Chairman Harkin, Ranking Member Alexander, and Members of the HELP Committee: I greatly appreciate this opportunity to speak to you about economic security for working women, particularly the experience of women in the retail industry. My name is Amy Traub and I am a senior policy analyst at Dēmos. Dēmos is a non-partisan public policy organization working for an America where we all have an equal say in our democracy and an equal chance in our economy. Economic security for women – who make up half of America’s workforce and contribute to the incomes of a majority of American households – is an essential part of an economy where we all have an equal chance.
My testimony this afternoon will focus on women in the retail industry, a major sector of the American economy, and one that is projected to add more than a million new jobs by 2022.[i] Retail is one of the top industries employing women, and I believe that the experience of women working in retail illuminates many of the broader challenges facing women trying to earn a living throughout our economy.
Currently 7.2 million American women work in the retail industry.[ii] According to the Bureau of Labor Statistics, retail salesperson is the most common occupation in the country today.[iii] Yet the typical woman working in this job earns just $10.58 an hour: a wage that keeps a family of three near poverty, even if the employee is able to secure enough hours for full-time work.[iv] Erratic schedules, a lack of sufficient work hours, and the scarcity of basic benefits like paid sick days contribute to making hourly retail jobs – not just for salespeople, but for cashiers, stockers, and other front-line positions – insecure jobs for American women, with serious consequences for their families and our nation as a whole.
In many cases, hourly retail jobs are insecure positions for men in the retail industry as well, but the reality is that women, who make up about half of the retail workforce (48.7%) are disproportionately represented among low-wage retail workers and among retail’s working poor. It’s also the case that in retail – as in other sectors – a substantial wage gap persists between male and female workers doing the same job: the typical female salesperson, for example, is paid four dollars less per hour than her male counterpart. Overall in sales and related occupations, women must work the equivalent of 103 days longer every year than their male co-workers doing the same job in order to bring home the same paycheck. At the same time, women still assume the majority of family care-giving responsibilities, meaning that it is disproportionately female retail employees who must juggle care for children, ill family members, and elderly parents with the rigid, unpredictable, and unstable work schedules (often with insufficient hours) that prevail for hourly workers in the retail industry. In turn, these rigid and unstable work schedules also impose extensive social costs on the nation in terms of poverty, public health, child well-being, and educational opportunities and outcomes for retail workers and their families. Low wages impose public costs as well, because families often must rely on public benefits, such as food stamps and Medicaid, to supplement women’s income from retail jobs. In effect, taxpayers are subsidizing the labor costs of the nation’s largest and most profitable retailers.
The retail industry does not have to pay low wages and offer unstable schedules. Before I go into detail about the challenges facing women in low-paid retail jobs, I want to highlight some bright spots: cases where retail offers jobs that advance the economic security of working women. For example, retail expert Zeynap Ton notes in the Harvard Business Review, “highly successful retail chains – such as QuickTrip convenience stores, Mercadona and Trader Joe’s Supermarkets, and Costco wholesale clubs – not only invest heavily in store employees but also have the lowest prices in their industries, solid financial performance, and better customer service than their competitors.”[v] The recent decision by The Gap to significantly raise pay for its 65,000 U.S. retail employees[vi] illustrates how even companies with a history of paying low wages can shift their business model to improve compensation. Even more striking are the steps recently taken by the nation’s largest retailer – Walmart – to upgrade its scheduling practices for hourly workers and improve its treatment of pregnant employees. Walmart improved scheduling and treatment of pregnant workers after years of organizing and strikes by its employees, as well as a lawsuit and shareholder resolution relating to conditions for pregnant workers.[vii] While neither The Gap nor Walmart have taken sufficient steps to offer adequately paid, sustainable jobs to the workers who make their stores profitable, their changed business strategies in the last year illustrate both a growing recognition of the inadequacy of retail jobs and the potential for retailers to improve employment conditions.
My testimony explores the challenges to women’s economic security in the retail industry in terms of wages and schedules; the public costs of the lack of economic security for women in the retail industry; and a discussion of the benefits of raising wages and improving schedules for women in the retail industry, including benefits for retailers themselves.
