Why Walmart Can Afford to Pay Its Workers Much More

November 21, 2013 | | U.S. News & World Report |

Come Black Friday (which for many big retailers has become a two-day affair starting on Thanksgiving), Walmart will again be facing strikes and protests from workers upset with the corporation's low pay. Even Ashton Kutcher has gotten on the company's case for paying wages that often leave its workers below the poverty line and depending on federal benefits simply to get by.

But can Walmart actually afford to pay its workers more? According to a couple of recent analyses, the answer is an unambiguous "yes."

First, Fortune's Stephen Gandel crunched the numbers and found that Walmart could afford to give its workers a 50 percent raise, resulting in an average pay of more than $33,000, without doing harm to its investors or stock price. (Right now, most of Walmart's workers make less than $25,000, per the Huffington Post's Dave Jamieson.)

A new report from Demos' Catherine Ruetschlin and Amy Traub, meanwhile, finds that simply foregoing the stock buybacks in which Walmart has been engaging in recent years would enable it to pay its workers $5.83 more per hour, a hike that would bring the average hourly wage for a Walmart worker up near $15. "If we assume Walmart's typical hourly worker making below the $25,000 per year threshold earns $9.06 an hour, the industry median for low-wage employees of large retailers, then this would hike pay to $14.89 an hour," Reutschilin and Traub note. "At this rate, any workers placed on the schedule for more than 32 hours a week would be able to bring home $25,000 a year."

Of course, Walmart is under no obligation to pay its workers more if it wants to keep lining the pockets of the Walton family (who, incidentally, hold as much wealth as the bottom 40 percent of Americans combined). But Ruetschlin and Traub argue that eschewing share buybacks in favor of increased pay willhelp the company improve its productivity, reduce employee turnover and better the customer experience, ultimately leading to more sales, all without forcing the company to raise prices. 

 

"These share repurchases benefit an increasingly narrow group of people, including the six Walton family heirs," said Ruetschlin, in a statement. "But buybacks do not improve the fundamentals of the firm. If the funds were used to raise the pay of the 825,000 low paid workers, it would not harm Walmart's competitive ability and would add no cost to the consumer."