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Retail Sales Up. What About Retail Wages?

David Callahan

Retails sales surged by a solid 1.1 percent last month, and that's being hailed as great news. But great news for who, exactly? 

Given the weak labor market, with millions still unemployed, it is unlikely that higher retail sales and profits will translate into higher wages for retail workers, who make up a growing slice of America's workforce. Instead, those gains are more likely to be reflected in bigger bonuses for executives and higher share values.

And there you have the problem with America's economy in a nutshell. Corporate profits have soared in recent years, but wages have been stagnant and the percentage of national income going to labor is near an all-time low. That's not just bad for workers, it's bad for the whole economy because ordinary households don't have the spending power we need to increase demand and spur growth.

Inequality, it turns out, isn't just unfair or corrosive to the social fabric; it's also a recipe for economic stagnation. It's no coincidence that the United States had higher growth rates in the mid-Twentieth Century than we've had in more recent decades. Back then, workers got a bigger piece of the pie they were baking and turned around and spent that money immediately. Now, much of the wealth created just gets piled higher in the investment portfolios of the top 1 percent, sending the stock market sky high but not creating much real demand. 

A sharing of profits was a basic part of mid-century "managed capitalism," a system where labor didn't just have a lot of clout, but where CEOs generally embraced the premise that the people who actually make the products should do better if those products sold well and that this would create a better business climate overall. 

We need that enlightened self-interest today. We need more business leaders like Jon Cooper, the head of the Spectronics Corporation, who came out recently in favor of raising the mininum wage to $10.10 an hour and said on Fox Business News:

I think that if we can pay these folks something closer to a living wage, that money isn’t going to stay in their pockets. If they get an extra $100 a week, let’s say, they’re going to spend that locally buying food for their families, clothing, school supplies for their kids. It’s going to go to local business, small business, it’s going to boost the economy and grow jobs.

That's exactly right. As for the retail sector itself, Demos released a report last year which found that the average retail sales worker made $21,000 a year, with cashiers making even less. Wages like that don't leave people with a lot of walking around money to boost growth.

That needs to change if we're ever going to pull out of this slump. Demos found that: "A wage standard at large retailers equivalent to $25,000 per year for full-time, year-round workers would increase GDP between $11.8 and $15.2 billion over the next year. As a result of the economic growth from a wage increase, employers would create 100,000 to 132,000 additional jobs."

Oh, and other thing: such a wage hike in retail would also lift 1.5 million workers out of poverty or near-poverty circumstances. A number like that should be music to the ears of conservatives who hate government net programs and believe the market can solve big problems like poverty.