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How Taxpayers Underwrite Walmart’s Bad Jobs

Amy Traub

In the study Robert Hiltonsmith and I recently completed, we find that taxpayers underwrite nearly 2 million poorly-paid jobs through federal contracts and other funding streams that channel our public dollars to private companies that perform work on behalf of America, but treat their employees in a very un-American way, failing to pay enough to support a family.  

Two million sounds like a big number, especially when you consider that not only the two million workers directly employed but also the families and communities they are part of are profoundly impacted by the low wages, irregular work schedules, and lack of benefits these jobs provide.

The problem is: our number is too low.

We looked at U.S. workers employed by government contractors, paid by federal health care spending, supported by Small Business Administration loans, working on federal construction grants, and maintaining buildings leased by the federal government. But we didn’t analyze the many other ways that taxpayers subsidize the workforce costs of every private employer who fails to pay a livable wage by offering Medicaid coverage, subsidized housing assistance, the food-stamp program, child-care subsidies, energy assistance, and reduced-price school meals to workers who could not keep coming to work every day without them. The reality is, as local, state, and federal taxpayers we subsidize the bottom line (and buoy the stock price) or every private sector company that doesn’t pay its employees enough to live on.

The biggest beneficiary of taxpayer largesse is our nation’s largest employer, the low-wage behemoth Walmart. This week a new study by the Democratic staff of the U.S. House Committee on Education and the Workforce draws on data from Wisconsin’s Medicaid program to find that a single 300-employee Walmart Supercenter in Wisconsin may cost taxpayers anywhere from $904,542 to nearly $1.75 million per year, or about $5,815 per employee. Wisconsin has 100 Walmart stores, 75 that are Walmart Supercenters.  Nationwide, Walmart has more than 4,000 stores.

As I’ve written before, Walmart has been a pioneer in low-wage, low-benefit employment, driving down wages in the retail industry  and beyond and blazing a dubious path for other companies to follow.

Yet there are signs that the Walmart’s low-road, heavily subsidized model may be reaching its limits. With disappointing sales and a slipping stock price, the company that once paid its workers so little that they could only afford to shop at Walmart now discovers that in the economy it has remade in its image, many consumers can’t even afford to shop much at Walmart. According to Bloomberg News,  Walmart was counting on late tax refunds – largely the result of the Earned Income Tax Credit, another public subsidy that benefits low-wage employers – to boost sales, but even that subsidy is now insufficient.

In the midst of this mess, Walmart shows every sign of doubling down on a failed model. A recent report by Erin Johansson at American Rights at Work documents allegations of illegal tactics by Walmart to suppress employee efforts to organize and speak out about working conditions. Yet workers aren’t giving up. This week, Walmart employees from more than a dozen cities are embarking on a “Ride for Respect” that will culminate at the company’s annual shareholder meeting in Bentonville, AK. They are standing up for themselves first and foremost. But poorly paid jobs have ripple effects throughout our economy, from slowing economic recovery by depressing consumer spending to obliging taxpayers to bear the cost of supporting workers. In that sense, they are standing up for all of us.