New Study Finds Wal-Mart’s Miserly Wages Cost Taxpayers

Date: 13 Aug 2004 | posted in: Retail | 5 Facebooktwitterredditmail

Update: For more recent analysis, see “New Data Show How Big Chains Free Ride on Taxpayers at the Expense of Responsible Small Businesses,” from June 2013.

California taxpayers are spending $86 million a year providing healthcare and other public assistance to the state’s 44,000 Wal-Mart employees, according to a new study by UC Berkeley’s Institute for Industrial Relations.

The study, “Hidden Cost of Wal-Mart Jobs,” found that the average Wal-Mart worker required $730 in taxpayer-funded healthcare and $1,222 in other forms of assistance, such as food stamps and subsidized housing, to get by.

Even compared to other retailers, Wal-Mart imposes an especially large burden on taxpayers. Wal-Mart workers earn 31 percent less than the average for workers at large retail companies (more than 1,000 employees), the study found, and require 39 percent more in public assistance.

Employees who’ve been with Wal-Mart for at least a year (about 65 percent of the company’s workforce) make an average of $9.70 per hour, compared to $14.01 per hour for workers at other large retail stores. In addition, 23 percent fewer Wal-Mart workers are covered by the company’s health insurance plan than employees at large retail stores as a whole.

The wage and benefit differential is even greater when Wal-Mart employees are compared to workers at unionized supermarkets, where health coverage is nearly universal and wages average $15.31 per hour.

As Wal-Mart expands in California, the cost to taxpayers will grow. While more than half of the company’s stores nationwide are supercenters, in California, Wal-Mart’s first supercenter opened just a few months ago in Palm Springs. The retailer plans to build at least forty supercenters across the state over the next few years.

Citing the competitive threat of Wal-Mart, supermarket chains in California are demanding wage and benefit concessions from their employees. The UC Berkeley study estimates that if other large retailers adopt Wal-Mart’s wage and benefit levels, it will cost California’s taxpayers an additional $410 million a year in public assistance.

Wal-Mart dismissed the study’s findings, arguing that many of its 44,000 California workers would otherwise be unemployed, placing an even greater burden on government welfare programs. There is strong evidence, however, Wal-Mart produces no net growth in employment. The jobs created by its stores replace other, often higher-paying, jobs at existing businesses that are forced to downsize or close.

The UC Berkeley study’s finding that the average Wal-Mart employee requires $1,952 per year in assistance is very similar to the results of another study released this year, in spite of the fact that the two studies used different methodologies. The other study, produced by US Representative George Miller, found that Wal-Mart workers cost taxpayers $2,100 per year on average.

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Stacy Mitchell

Stacy Mitchell is co-director of the Institute for Local Self-Reliance and directs its Independent Business Initiative, which produces research and designs policy to counter concentrated corporate power and strengthen local economies.