Challenges to women’s economic security in the retail industry
Poverty wages for women in retail
5.5 million American women were classified as working poor in 2012, and millions more live just over the poverty level.[viii] The retail industry is one of their leading employers, with 571,000 working poor women – one in every ten working poor women in the nation – employed in retail. 1.3 million women working in retail lives in poverty or near poverty (defined as within 150 percent of the poverty line). And with substantial job growth projected for the industry in the coming years, the nation can expect hundreds of thousands retail jobs that pay wages too low to support a family if wages do not rise.
Retail jobs are a critical source of income for the families of women working in this sector. Approximately 93 percent of women working year-round in the retail industry are ages 20 and above, not teens looking for extra spending money, while 36 percent of them are raising children. Whatever the household composition, retail wages provide for household necessities. Four out of ten (39.5 percent) of women workers in retail contribute at least half of their family’s total income. A large number of them – more than one in five – are the sole earner of their household. The lowest paid women in retail are even more likely to be supporting their households single-handedly.
The gender pay gap in retail is another major concern: in sales and related occupations, the typical woman is paid just 72 cents for every dollar made by the typical man. The impact of that pay gap reverberates beyond individual households to the larger economy: in 2012, lost wages to women mounted to an estimated $40.8 billion, with steep costs for female retail workers, their families, and the economy as a whole.
Scheduling problems for women in retail
Retail employees trying to work their way out of poverty face an obstacle that goes beyond low wages: the lack of sufficient work hours and predictable, stable schedules. If retail workers cannot secure enough hours of work each week, higher wages will not be sufficient to provide a decent standard of living and will fail to lift families out of poverty. In 2012, nearly 1 in every 5 women employed in low-wage retail jobs worked part-time hours despite wanting a full-time position. Some, although officially working as full-time employees, were simply not scheduled to work full hours every week, cutting into their incomes. These findings are consistent with the results of the CitiSales Study, a 2006 survey of more than 6,000 predominantly female employees of a large retail firm which found that 33 percent of full-time retail employees, and 43 percent of part-time employees would like to work more hours.[ix] Our analysis of Census data suggests scarcity of work hours was not limited to small retailers with few workers on the payroll: among workers at the largest retail firms – which might seem to have greater resources to offer sufficient hours to employees eager for more work – the percentage of involuntary part-time workers was even higher than at smaller companies.
The problem of inadequate and unstable hours in retail is not limited to workers officially classified as involuntary part-timers: many women trying to balance their jobs with educational pursuits, family responsibilities, additional employment, or other commitments choose to work only part time. Yet rigid, unpredictable, and unstable work schedules threaten the economic stability of full- and part-timers alike. Demos’ 2011 report, “Scheduling Hourly Workers,” documented the rise of just-in-time scheduling practices in retail and other service industries.[x] In an effort to optimize their labor costs, employers use scheduling software and measures of consumer demand such as floor traffic, sales volume, or weather conditions to match workers’ hours to the projected need for labor on a daily or even hourly basis. The Retail Action Project’s 2012 survey of New York City retail employees is one of the best sources of data on this growing industry practice.[xi] According to the survey, only 17 percent of New York retail workers – and 10 percent of part-timers – had a fixed work schedule. For others, hours varied week to week or month to month, with 70 percent of workers reporting that they were notified of their schedule just a week in advance.
Without a stable and predictable work schedule, incomes fluctuate and workers cannot budget effectively. At the same time, low-income workers may lose eligibility for public benefits that supplement their incomes if they do not work the required amount of hours. Ever-shifting schedules mean working mothers cannot plan child care arrangements – meaning they may lose the opportunity to work a much needed shift (or the job itself) if they cannot arrange last-minute child care. Efforts to move into a better-paying job may also be stymied, as pursuing education or training opportunities is made more difficult, if not impossible, by ever-changing work schedules. Attempts to take a second job to make up for inadequate income in the first are similarly unfeasible. In effect, unstable and unpredictable schedules deprive women in retail of both income and opportunities to rise up.
