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Turning People into Profits

Wal-Mart’s Magic Numbers

by STAN COX

The king of discount retailing is looking like a blue chip bargain.

James Hale, The Online Investor, March 4, 2004

Wal-Mart probably doesn’t set out with the purpose of destroying lives and wrecking the American economy. The company is trying, in a bigger way than has ever been tried before, to achieve three contradictory goals: pay its workers enough, make its mechandise affordable to almost everyone, and increase value for stockholders. In doing so, it has been both a wild success and an utter failure. In its ultimate inability to satisfy all three goals simultaneously, Wal-Mart mirrors the economy at large.

A list of numbers serves to illustrate how Wal-Mart deals with tradeoffs among the interests of workers, customers, and shareholders:

Pay scales, high to low

$2,200,000,000: Total dividends Wal-Mart plans to pay its shareholders this fiscal year, after a 44% dividend increase announced March 2, 2004

$23,000,000: Average annual compensation for Wal-Mart CEO Lee Scott, 2000-2003

$4,500,000: Average annual compensation for previous Wal-Mart CEO David Glass, 1995-2000

$70,000 to $150,000: Bonuses (coming on top of typical base salaries exceeding $50,000) commonly earned by Wal-Mart store managers in 2002 as incentives to increase their own store’s annual profit, with profit increases coming largely through holding down labor costs

$9.68: Average hourly living wage as defined by 22 of the U.S. cities and towns that passed living wage ordinances between 2000 and 2004

$9.60: Average hourly wage Wal-Mart could pay if one-third of its current profits were diverted to pay its U.S. employees instead

$9.54: Average hourly wage Wal-Mart could afford to pay if it raised its prices an average of 1%

$9.32: Average hourly wage Wal-Mart could pay if the current annual dividend going to its stockholders were diverted to pay its U.S. employees

$9.15: Hourly wage that Dana Mailloux was earning at a Ft. Myers, Florida Wal-Mart when she and more than a dozen similarly paid employees were laid off because of "lack of work", after which, as they were leaving the store, they noticed "six new hires — red vests in hand — filling out paperwork," and then that next weekend saw Help Wanted ads on the store’s bulletin board

$8.00: Approximate nationwide average hourly wage for Wal-Mart employees

$6.25: Starting wage for a cashier at the Wal-Mart Supercenter in Salina, Kansas, 2003

$12,192: Income earned by a newly hired cashier working 40-hour weeks (more than the 32-hour company-wide average) for a year, with no weekdays off, at the Salina Supercenter

$13,994: Minimum annual expenses for bare existence faced by a single cashier with children 4 and 12 who lives in Salina, Kansas and provides as many necessities as possible by shopping at the Supercenter where she works (Expenses do not include child care costs, which, if the cashier finds a qualified provider, are covered by a state subsidy.)

$6.00: Typical hourly rate being paid by Wal-Mart to custodial contractors for the services of more than 300 undocumented workers in late 2003 (with the contractor, not Wal-Mart, having to pick up the employer’s share of the workers’ Social Security tax)

$0.31: The legal hourly minimum wage in China

$0.23: Average hourly wage at 15 Chinese factories making clothing, shoes, and handbags to be sold at U.S. Wal-Mart stores, 2001

73: Average number of hours worked per week by employees at those 15 factories

Some other numbers

127: The number of Wal-Mart stores, out of 128 audited in 2000, that were found not to be allowing sufficiently for 15-minute breaks as provided for in company policy

$150,000,000: The total back pay Wal-Mart is estimated to owe employees in Texas for having compelled them to work through their 15-minute breaks over a four-year period

40 hours, 36 seconds: Amount of time worked in one week by Wal-Mart employee Georgie Hartwig of Washington State, for which she was upbraided by her manager for clocking more than 40 hours, which costs the store in overtime wages

45%: Proportion of her entire annual wage that a single Wal-Mart employee might have to pay out-of-pocket before collecting any benefits from the company-sponsored health plan

42,000: Number of Wal-Mart employees in the state of Georgia in 2002

10,261: Number of children of Wal-Mart employees in Georgia who are enrolled in the state’s PeachCare for Kids health insurance program, which provides medical coverage to children whose parents cannot afford it

$420,750: Annual cost to U.S. taxpayers of a single 200-employee Wal-Mart store, because of support required for underpaid workers — including subsidized school lunches, food stamps, housing credits, tax credits, energy assistance, and health care

5: Wal-Mart’s rank, if it were a separate nation, among China’s biggest export markets — ahead of Germany and Britain

45%: Decrease in annual sales of Levi-Strauss clothing from 1996 through the first half of 2003, largely because of competition from less expensive jeans sold at Wal-Mart

6%: Sales increase in the third quarter of 2003, just after Levi-Strauss began supplying jeans to Wal-Mart

60: Number of U.S. clothing factories operated by Levi-Strauss in 1981

2004: The year in which Levi-Strauss will close its last two U.S. plants and stop manufacturing jeans, importing them from overseas instead

STAN COX lives in Salina, Kansas, where he is a plant breeder and writer. He can be reached at: t.stan@cox.net