Feb 19, 2015 5:29 PM
Wal-Mart raises will still leave many unable to pay expenses
The Associated Press
WASHINGTON (AP) For roughly 500,000 Wal-Mart workers set to receive pay raises, something is better than nothing.
But it still won't be enough for many of them to afford housing and transportation and feed and raise children without government aid, according to economists and researchers.
The nation's largest private employer with 1.3 million jobs unveiled a salary bump for many of its lowest-paid workers on Thursday, promising a 1.1 percent increase in the average full-time wage over the next year, to $13 an hour. Part-time workers would get a 5.2 percent raise, to an average $10 an hour, by February 2016.
Both fall below the $15 an hour "living wage" many union-backed Wal-Mart employees have been pushing for. Driven by rising income inequality and a decades-long decline in middle-class jobs, workers are also campaigning for steep wage hikes at other major non-unionized employers, including McDonalds and other fast food chains.
Despite the raise, incomes for many Wal-Mart workers would still hover near the poverty line, reinforcing an image that some more socially-minded consumers find offensive.
"I will return to Wal-Mart when I know that they pay well enough that none of their employees are on government assistance and are all fully employed with full benefits," Shelley Thull, a retired teacher in Topeka, Kansas, said Thursday in an email.
Wal-Mart's reputation has been pummeled by long-standing complaints that its workers can't even afford cars to shorten their commutes. Many depend on families, friends, churches and Medicaid and other government programs, experiences that contradict the career possibilities being advertised by Wal-Mart.
"The point is broader than just a starting wage rate," Wal-Mart CEO Doug McMillon told The Associated Press in an interview this week at the company headquarters in Bentonville, Ark.
"We have to create a situation where that ladder of opportunity starts at an appropriate place, for their first job or near retirement. That's got to be achievable but the other rungs have to be clear enough so they know how to climb up," he said.
The announcement was clearly a recognition that workers across the retail economy are finding fewer ladder rungs to climb. In many cases, people are staying at entry-level jobs for their entire careers, stagnating their incomes and limiting their ability to spend at stores such as Wal-Mart.
Bill Simon, a former senior Wal-Mart executive, acknowledged as much to The Associated Press for a story published last year, when he said that many of the superstore retailer's employees would be better off seeking higher-paying jobs elsewhere.
Still, the impact of the pay raise will depend on where Wal-Mart workers live.
In Fayetteville, Arkansas near the company headquarters a single parent of one child would need to earn $16.85 an hour, almost $4 an hour more than Wal-Mart's pay raise for full-time workers, according to a living wage calculator created Amy Glasmeier, a professor of economic geography at the Massachusetts Institute of Technology.
The calculator examines the costs of food, housing, transportation and medical care around the country.
In pricier parts of the country, the living wage is far higher: In Philadelphia, it rises to $19.68 an hour. In San Leandro, California, one of the San Francisco Bay Area's more affordable suburbs, a single parent's living wage is $23.22.
"The real challenge for them is to step up and calculate market by market, what is a fair wage," Glasmeier said.
But wages are only one factor for low-paid retail workers. At Wal-Mart and many other stores, many never get enough hours to earn a sufficient income.
"Are they able to get those hours so that they can earn a living wage, is the really big question," said Heather Boushey, executive director and chief economist at the Washington Center for Equitable Growth.
The answer? Doubtful.
Roughly half of all Wal-Mart employees work part-time. Wal-Mart announced Thursday that along with the raises, employees who want more hours would now be able to "view open shifts." But the company did not commit to offering them more hours.
With the raise, an average full-time employee working 35 hours a week would make $23,660 a year. An average part-time employee working 30 hours a week would earn only $15,600, just below the federal poverty line for a two-person household.
Some economists say retailers shouldn't have to bear the burden of fixing poverty.
"It's unrealistic and inappropriate to expect that corporations will achieve that goal for the rest of society," said Michael Strain, deputy director of economic policy studies at the American Enterprise Institute.
Instead, the burden should be borne by society as a whole, through the government, Strain said. He notes that federal programs such as the Earned Income Tax Credit help those with low wages. Nearly 28 million households received the credit in 2013, getting an average payment of $2,407 after filing their taxes, according to the IRS.
"All of society should pitch in," Strain said. "If you only do it through $15 an hour, then its only McDonalds and Wal-Mart contributing."
Contibutors include Associated Press writers Anne D'Innocenzio in Bentonville, Arkansas; and Hannah Cushman in Chicago.