A half-century ago, America’s largest private-sector employer was General Motors, whose full-time workers earned an average hourly wage of around $50, in today’s dollars, including health and pension benefits.
Today, America’s largest employer is Walmart, whose average sales associate earns $8.81 an hour. And a third of Walmart’s employees work less than 28 hours per week and don’t qualify for benefits.
There are many reasons for the difference — including globalization and technological changes that have shrunk employment in American manufacturing while enlarging it in sectors involving personal services, such as retail.
But one reason, closely related to this seismic shift, is the decline of labor unions. In the 1950s, more than a third of private-sector workers belonged to a union. Today, fewer than 7 percent do. As a result, the typical American worker no longer has the bargaining clout to get a sizable share of corporate profits.
At the peak of its power and influence in the 1950s, the United Auto Workers could claim a significant portion of GM’s earnings for its members.
Walmart’s employees, by contrast, have no union to represent them, so they’ve had no means of getting much of the corporation’s earnings.
Walmart earned $16 billion last year (it just reported a 9 percent increase in earnings in the third quarter of 2012, to $3.6 billion), much of which went to Walmart’s shareholders — including the family of its founder, Sam Walton.
The wealth of the Walton family now exceeds the wealth of the bottom 40 percent of American families combined, according to an analysis by the Economic Policy Institute.
Is this about to change?
Despite decades of failed union organizing, Walmart workers are getting together. On Black Friday, they staged protests outside at least 1,000 Walmarts across the United States.
The action has given Walmart employees a chance to air their grievances in public — not only lousy wages, but also unsafe and unsanitary conditions, excessive hours and sexual harassment. The bad publicity for the company comes exactly when it wants the public to think of it as Santa Claus.
What happens at Walmart will have consequences far beyond the company. Other big-box retailers are watching. Walmart is their major competitor. Its pay scale and working conditions set the standard.
More broadly, the widening inequality reflected in the gap between the pay of Walmart workers and the returns to Walmart investors, including the Walton family, haunts the American economy.
Consumer spending is 70 percent of economic activity. As income and wealth continue to concentrate at the top, and the median wage continues to drop — it’s now 8 percent lower than it was in 2000 — a growing portion of the American workforce lacks the purchasing power to get the economy back to speed.
Without a vibrant and growing middle class, Walmart won’t have the customers it needs.
Most new jobs in America are in personal services like retail, with low pay and bad hours. According to the Bureau of Labor Statistics, the average full-time retail worker earns between $18,000 and $21,000 per year.
If retail workers got a raise, would consumers have to pay higher prices? A new study by the think tank Demos reports that raising the salary of all full-time workers at large retailers to $25,000 per year would lift more than 700,000 people out of poverty, at a cost of only a 1 percent price increase for customers.
According to the study, the cost of the wage increases to major retailers would be $20.8 billion, about 1 percent of the sector’s $2.17 trillion in total annual sales. But the study also estimates the increased purchasing power of lower-wage workers as a result of raises would generate $4 billion to $5 billion in additional retail sales.
This seems like a good deal all around.
Robert B. Reich, chancellor’s professor of public policy at the University of California and former U.S. secretary of labor, blogs at www.robertreich.org.