Actually, make it two: have you ever actually worked at a real job, ever? Because the numbers in this meme only make sense if you do not understand even the most basic facts about how working in America, er, works. To be fair, here at Meme Killer the only enterprise we’ve ever run has been some sketchy “blog” website or something, so we’re not exactly experts in business administration, either. But you’d think that libertarians, those self-styled Makers who earn their fortunes with nothing but gumption and the power of the Free Market, would maybe understand a little bit more about how the business world actually works? Let’s examine.
The Libertarian Eye did do all the multiplication correctly—congrats! Just one eensy problem—they’re multiplying the wrong numbers. “Wal-Mart Has 2 Million Employees.” Wrong; it’s 1.4 million employees in the US. Even with rounding, 2 million is wrong. (There are more employees worldwide, but differences in labor laws, standards of living, and currency values make it useless to include them in a discussion about wages in America.)
“The Average Employee Makes $8.81 an Hour.” Close but still wrong–the average sales associate makes $8.81 an hour. The overall average wage for hourly workers at Wal-Mart is $12.81.
This is an important distinction because it’s these entry-level workers who are being paid these below-the-poverty line wages.
“Paying $15/Hour Would Give a Raise of $6.19 an Hour.” This is solid multiplication–work that calculator, Libertarian Eye!–but it follows from the false claim that the average Wal-Mart employee makes $8.81 an hour.
“That Would Cost Wal-Mart an Additional $12.4 Million/Hour.” This is the (wrong) number of US employees of Wal-Mart, times the (wrong) marginal cost of more expensive labor. Unlike that thing you learned in elementary school, where a negative number times a negative number makes a positive number, one wrong number times another wrong number still gets you a wrong number.
“Which Would Cost Wal-Mart an extra $99 million per 8 Hour Day.” Successful multiplication by eight, to be sure, but most Wal-Mart workers don’t work eight hours a day. Part of the esteemed Walmart Way is to do “flexible scheduling,” in which workers come in for different shifts, which may or may not be eight hours long, at different times of the day. Wal-Mart does not make public how many workers it employs this way, but we can safely say that a full eight-hour day is not the norm for many of its entry-level employees.
“Which Would Cost Wal-Mart $36.15 billion per year.” Here’s where Mr. Eye makes the leap from the cliff of oversimplification into the ocean of full-blown business illiteracy. That $36.15 figure is obtained by multiplying $99 (the supposed cost per day of raising wages to $15/hour) times 365, the number of days in a year. Do you know anyone, anywhere, who works at the same job eight hours a day, seven days a week, all year, with no vacations or time off? Of course you don’t, because you live in the real world.
In the US, full-time work is generally understood to mean 40 hours a week, 50 weeks a year; but there is no legal definition of full-time; it’s up to the employer. Wal-Mart defines full-time employment as 34 hours per week. But lots of Wal-Mart employees aren’t full-time! Another part of the Walmart Way is that it’s better to hire several part-time employees, instead of one full-time employee, to avoid providing health care and other benefits. Again, Wal-Mart doesn’t make public how many of its employees are part-time, but it seems to be about one-third of its wage-labor force, who are limited to 28 hours per week.
“Wal-Mart Profited $16.8 Billion Last Year.” True! One out of seven isn’t too bad; that’d be an impressive .142 batting average in baseball.
“This raise would cause Wal-Mart to Lose $19.35 Billion.” Correct subtraction, and one of the two numbers is even correct!
Except…there’s a strange assumption here: that there’s nothing else Wal-Mart could possibly do to compensate for the increased cost of labor. Apparently in Randland, firms just have to eat the losses that the socialists and second-handers want to impose on them. Prisoners of the market, the nice folks who run Wal-Mart must either pay their employees so little that they are below the federal poverty line, or go out of business. It’s actually a delightfully Marxist way of looking at the world–Libertarian Eye thinks the capitalist system by its very nature requires a permanent class of millions of impoverished working Americans in order to function at all, and there’s nothing the Walton family or any other rich capitalist can (or should) do about it or they too would end up bankrupt and out on the soup line.
Here at Meme Killer, we reject Marxism! And we know that there are lots of things a company like Wal-Mart could do to deal with increased costs (which, it turns out, would be more like $20, not $36, billion; we’ve ginned up a spreadsheet if you want to check our work): It could pass the costs along to the consumer, by raising prices. If Wal-Mart passed every dime higher labor costs on to consumers, they’d pay…46 cents more per trip. (This paper used $12, not $15, as the baseline wage, but it should give you some idea of the orders of magnitude involved.)
Wal-Mart could stop buying back its own stock; part of continued efforts to concentrate ownership wealth in the hands of the Walton family and their friends. It could compensate its top-level management less, both in salary and in pension. This is not just a bunch of Ivory-Tower-dwelling academics and basement-dwelling bloggers who’ve never made a payroll doing theoretical calculations, mind you: There are real-world examples of retail firms that compensate their floor-level employees decently and their CEOs modestly, without getting eaten alive by the all-powerful Free Market.
Wal-Mart pays its employees so little not because they have to, but because they want to–because senior corporate executives, shockingly, choose to implement policies that enrich senior corporate executives. Which, hey, free country! But, it’d be nice if the rest of us didn’t have to subsidize their choices.
Any questions, Libertarian Eye?