Scott: Raising Minimum Wage is the Right Thing to Do
By George Anderson
Lee Scott, CEO of Wal-Mart, says doing the right thing is something that is bred into the company’s culture.
In a recent speech, Mr. Scott outlined a number of changes that his company is taking to make sure it continues to do the right thing. (See full text: Twenty
First Century Leadership, Presented by Lee Scott, October 24, 2005 – PDF format)
Wal-Mart has given notice to overseas suppliers that they will be held to a higher standard in how they treat employees and how their operations affect the environment. The company
has expanded its health care coverage options for employees (see RetailWire 10/24/05, Wal-Mart
Making Benefits More Affordable), and embarked on a program to reduce greenhouse gases and eventually “to be supplied by 100 percent renewable energy” and to “create zero
waste.”
Mr. Scott also expressed concern for the welfare of his customers, many of whom are at the bottom of the economic ladder. Doing the right thing, Mr. Scott said, involves lobbying lawmakers to raise the national minimum wage.
“The U.S. minimum wage of $5.15 an hour has not been raised in nearly a decade and we believe it is out of date with the times. We can see first-hand at Wal-Mart how many of our customers are struggling to get by. We have seen an increase in spending on the 1st and the 15th of each month and less spending at the end of the month, letting us know that our customers simply don’t have the money to buy basic necessities between pay checks.”
Acknowledging that it was unusual for the company to take such a public position on an issue of national economic policy, Mr. Scott said, “Given increasing gas prices and other economic pressures on our customers, the challenges will continue for many of them to support themselves and their families” adding, “We simply believe it is time for Congress to take a responsible look at the minimum wage and other legislation that may help working families.”
Moderator’s Comment: Should the rest of the retail industry get behind Wal-Mart’s call and lobby Congress for the national minimum wage to be raised?
Wal-Mart’s Scott responded to critics over how well the company pays its own: “Last year we earned $10 billion in profits, so our critics argue that we
should pay more to our Associates. But I ask anyone to do the math. Even slight overall adjustments to wages eliminate our thin profit margin. Because we are so big, people forget
that we have to compete. There are excellent retail competitors in every category we serve. When we look at our wages and benefits — and theirs — we almost always pay better,
but that is also often overlooked or ignored in the public debate about Wal-Mart.” –
George Anderson – Moderator
Rick and George, you must be particularly gratified at the response to this discussion – predominantly contributors not on the BrainTrust or official Commentators. Interesting to see what a reaction this subject inspires. For my part, it sounds like more hot air coming out of Bentonville. I wholeheartedly agree with those who have pointed out that if Mr Scott thinks employees should be paid more than the minimum wage then he should start in his own backyard. Encouraging other retailers to jump onto “Wal-Mart’s” bandwagon and take their lead (i.e. the one they aren’t actually taking, just talking about) is not entirely ethical.
Raising the minimum wage would help the retail industry tremendously. Many retailers will say that they cannot afford it, especially if their wages rates are linked to the minimum wage. (Example: “We start people at $2/hr more than the minimum wage”.) If every retailer has to pay more, then no retailer is disadvantaged. Generally, this fact is ignored by retailers who don’t want to raise the minimum. I don’t understand why people ignore this logic, but they do. Just as Social Security is indexed to the cost of living, the minimum wage should be indexed and set to a standard agreed upon in advance, adjusted annually, such as x% of the “living wage.” It would help greatly if illegal immigration was cleaned up at the same time, otherwise the incentives for mom and pop to hire illegals will be greater. I was not surprised to learn a few days ago that there are several million people in the US with expired visas, and there are 55 federal agents to track them down.
If Wal-Mart wants to raise the minimum wage it pays it’s employees, then it should. Why monkey around with all the ramifications surrounding a national minimum wage increase?
If I were a player in this industry, I would keep as quiet as possible. Is the minimum wage too low? In my opinion, yes. But you are going to have a ton of opinions on that point. Was it good PR for WM to come out in favor of an increase? Absolutely.
Retail and QSR are the primary players in minimum wage issues. Many retailers really do operate on relatively thin margins. It’s specious to argue that if everyone pays higher costs, no one gains advantage. That’s not the point. If all airlines pay higher fuel costs, no one has an advantage…and everyone goes bankrupt! If all car makers pay high health costs, no one has an advantage……and everyone goes bankrupt!
Many segments of retail have had very low (if any at all) price inflation. Competitive pressures, market share plays, and efficient operators have combined to keep retail prices from rising despite overall cost inflation for the retailer. If wages go up, what gives? Prices? Service?
Sure, let’s increase the minimum wage. And now let’s figure out how to make it work economically.
Why don’t we just jump full-fledged into socialism here!? Since when (as capitalists) do we agree that government controls, be they price or wage, do anything but hurt economic activity? Why stop at a $2 increase? Why not $10… imagine how much of our goods consumers could buy if everyone made $15+/hr!!!
Mr. Scott’s argument that raising the minimum wage is “the right thing to do” seems to me a bit disingenuous. Coming at the same time that an internal memo from Wal-Mart suggests they are looking at ways to cut back worker benefits by moving them to PT, and not hiring sickly ones.