The rigidity of retail schedules poses a related problem. If workers are scheduled for a shift they cannot work, they may face disciplinary measures and a loss of income. The problem is exacerbated by the lack of paid leave, including time off for the inevitable illness. Less than half of workers at retail trade establishments are provided with any paid sick days[xii] and it is disproportionately low-paid workers that lack this benefit. In a 2013 survey of low-wage workers in a range of industries, 14 percent of workers overall, and 19 percent of working mothers, reported having lost a job because they got sick or stayed home to care for child or parent.[xiii] For women, who still disproportionately assume the majority of family caregiving responsibilities, a lack of paid sick time and paid family leave pose particularly serious risks of income loss and job loss.
Public costs of the lack of economic security for women in the retail industry
Taxpayers subsidize retailers’ payroll
Retail’s most obvious public cost stems from large retailers paying their employees so little that workers and their families must rely on publicly funded benefits, such as food stamps, Medicaid, and the Earned Income Tax Credit, to make ends meet. With women employed by large retailers more likely to be in low-wage jobs and more likely to be raising families, this is a key issue for women in the industry.[xiv] A recent study by Americans for Tax Fairness estimates that the nation’s largest retail employer, Walmart, receives $6.2 billion annually in taxpayer subsidies in the form of benefits that supplement its low wages.[xv] The research builds on a congressional study finding that employees at a single Walmart supercenter in Wisconsin rely on $904,542 to $1,744,590 per year in public benefits because Walmart does not pay enough to support a family.[xvi] While other retailers have not been analyzed as systematically, a review of state-level studies by Good Jobs First found that Walmart routinely leads the list of corporations whose payroll costs are subsidized by taxpayers, followed by other large retailers such as Target, Kroger, and Home Depot, as well as fast food companies, nursing homes, and meat processors.[xvii] Absent a wage increase or other policy change, the taxpayer bill for subsidizing the labor costs of the nation’s largest and most profitable retailers will continue to increase as the low-paid retail workforce grows.
The public health costs of low wages and rigid, unstable schedules in retail
A growing body of research illustrates how low wages and unstable schedules contribute to public health crises such as the obesity epidemic that impose steep public costs.[xviii] Special concerns arise for female workers when they are pregnant or their children are young. For example, pregnant employees may be unable to safely carry out typical retail tasks such a climbing ladders to bring down merchandise, lifting heavy boxes, using harsh cleaning chemicals, or even standing on their feet for prolonged periods. Yet as a recent lawsuit and shareholder resolution at Walmart vividly illustrated, some retailers refuse to accommodate pregnant workers with light duty, potentially imperiling their pregnancy, or pushing them to take unpaid leave they cannot afford.[xix] The lack of paid maternity leave is a related problem. Just 5 percent of workers in retail trade establishments are offered paid leave to care for a new baby,[xx] increasing the financial pressure on low-income mothers to return to work very soon after birth. This too has a public health consequence, as short leaves at pregnancy are associated with higher rates of infant mortality, lower birth weight babies, and shorter duration of breastfeeding.[xxi]
As children grow up, last-minute unpredictable work schedules make it difficult to set up doctor’s appointments. As noted earlier, less than half of workers in retail have access to paid sick days, increasing parents’ risk missing regular infant and childhood medical check-ups and immunizations. Because mothers are more likely to be the parent taking their children to the doctor, female workers and their families are disproportionately affected. The lack of paid sick days also increases the risk that retail workers will go to work (and their children will go to school or daycare) while sick, potentially spreading the flu or other communicable diseases to customers and contributing to outbreaks. If large retailers shifted to offer paid sick days and more stable schedules, they could contribute to significant public savings: the Institute for Women’s Policy Research calculates that 1.3 million hospital emergency department visits could be prevented in the United States each year if businesses of all kinds provided paid sick days to workers who currently lack access, reducing medical costs by $1.1 billion annually, with over $500 million in savings for public health insurance programs.[xxii]
Low wages and unstable schedules in retail block opportunity for the next generation
