The more workers are earning low wages, the less likely the economy will reach escape velocity
The retail sector has been a star of recent jobs reports. May’s numbers from the Department of Labor say it was responsible for adding 28,000 positions to the overall economy. It’s on an upward trend – the monthly retail employment number has averaged 20,000 for the past year.
Considering one in nine Americans work in, for or in stores ranging from the corner grocery to big box behemoths, this should be great news. And it would be – if these jobs paid anything resembling a living wage. But all too many of them don’t.
Actor Tom Cruise might have described Wal-Mart as a “role model” at last week’s annual shareholder meeting, but that’s only true if your definition of success is simply keeping people off the unemployment rolls.
If, however, you value things like a middle class salary, the potential for upward growth, or even something as basic as predictable and reliable work hours, the increasing importance of retail positions to our national economy is nothing to cheer about.
This week’s two-day strike by janitors against Target stores near the company’s Minneapolis corporate headquarters is just the latest evidence that that one of the United States’ fastest growing job categories is less than lucrative for a growing number of its workers. Among their issues: they are paid $8.50 an hour.
The Target janitors are not alone. Limited strikes against retailers ranging from Wal-Mart to Simply Fashion have taken place across the country over the past several months. In New York City, a 2012 survey by the Retail Action Project found that half of retail workers – the men and women who stock shelves, fold clothes, assist customers with their questions, ring up the sales and mop the aisles after the doors have closed for the day – earn less than $10 an hour. According to the progressive think tank Demos, the average cashier earns $18,500 a year, while a salesperson brings home a princely $21,000 a year.
If you are wondering how people get by with these wages, there is an easy answer: they all too often don’t. The Retail Action Project’s report discovered that a third of the retail workers they studied were receiving at least some form of public assistance from the government to help them get by. Many lacked health insurance.
And, no, this wasn’t simply because these workers live in hyper-expensive New York City. According to a report released by Congressional Democrats last month, one Wal-Mart located in Wisconsin sets taxpayers back by almost $6,000 per employee, due to the low wages that leave a goodly percentage of the company’s workers in need of social welfare programs ranging from subsidized housing to help paying winter heating bills.
They are also almost certainly to be among the users of rip-off financial services, ranging from tire rental outfits to payday loan lenders. The Consumer Financial Protection Bureau reports the median income of someone taking on short-term, high interest debt of the sort that can exceed several hundred percent annually is $22,476.
Many of these salesmen and saleswomen can’t even resort to the time-honored personal finance saw of telling the people to get off their butts and take on a second job to supplement their wages. More than 80% of retail employees are forced to plan their lives day-to-day; they could be working on Monday morning or Saturday night or, for that matter, almost any hour of the week including Thanksgiving evening. Their employers do not need to guarantee them any working hours at all.
Yet the more workers are earning sub-par wages, the less likely the economy is to reach take-off speed. There is perhaps, no better place to see the problems in action than Wal-Mart. It’s starting to see the karmic results of its exploitation of workers. Wal-Mart is widely rumored to be under earnings pressure, with Bloomberg reporting the store is so desperate to keep costs under control, that there are no longer enough workers to keep store shelves adequately stocked.
There is, of course, a better way. Demos estimated that raising retail pay by a few dollars an hour would result in an additional $4-$5bn in retail spending annually. The reason? Lower-income workers tend to spend more of the money they bring home because – surprise – they need to spend it in order to get by. That not only helps them, but it makes all our lives better.
Consumer spending is over 60% of the American economy. More of that money needs to make its way down to the people ringing up all those purchases.