Friday, November 23, 2012

Economy depends on success of Walmart strike

Walmart employees and supporters rally in support of striking workers in front of a store in Pico Rivera, California, on Tuesday.


Walmart and other big-box retailers have helped eviscerate the very American middle class they depend on to buy their stuff

A half-century ago, America's largest private-sector employer was General Motors, whose full-time workers earned an average hourly wage of around $50, in today's dollars, including health and pension benefits. Today, America's largest employer is Walmart, whose average employee earns $8.81 an hour. A third of Walmart's employees work fewer than 28 hours per week and do not qualify for benefits.

There are many reasons for the difference – including globalization and technological changes that have shrunk employment in American manufacturing, while enlarging it in sectors involving personal services, such as retail. But one reason, closely related to this seismic shift, is the decline of labor unions in the United States.

In the 1950s, over a third of private-sector workers belonged to a union. Today, fewer than 7% do. As a result, the typical American worker no longer has the bargaining clout to get a sizeable share of corporate profits.

At the peak of its power and influence in the 1950s, the United Auto Workers could claim a significant portion of GM's earnings for its members. Walmart's employees, by contrast, have no union to represent them. So, they've had no means of getting much of the corporation's earnings.

Walmart earned $16bn last year (it just reported a 9% increase in earnings in the third quarter of 2012, to $3.6bn), much of which went to Walmart's shareholders – including the family of its founder, Sam Walton. The wealth of the Walton family now exceeds the wealth of the bottom 40% of American families combined, according to an analysis by the Economic Policy Institute.

The labor action is unlikely to dim the enthusiasm of buyers looking for Walmart bargains, but it's at least garnering media attention. Walmart employees have a chance to air their grievances in public – not only lousy wages (as low at $8 an hour), but also unsafe and unsanitary working conditions, excessive hours and sexual harassment – generating bad publicity for the company exactly when it wants the public to think of it as Santa Claus. And the threatened strike, the first in 50 years, is gaining steam.

A new study by the thinktank Demos reports that raising the salary of all full-time workers at large retailers to $25,000 per year would lift more than 700,000 people out of poverty, at a cost of only a 1% price increase for customers.

And, in the end, retailers would benefit. According to the study, the cost of the wage increases to major retailers would be $20.8bn — about 1% of the sector's $2.17tn in total annual sales. But the study also estimates the increased purchasing power of lower-wage workers, as a result of the pay raises, would generate $4-5bn in additional retail sales.

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