Beyond public health, the unpredictable and inflexible schedules associated with retail and other low-wage work hinder parents from participating in their children’s education and development, constraining opportunity for the next generation of Americans and entrenching economic inequality. No matter how much they want to, women working the unstable schedules common in the retail industry may not be regularly available to help children with homework, attend parent-teacher conferences or other school events, or otherwise have sustained involvement in their child’s education. Indeed, an analysis of the American Time Use Survey finds that low-wage women working non-standard schedules spend less time with their families – particularly with school-age children – than those working standard schedules.[xxiii] The study also notes that retail is among the top industries employing workers with non-standard schedules, defined as work before 6 a.m. or after 6 p.m. or on the weekends. Researchers at New York University examined the consequences of this time deficit, finding that low-income parents working changing shifts at non-standard hours were more likely to have children with behavior problems at school and lower school performance as reported by teachers.[xxiv]
Retail’s low wages are also an impediment to opportunity for children, with potentially devastating consequences for their future life chances. Children of low-income parents are seven times more likely to drop out of school than are higher income youth[xxv] and are far more likely to become parents in their teen years.[xxvi] Young people whose parents hold low-wage jobs are more likely to become “disconnected youth” in their post-high school years, neither working nor pursuing education or training.[xxvii] Considering the tremendous societal loss, researchers at the University of Massachusetts note, “the effects of non-high school completion are profound… lifelong income loss, diminished health, and more likely reliance on publicly-funded services results in considerable societal expense. Yet, arguably, the greatest cost to society is the loss of talents, abilities, and affiliation of millions of young people.”[xxviii]
And yet, a different path is possible. Based on his studies of low-income working parents in Milwaukee, Harvard professor Hirokazu Yoshikawa observes that “a work trajectory that's characterized by full-time work with wage growth over the period of the two years resulted in increases in children's school performance and reductions in their acting out behaviors… positive work experiences that result in increases in income over time… can help actually improve children's school success.”[xxix] By investing in stable careers for the women working in its stores, the retail industry can make a positive difference for the next generation.
Low wages and unstable schedules in retail combine with high pay at the top to fuel inequality
The US has seen a highly unbalanced economic recovery, with the nation’s highest earners pocketing nearly all of the economic growth since the Great Recession, and the top 10 percent taking home their greatest share of income in recorded history.[xxx] This growing concentration of income at the top, combined with a wave of strikes and protests by low-wage workers – including retail workers employed by Walmart – has brought renewed attention to the corrosive effects of inequality. And retail is among the most unequal sectors of the economy.
In 2012, CEOs in the retail industry earned 304 times the annual income of the average retail worker— among the highest CEO-to-worker ratios of any sector in the economy in any year since 2000.[xxxi] Over the years between 2000 and 2012, the only economic sector with greater average pay disparities than retail is accommodations and food services. And the trend is worsening: after dipping briefly during the Great Recession, pay disparities in retail have grown since 2009, nearly recovering their pre-Recession peak. This mounting inequality has a gendered face: while women make up more than half of the retail labor force at large firms, they account for just 1.8 percent of retail CEOs in the Fortune 1000, according to Catalyst.[xxxii]
The growing inequality fueled by retail and other low-wage industries has far-reaching effects on our society. Increasingly, research shows that inequality is associated with slower economic growth and volatility, as well as social instability and declines in the quality of health and education.[xxxiii] At the same time, studies suggest that inequality undermines our democracy, as political decision-making increasingly reflects the policy preferences of major political donors with substantially different priorities than the voting public.[xxxiv] Of course, no single industry caused this damage on its own or can fix it single-handedly. Nevertheless, as the employer of one in ten working Americans – and one in ten working poor women – raising wages and improving schedules in the retail industry would be a significant step toward reducing inequality and the harms it causes throughout society.
The benefits of raising wages and improving schedules for women in the retail industry
In Demos’ forthcoming paper on women in the retail industry, we model the effects of a wage increase to $12.25 an hour (the equivalent of $25,000 a year for a full-time worker) at large retail companies. We look at costs to retailers, the price increase for consumers, and the impact on the nation’s gross domestic product and job creation. We also consider the impact of improved scheduling practices such as providing work schedules further in advance, guaranteeing workers a consistent number of hours, and giving workers opportunities to swap shifts, cross-train for different positions, or work in different store locations, ensuring that both employee and employer scheduling needs are met. While the numerical results of that study are not yet available, this section discusses the evidence for the benefits of raising wages and improving schedules for women in the retail industry.
