Walmart’s increased starting pay is a good start but still not enough. Here’s why

 

By Rick Wartzman

Walmart raised its starting pay this week, and in so doing, the nation’s biggest employer highlighted what has been going right with the U.S. economy—and also precisely what’s wrong with it.

The move by the retail giant, which lifted its minimum wage to $14 an hour from $12, speaks in large part to the ongoing tightness of the labor market, with the unemployment rate in December matching a half-century low of 3.5%.

This didn’t happen by accident. Massive federal investments helped the economy rebound swiftly from the ill-effects of the pandemic. President Biden might not qualify as the second coming of FDR, but he has proven clearly that a vigorous government response is the right way to pull a country out of a crisis.

Indeed, even amid widespread concern that the Federal Reserve may keep boosting interest rates to the point of plunging us into a recession, some are expressing hope that we may avert a downturn altogether.

“We are on the verge of a soft landing, with rapidly falling inflation, plentiful employment, positive real wage growth, reduced wage inequality . . . a veritable ‘morning in America’ perhaps first in generations,” Arindrajit Dube, an economist at the University of Massachusetts Amherst, tweeted recently.

For its part, Walmart is not only reacting to broader economic forces, but also to its own ever-expanding sense of responsibility to its workers. Under CEO Doug McMillon, the company has increased hourly wages multiple times since 2015, while also relying more on full-time workers and less on part-timers, creating new career pathways, providing more skills training to frontline workers and opportunities for them to attend college, and improving other benefits.

It’s tough not to sneer at the Davos crowd as they talk about how it is up to corporations to save the world. The fact is, however, that Walmart will now make it a bit easier for several hundred thousand of its employees to get by. At some of its stores, the starting pay will go to as high as $19 an hour. That is a good thing.

But we must also recognize how Walmart—and, by extension, most of the rest of corporate America—is falling short.

After its latest wage bump, the average Walmart worker will bring in about $17.50 an hour, up from roughly $17 an hour. Based on the average hours clocked each week by the company’s 1.1 million full-timers and 500,000 or so part-timers, that comes out to a little over $29,000 a year. If you include just full-time workers, they’ll average $32,760 annually.

What is it like to try to make ends meet on less than $33,000 a year?

Everyone’s circumstances are different, of course, but you can get a pretty good picture from Steady, a digital app that, among other things, helps people with financial planning and budgeting. To avail themselves of these features, more than 2 million low-paid workers have hooked up their bank accounts to the Steady platform, giving the firm a direct peek into their lives.

In all, there are about 10,000 individuals on Steady who pull in $32,000 to $33,000 a year—Walmart’s average full-time pay. They are from all over the country and work in a variety of industries, including retail, healthcare, food services, and logistics.

On average, their monthly expenses exceed their income by $41. Their average savings account balance is all of $25. Sixty-eight percent use payday loans or advance-pay products to cover their bills.

“This is not a family-sustaining wage by any means,” says Lexi Gervis, Steady’s vice president of impact. “This is a paycheck-to-paycheck existence.”

The figures from Steady are shocking. But they’re not surprising. Any way you slice it—whether by overall economic output or productivity—the vast majority of working folks have not gotten their fair share of a growing pie over the past 50 years.

Why don’t companies pay more? There is no single reason, but this is certainly a huge factor: Despite lots of rhetoric to the contrary, corporations continue to favor the interests of shareholders over the well-being of their employees.

Meanwhile, with the federal minimum wage stuck at $7.25 an hour since 2009, Washington has abdicated any sense that “if people worked, they ought to make a living wage,” as the late Eugene Mittelman—who served as labor counsel for Republican senator Jacob Javits of New York—once described the bipartisan consensus on Capitol Hill. “This wasn’t economically driven,” Mittelman told me. “It was morally driven.”

As the years have passed, we as a society have become numb to the daily struggles of tens of millions of hardworking Americans who frequently find themselves confronted with god-awful choices: Should I pay rent or buy medicine? Heat my home or feed my kids?

We cheer when wages rise to $14 or $15 an hour, forgetting that this is not actually a living wage. For that, 8 in 10 Americans reside somewhere that requires at least $20 an hour—and, congressional paralysis notwithstanding, I believe that a government mandate will ultimately be the only way to get there.

The economy may manage a soft landing. But for all too many workers at Walmart and elsewhere, life remains unconscionably hard.


Rick Wartzman is the copresident of Bendable Labs, a technology, consulting, and research firm that specializes in the areas of lifelong learning, workforce development, and job quality. His most recent book is Still Broke: Walmart’s Remarkable Transformation and the Limits of Socially Conscious Capitalism.

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