Apple always seemed like the perfect company. Not so fast. When CEO Tim Cook testified before Congress on May 25, he didn’t come to talk about Apple’s latest amazing gadget or the need to grant more visas to computer programmers. Rather, in his maiden voyage to Capitol Hill as Steve Jobs’s successor, Cook had to defend the company’s tax-avoidance efforts. What should have been a triumph for Cook was instead an awkward encounter. [...]
With each passing year, in fact, corporations are keeping more of the pie for themselves. The chart showing wages as a percentage of GDP against corporate profits over the last several years looks like the gaping maw of a hippopotamus. Wages were 43.5 percent of GDP in 2012, down from 49 percent in 2001, and a modern-day low. U.S. median family income has actually fallen since 2009.
But the strategy of beggaring American workers for the sake of short-term profits may have reached its limits at America’s biggest retailer. “Where are all the customers?” read a plaintive email from a Walmart executive that leaked in early February. “And where is all their money?” Once the epitome of hyperfunctioning America, Walmart is an increasingly sad, dysfunctional place, plagued by empty aisles, empty shelves, and falling sales.
The problem for Walmart, and for many other retailers, is that wages simply aren’t growing much in the U.S. According to the Bureau of Labor Statistics, average hourly earnings are up just 1.9 percent in the past 12 months. And that’s partially because America’s largest private-sector employer has been too effective at keeping domestic labor costs down. Walmart notes that it employs 1.4 million people in the U.S. The company says the average wage for its associates is about $13 an hour. Because it is so big—Walmart accounts for about 1.23 percent of all private-sector jobs in the U.S., and about 9.3 percent of all retail and trade service workers in the country—it sets the standard for retail and service wages.
“Today we are really seeing the limits of the ultra-low-wage model that Walmart pioneered. Workers are consumers, and when they aren’t paid enough to buy goods, the economy can’t grow,” said Amy Traub, senior policy analyst at the Manhattan-based think tank Demos. The company has become so obsessed with keeping labor costs to a minimum that, as Bloomberg reported, it is having difficulty keeping the thousands of items stocked on its shelves, which further alienates customers and tamps down sales. Notes Traub: “We end up trapped in a vicious cycle of low growth, and companies that persist in trying to cut labor costs further only make matters worse for themselves.”