Improving wages and schedules for women in retail would benefit the economy
Families living in or near poverty spend close to 100 percent of their income just to meet their basic needs, so when they receive an extra dollar in pay, they spend it on goods or services that were out of reach before. This ongoing need makes low-income households more likely to spend new earnings immediately – channeling any addition to their income right back into the economy. High-income households, in contrast, put a larger portion of their money into long-term investments such as retirement savings that do not factor into consumer demand.[xxxv] Because spending patterns differ widely across income groups, investments that enhance the budgets of low-income households have a greater impact on the economy than money given to those at the top. For example, the economic stimulus payments of 2008 increased spending among low-income households far more than higher earners, with a substantial portion of the new purchases going toward durable and non-durable retail goods.[xxxvi] Increasing the purchasing power of low-income households is good economic policy during a period of flagging demand. By raising the floor of large chain retail wages, these businesses can provide a private sector stimulus without depending on the government to enact the change.
The amount of economic activity generated by a wage raise is determined by what economists refer to as the multiplier. The multiplier indicates how many times a new dollar will circulate in the economy before its amplifying effects fade away. When a worker receives a raise, she will have additional money to spend – that spending becomes someone else’s new income, either the business owner where she makes a purchase or the worker at the store who gets more hours or more money when business is good. Multipliers differ depending on where the dollar appears in the economy; if low-income households have an extra dollar to spend the multiplier is higher than if that dollar goes to high income savers. So a transfer of purchasing power to low-wage workers will boost economic activity to the degree that the multiplier forecasts ripple effects across consumer spending.
In order to predict how a raise for employees at large retail firms will impact the economy, we incorporate both the positive effect of the multiplier on household spending and the potentially negative effect on the balance sheet of employers. Firms can either pay for the wage raise out of profits, pass on the cost of the additional wage bill to consumers through higher prices, or combine both tactics to cover the cost. The extent to which retail employers will place the burden of higher wages on their customers is unclear. Research on the relationship between prices and the minimum wage focuses entirely on the fast food industry and presents mixed results.[xxxvii] But there is reason to believe that firms will pass-through less than 100 percent of the cost. That is because the new minimum produces gains to the firm that offset part of the cost before either profits or consumer spending have to make up the difference.
Employers that invest in their labor force are better able to hang on to their best, most experienced workers, increasing operational efficiency and cutting down on the costs of labor turnover. The differences can be dramatic. One study from the Wharton School of Business found that a $1 increase in payroll at retailers leads to an additional $4 to $28 in sales each month, with a 25 percent rise in payroll generating 2.6 percent more in sales.[xxxviii] Revenue grows because well-paid, experienced employees are better able to provide the essential services that customers need – with knowledge of inventory, products, brands, and prices – and satisfied customers spend more money in the store.27 The benefits of the new wage floor appear on the balance sheet as profits, mitigating a part of the wage bill so that customers and firms take on only the remaining part of the cost. A raise for retail wages is an investment in the labor force, increasing productivity and translating to lower costs and higher sales for the firm, and negating a portion of the wage bill before it ever reaches consumers.
Higher wages and better schedules lead to higher sales
The reality is that large retail firms won’t have to cover the entire wage bill or cost of improving scheduling because these improvements to retail jobs have the potential to pay for themselves, at least in part. A large body of research shows that paying higher wages in the retail sector results in greater productivity and higher sales. Zeynep Ton, an expert on the retail sector at MIT, has shown that businesses that make an investment in their retail workforce find that well-paid, knowledgeable, and experienced employees can be a driver of sales, rather than costs.[xxxix] Paying for high quality workers who can answer customer requests and identify priorities meets the long term goals of the business, as opposed to simply satisfying short-term cost minimization.