Raising the minimum wage does hurt economic activity, particularly small business trying to get up and running, or trying to stay in business when companies like Wal-Mart come to town. Wal-Mart could easily absorb a minimum wage increase, but many of their smaller competitors may not fare so well.
While I am by no means “anti-Wal-Mart,” I find their most recent position on minimum wage deeply troubling.
As a hiring manager in a retail environment, I will tell you that I have not hired one hourly employee for minimum wage in the past 10 years. It just doesn’t happen. Now, I am in a metro area and I am sure that there are rural areas that are still hiring at minimum wage. If Wal-Mart’s average is $10 per hour, raising the minimum wage is not going to force their hand to pay their associates any more. I doubt there is a Wal-Mart store anywhere in the country that is starting employees at the minimum wage, so it really would have zero effect on their overall payroll.
If you raise the minimum wage, then there is a trickle effect that will eventually cause all wages to increase over time. The effect will then cause prices to rise. Is that an argument to not raise the minimum wage? I don’t think so. It seems that if we have not raised it in 10 years it is worth serious consideration.
If you look at what Wal-Mart (Lee Scott) has promised over the past year, it looks to me that he is addressing some of those promises. He is addressing the issues (or at least taking the offensive) that have dogged them for years. It will be interesting to see what happens over time. If Wal-Mart can hit some of the goals established by Scott, I think it will be an outstanding accomplishment. Only time will tell.
Though this argument (it eliminates the lowest wage jobs vs. higher wages > higher demand > more employment) has gone on forever – or at least seems like it – I think it’s reasonable to say that if we are to have a minimum wage, then it makes sense to at least index it to inflation. To not do so is to, eventually, de facto repeal it….. of course, that will sit well with those who wish to do so overtly.
Many economists and those running businesses have argued over the years that any increase in the minimum wage would result in a loss of jobs. If true, then it would seem that Mr. Scott’s recommendation would hurt those it sets out to help. If conservative Wal-Mart is saying that raising the minimum wage would be good for the economy, then perhaps the arguments we’ve heard over the years were more about self interest than about what would be in the best interest of all. Color me confused.
Wal-Mart has done enough to transform and, in some cases, distress the U.S. economy. And I agree with another writer that if they want to pay their employees more than the minimum wage — by all means go ahead. They don’t need the government’s permission. IMHO, the minimum wage is to make sure employees are not being abused…..not to line anyone’s pockets. A couple of years ago, even the fast food chains were paying several dollars above minimum wage.
Let market forces prevail!
If Wal-Mart is truly going to leverage their buying power to help persuade the international community to improve working conditions and compensation rates, this will be a good thing for U.S. manufacturers still operating as U.S. companies. Combining this move with a call to raise U.S. minimum wages is politics, not retailing. Wal-Mart has set the floor for retail wages for years. If they want to impact actual wages, they could simply give their employees a raise.
I find it more than a little bit ironic that this is happening right before the holiday season and in a string of announcements aimed at improving their image. The fact that there was not an accompanying announcement dedicating a dollar amount to wage increases demonstrates their commitment to the issue and reveals, in my mind, this as a marketing ploy and not genuinely doing the right thing, as Scott claims.
Just PR for Wal-Mart. Can anyone point me to a book or other intellectual writing that explicates an argument that it is in the long-term best interest of a society to have government determine a minimum wage? I am sure there is something beyond the higher wages -> higher demand -> higher employment argument which would suggest all you have to do is perpetually raise wages to increase GDP and aggregate wealth. I am stuck in the old Milton Freedman and Adam Smith schools of thought at present.
On another note, does raising min wages also mitigate those in the marketplace that use innovative compensation strategies (e.g. Whole Foods and Costco) to differentiate?
This is an easy way for Wal-Mart to look like a good guy and not have to cost them anything. Wal-Mart pays well above the minimum wage but well below a decent living standard. In the USA, if you are working for less than $20 an hour, you are basically a volunteer. People who don’t work at all get about $20 an hour in cash and benefits from the government. Whether you make $5.15 an hour, $10 an hour or $20 an hour, you are pretty much poor. People working for less than $20 an hour will find that every time they get a raise in pay, they lose an equal amount of government handouts. As pay increases, people find their Food Stamp benefits decline, Medicaid coverage goes down, financial aid for college goes away, utility assistance goes away. So pretty much until you get passed $20 an hour, no one is going to see much of a lifestyle improvement. But perhaps it’s better that people work for the money than receive it in handouts. I’m all for a minimum wage increase as long as government handouts decrease. Still raising the minimum wage is just “feel good” political rhetoric preached by those with selfish reasons. Wal-Mart would love to see a few more little guys go out of business without costing Wal-Mart a nickel.
Boy, shall Wal-Mart become our new Congress so it can solve its tight handed purse strings?
Many of us lost faith in this giant, that is so tight when yesterday it was disclosed one of its highest ranking officers put out a memo on how to save benefits cost. Don’t hire the elderly or non healthy looking candidates. Get people who live a healthy and fit lifestyle.
Of course, Wal-Mart, you are dreaming. The healthiest people are the ones who are already demanding better salaries and benefits. Meaning, go elsewhere to work… not Wal-Mart. The evidence is apparent today. Just look in a Wal-Mart. Hmmmmmmmmmmm