at Walmart, an organization of employees that advocates for better wages and hours.
She said, however, that the company could afford to pay its workers $15 an hour.
Sanders Mosley, 26, who works at the Baldwin Hills store, echoed that sentiment: “Ten dollars is pocket change. Give us a little love.”
Obama and many Democrats want to raise the federal minimum wage to $10.10 an hour.
Six in 10 Americans favor a higher minimum wage, according to poll results this week from the Associated Press and GfK Public Affairs.
But Republicans and some leading business groups oppose the move because they said it would lead companies to cut their workforces.
“Wal-Mart made its decision based upon what is best for their employees, their customers, their shareholders and the communities in which they operate,” the National Retail Federation pointed out, and there was no need for the government to mandate pay increases.
The White House said Wal-Mart was following a national trend in acting on its own to boost pay because Congress has failed to raise the minimum wage.
“Today’s announcement is another example of businesses, along with cities and states, taking action on their own to raise wages for their workers, recognizing that doing so can raise productivity, reduce turnover and improve morale,” White House spokesman Eric Schultz said.
Congressional action to raise that base has been stalled for years. The wage hasn’t increased since 2009, and now, 29 states and the District of Columbia have minimum wages above the federal standard, and seven of them are at $9 or higher.
Some cities, such as San Francisco and Seattle, have even higher minimum wages. Los Angeles Mayor Eric Garcetti wants to raise the city’s minimum wage to $13.25 by 2017.
http://www.latimes.com/business/la-fi-walmart-raise-20150220-story.html
Unfortunately, this article demonstrates that the media focus is ALWAYS on boosting wages, without a single mention or suggestion that companies transform to employee-owned companies. Even a wage boost to $15 per hour is a pittance in today’s reality of creeping inflation. But it appears that advocates believe that $15 per hour should be the target. And then what, mission accomplished, economic injustice solved, retreat?
The better solution to wage boosts, which inevitably are passed on in the form of higher consumer prices for products and services (inflationary spiral) is to institute an Employee Stock Ownership Plan (ESOP) to enable working people without savings to buy stock in their employer company and pay for it out of its future dividend yield––on the promise of the capital investment’s future income.
The ESOP provides access by employees to capital credit to buy company stock and pay for it in pre-tax dollars out of what the assets underneath that stock yield. Bank loans are made to the ESOP trust that represents employees, instead of to the company (current owners). The trust gives the lender a note and with the borrowed monies makes the investment in the company stock. The company then issues stock to the ESOP trust. The company now has the money, which otherwise could have been borrowed directly without the ESOP (benefiting current owners), to make the planned investment and repay the loan from pre-tax forecasted future capital earnings. The company promises the bank to make pre-tax full-dividend payments to the ESOP trust to enable the trust to replay the lender. Assuming that it would take five years for that capital investment to pay for itself, at the end of five years the employees now own the full stock value in the expanded company.
Companies can use the ESOP as the credit mechanism to create employee ownership in ratios up to a 100 percent leverage buyout. Nothing has been taken away from the existing owners. However, using the ESOP, the existing owners will surrender the exclusive right to acquire more ownership in the company and have a smaller percentage of ownership in the total company, but they have not been prevented from making a fair rate of return on their thus-far accumulated ownership shares because the company earns a rate of return throughout the process. After the loan has been paid off with pre-tax earnings, the employees will have more earnings from capital and they will have more consumer power to purchase products and services. Multiply this by tens of thousands of employee-owned companies and the economy revs up to grow dramatically.
ESOPs work as designed and optimized when the workers receive the full property rights as owners, including full voting rights, not simply treated as beneficial owners with power concentrated at the top of the company, without any accountability or transparency. Unfortunately, some ESOPs have been structured so that the rights, powers, and benefits of ownership remain concentrated in a small non-accountable elite controlling corporate and financial governance. When the employees are owners, dependent on their income from the company’s bottom line rather than through ordinary labor wages and benefits, the workers’ economic interests are more invested to see that their company succeeds. In this way, each person in the company is empowered as a labor worker and as a capital worker (owner) and inspired to work together as a team to make better operational decisions to serve and maximize value to their customers.