Ton’s close study of retailers like Home Depot and the defunct Borders bookstore chain leads to similar conclusions about scheduling: retailers’ efforts to precisely match labor supply to consumer traffic often fall short because just-in-time scheduling strategies fuel employee turnover, absenteeism and tardiness. This means that despite sophisticated scheduling software, retailers “don’t know who will quit, who will be late tomorrow, and who just won’t bother to show up.”[xl] Finally, Ton concludes that a misguided effort to cut labor costs leads many retailers to understaff their stores, losing sales and passing up profits. Missed sales opportunities could be recaptured if, for example, retailers drew on the pool of more than one million women working part-time retail jobs who report wanting a full-time hours.
Ton’s findings are supported by other research on the performance of retail firms. For example, the CitiSales study conducted by researchers at Boston College and the University of Kentucky finds that giving retail employees more control over their work schedules optimizes recruitment among the hourly workforce, boosts retention of key talent, promotes employee productivity, engages employees, cultivates quality customer service, and reduces costs associated with turnover.[xli] Researchers have also compared Costco, a high-wage retail employer that guarantees employees a set number of hours per week, with its warehouse club rival, low-wage employer Sam’s Club, revealing a substantial payoff to paying fair wages and offering stable schedules: sales per employee at Costco are nearly double the average sales per employee at Sam’s Club.[xlii] Across the retail sector higher payroll levels and more stable schedules are associated with customer satisfaction, which translates to more money in the register.
The retail industry has tremendous potential to offer good, family-sustaining jobs to the 7.8 million American women projected to work in the industry in the next decade. To realize this potential, and advance women’s economic security, retailers must raise wages and improve scheduling policies for their workforce. Recent movements toward increasing pay at the Gap and improving schedules at Walmart have been encouraging, but broad change is likely to occur only as a result of legislation. Legislation to increase the minimum wage, strengthen the Equal Pay Act, facilitate union organizing, and guarantee a minimum number of paid sick days and paid family leave would enhance the economic security of women in the retail industry and throughout the economy. Congress should also consider the models offered by state laws on reporting pay, which compensate employees for a minimum number of hours during a work shift for which they have been scheduled.
[i] The Bureau of Labor Statistics projects that the retail industry will employ approximately 16 million Americans by 2022, a number of private employees exceeded only by health care and social assistance (22 million workers) and professional and business services (21 million workers). See The Bureau of Labor Statistics, “Employment by major industry sector, 2002, 2012, and projected 2022,” 2013. http://www.bls.gov/news.release/ecopro.t03.htm
[ii] Bureau of Labor Statistics Current Population Survey March Supplement, 2012.
[iv] Bureau of Labor Statistics Current Population Survey March Supplement, 2012.
[xiv] There 35 percent more women than men among low-wage earners at large retailers. 40.3 percent of women employed at large retailers has children, compared to 30.3 percent of men.
[xxiv] Working Nonstandard Schedules and Variable Shifts in Low-Income Families. Hsueh, JoAnn; Yoshikawa, Hirokazu. Developmental Psychology vol. 43 issue 3 May 2007. p. 620-632.
[xxxiii] Jonathan D. Ostry, Andrew Berg, and Charalambos G. Tsangarides, “Redistribution, Equality, and Growth,” International Monetary Fund Research Department, February 2014, http://www.imf.org/external/pubs/ft/sdn/2014/sdn1402.pdf.
[xxxv] BLS Consumer Expenditures Survey, Table 1202. Income before taxes: Annual expenditure means, shares, standard errors, and coefficient of variation, 2012 http://www.bls.gov/cex/#tables
[xxxvi] Jonathan A. Parker, Nicholas S. Souleles, David S. Johnson, and Robert McClelland, “Consumer Spending and the Economic Stimulus Payments of 2008,” NBER Working Paper No. 16684, January 2011, http://www.nber.org/papers/w16684
[xxxix] Zeynap Ton, The Good Jobs Strategy: How the Smartest Companies Invest in Employees to Lower Costs and Boost Profits. Houghton Mifflin Harcourt, 2012.
[xl] Zeynap Ton, The Good Jobs Strategy: How the Smartest Companies Invest in Employees to Lower Costs and Boost Profits. Houghton Mifflin Harcourt, 2012. P 142