As we all know, the founder of the Ford famously doubled the wages of his factory worker in 1914, to the shock of other automobile manufacturers. Ford’s motives, admittedly, were mixed. He mostly wanted to stop high employee turnover at his factories, which were driving employee costs up.
Ford also had another incentive, however, and that’s the one that has gone down in history. He understood that if he paid his workers a living wage, they would be able to afford to purchase his Model T.
It’s hard not to think about this episode from our not-so-distant past when reading about the latest woes at Wal-Mart.
In company emails that came into the possession of Bloomberg News last week, Wal-Mart executives expressed dismay over the company’s weak performance for the first several days of February. “Sales to date are a total disaster,” wrote Jerry Murray, a Wal-Mart vice-president.
“Where are all the customers? And where’s their money?” wrote Cameron Geiger, another Wal-Mart vice-president.
Shoppers, it appeared, had simply closed their pocketbooks.
Executive emails went on to blame the increase in the Social Security tax that started on January 1, when temporary rollbacks in the rate that were put in place during the economic downturn expired. Also cited as culprits: a delay in federal tax refunds, falling consumer confidence, the ever-faltering economy and the continued unemployment woes of would-be shoppers.
They managed, at least according to what Bloomberg made public, to avoid blaming a rise in the price of gas, which increased from an average cost of $3.29 a gallon on January 18 to $3.73 today, an increase of 13% over the course of one month.
I need to point out here that a company spokesman said the emails were “not entirely accurate.” Nonetheless, these missives need to be taken seriously because Wal-Mart has been one of the best canaries in the coalmine for our downwardly mobile society for years, with executives there among the first to note such recessions trends as consumers milling about stores the day before cash and other benefit transfers occur, only to mob the cash registers at 12:01 a.m.
These emails offer no exception to the company’s excellent predicting track record, with CEO Bill Simon exhorting his troops to fight in the current “tougher economic environment” for “a bigger share of a smaller consumer spending pie.”
The only part Wal-Mart executives missed? The role of their company, and other companies like Wal-Mart, in our ongoing personal financial morass.
According to Wal-Mart’s figures, the average associate earns $12.57 an hour. Since many Wal-Mart employees do not work full-time, that money is often not enough to keep them out of poverty. They have a disproportionate tendency to be living close enough to the edge to be eligible for food stamps, Medicaid, and other government programs meant to aid low-income households.
Moreover, the biggest beneficiaries of Wal-Mart’s low prices are not consumers, not their employees, but the descendants of company founder Sam Walton. Their collective net worth was recently estimated by the Economic Policy Institute to be equal to that of bottom 41.5 percent of American families.
Imagine what good Wal-Mart could do if, instead of obsessing about grabbing “ a bigger share of a smaller consumer pie,” company executives began to ponder ways to increase the size of that monetary dish. Here’s one thought: they could publicly support President Barack Obama’s call to increase the federal minimum wage to $9 an hour. As the White House has pointed out, they’ve supported such initiatives in the past.
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