Why Big U.S. Retailers Can Afford To Increase Wages

By 2020, more than one-quarter of U.S. workers will be working low-wage jobs, not making enough money to keep a family of four out of poverty. The corporations that employ the most low-wage workers, meanwhile, “have largely recovered from the recession and most are in strong financial positions.” 92 percent of them were profitable last year, while three-quarters are making more in revenues than they were before the recession.

The retail industry is one of those that employs the most low-wage workers. (About 36 percent of low-wage workers work in retail.) And according to a new report from Demos, big retailers could afford to boost their workers’ income to $25,000 per year without eating into their bottom line:

The cost of increasing the living standards of more than 5 million Americans, adding $11.8 to $15.2 billion to GDP, and creating no less than 100,000 jobs amounts to just a small portion of total earnings among the biggest firms. The retail sector takes in more than $4 trillion annually and firms with 1000 or more employees account for more than half of that. At the same time labor compensation in the sector contributes only 12 percent of the total value of production, making payroll just a fraction of total costs. Large retailers could pay full-time, year-round workers $25,000 per year and still make a profit — satisfying shareholders while rewarding their workers for the value they bring to the firm. A raise at large retailers adds $20.8 billion to payroll for the year, or less than 1 percent of total sales in the sector. At the same time it is very likely the firm will experience benefits that offset the cost of the wage increase — in the form of productivity gains and higher sales per employee — making the net cost of the new wage even lower.

Meanwhile, “if retailers pass half of the costs of a wage raise on to their customers, the average household will see just 15 cents added to the cost of its shopping basket on any trip to a large retailer. That amounts to an annual cost of $17.73.”