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Wal-Mart CEO Talks Corporate Responsibility without Raising Wages

December 20, 2012
 By Marc Bussanich

Despite strong opposition to Wal-Mart’s entry in New York City, the company’s CEO, Mike Duke, visited New York recently to speak at the Council on Foreign Relations about corporate responsibility.

Union members and community groups protested because they argued it’s hypocritical for Duke to lecture on corporate responsibility, women’s empowerment and sustainability when Wal-Mart’s wages do not sustain middle-class standards. But Wal-Mart and other retailers have the unique opportunity to bolster the nation’s economy. 

The authors of a new report for Demos, a policy and advocacy group, claim in Retail’s Hidden Potential that if the top ten U.S. retailers by employment lifted the wage floor from the average retail salary of $21,000 per year to $25,000 the higher wages would essentially amount to a private sector stimulus.

“If large retailers raised wages to pay the equivalent of $25,000 per year for full-time, year-round work, GDP would increase by $11.8 to $15.2 billion and employers would create 100,000 to 132,000 new jobs,” according to the report.

Catherine Ruetschlin, a policy analyst at Demos and one of the report’s authors, said that over the next decade retail will be the second largest source of new jobs in the U.S.

“The highest output growth in the U.S. over the next decade will occur in retail. Therefore, retail workers and shoppers will be the economic drivers; they have the power and capacity to affect broad changes in our economy. Wal-Mart already claims they pay higher wages, so they should be able to do it. We demonstrate that. They’ll get productivity benefits for doing it, and it’s a reasonable business choice for them to make,” said Ruetschlin.

The total amount of the wage increase to $25,000, which would impact five million people, would equal almost $21 billion for the retailers, just one percent of their total sales. Ruetschlin admits that a $25,000 annual salary is not a whole lot for people who work hard, year round.

“The new wage floor we’re advocating is half of median household income in the U.S., and barely enough to keep a family of four out of poverty.”

But she and her colleagues argue that the retailers would also benefit from the wage increase because retail workers would spend it.

“You put money into the hands of people who need it, and they will spend it,” Ruetschlin said.

Unfortunately, the retailers every year spend about $25 billion on buying back shares of their companies that drives up earnings per share, benefits wealthy and ordinary investors alike but does nothing to enhance the company’s and country’s productivity.

“The retailers prioritize share buybacks over productive investment for the country. Buybacks typically consolidate ownership, leaving individual investors less power over the firm’s decision making,” said Ruetschlin.

Mr. Duke was asked by Daniel Doctoroff, CEO and President, Bloomberg L.P., what he thinks about the tension that exists between responsibility and profitability, in light of the ongoing protests against Wal-Mart for firing workers trying to organize.

“I don’t spend much time thinking of the tension. I appreciate that there can be different points of view, but I feel a great sense of pride that we have 1.4 million associates in the U.S. and just last year we promoted 165,000 people who started with the company as hourly associates into management positions overseeing store operations,” said Duke.

Steven Restivo, Senior Director of Community Affairs, Wal-Mart, who wrote “Protests Don’t Help Communities, But Wal-Mart Does” for Huffington Post, was asked whether Wal-Mart could afford to raise employee wages, and echoed Duke’s words.  

“We really focus on the chance of growth and opportunity. Seventy-five percent of store management teams across the country started as hourly associates, and we promoted 165,000 associates last year into management roles. If you want a career in retail and want to work for Wal-Mart you don’t have to look much further than your supervisor to see the path of advancement,” said Restivo.

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