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Are Low Retail Wages Required For Low Prices?

Catherine Ruetschlin

It’s the biggest shopping season on the calendar and retail companies are expecting hundreds of billions of dollars in sales. To meet this demand, retail pulls in around 600,000 seasonal workers on top of a workforce of 15 million.  This massive work force is majority female and fairly diverse – people of color comprise about 30 percent of workers in the sector.  It is also low-paid. 

According to the Bureau of Labor Statistics, the typical cashier makes just $18,500 per year for full time work. The nation’s largest employer and largest employer of African Americans – Walmart – is engaged in a struggle to keep it that way.   Right as we turn to these workers to provide assistance and advice during the holiday season, many retail employees are striking for basic respect. And they deserve it.  A new paper by Demos shows that retail employers can afford to pay decent wages, and the benefits would feed back into the economy as higher GDP, more jobs, less poverty, and even higher retail sales.

Women and people of color are disproportionately represented in the low-wage, year-round retail workforce, where almost 40 percent of workers are people of color and 63 percent are female. These were also the populations hardest hit by the recession, with unemployment rates still topping 14 percent among African Americans and at 10 percent for Latinos.  Since retail is projected to have some of the greatest employment growth in the country over the coming decade, the quality of retail employment matters to the economy’s traditionally vulnerable workers who may be compelled to take any job available and have little recourse to bargain for fair treatment once that employment is secured. 

There is also plenty of reason for this to be cause for concern beyond those households who depend on a retail paycheck.  The fact is low wages in the retail sector are not only holding back workers and their families.  The study shows that a wage raise at large retail employers to the equivalent of $25,000 per year for a full-time worker would lift 1.5 million workers and the family members they support out of poverty or near poverty.  As these workers take their wages back into the market and consumer spending grows, the increase in wages at the bottom would contribute between $11.8 and $15.2 billion in additional GDP over the coming year.  That growth would lead employers across sectors to hire more than 100,000 new employees.  With gains in GDP and jobs, a raise for low-wage retail workers is a raise for the economy overall.

Firms can afford this wage increase, and they’ll see benefits that return in-kind.  And, the study finds, the cost of the raise is dwarfed when compared to current sales, payroll, or profits.  The top 10 retailers alone could pay for the raise across all large firms with just the money they spend buying back their own stocks to bump up earnings per share.  Redirecting their profits toward the workforce instead is an investment in their own productivity, sales, and outlook for growth.  Research shows that paying fair wages to retail employees can lead to higher worker output, and that translates to more money in the cash register.  In addition, a portion of the wages that employers send out in paychecks comes back in customers’ wallets.  That spending will tally up to as much as $5 billion in additional sales for the retail sector after a raise. 

As shoppers flood the stores over the coming weeks, we will be counting on a workforce that is putting in long hours and yet still struggling to make ends meet. This study shows that the biggest retailers could do much better for their employees, for themselves, and for the economy.  Low wages are not a necessity, but a choice. Firms like Walmart should look beyond their short-term goals to set a new standard for the industry and expect positive returns. 

This season, retailers have more than just your perfect holiday gift items – they also have the potential for a private sector stimulus that improves millions of lives, contributes to economic growth, and even boosts their own sales.