The Most Successful Companies Seem To Pay The Least
A recent study by the National Employment Law Project of America has come to conclusions that tend to defy assumptions made about labor practices. High on the list of those assumptions would be that the businesses that pay the least to their staff tend to record the highest profits. This is something that contradicts the argument against increasing the minimum wage, with big businesses arguing that a higher minimum wage would force a reduction in employment opportunities to fund it.
The key finds are:
The majority of low paid workers are in a small field dominated by big business
The big businesses employing low paid workers post the highest profits
The big businesses in question emerged from the recession the fastest
Almost 50% of minimum wage workers are adult women
The traditional view has always been that small businesses tend to offer lower, closer to minimum wage salaries as a means of surviving and growing. This is clearly not the case, with it being apparent that a number of large businesses facilitate their seemingly ever increasing profits by maintaining a low wage bill.
It will be of little surprise, in light of the above, to learn that Walmart, the single biggest employer in America, is home to the highest number of minimum wage employees. They are closely followed by fast food chains such as McDonalds, KFC and Taco Bell. Whilst it is fair to say that these companies all offer employment that practically, within reason, any person could do with minimum training and thus there’s no paying for sought after skills, the profits recorded by these companies in light of their minimum wage policy is staggering.
The starkest example of this can be found in the case of McDonald’s. They employ over 850,000, with most working on an hourly minimum wage of under $10. It is hard to avoid a conclusion that the minimum wage approach, despite the large number of people employed, greatly assisted McDonald’s in recording a staggering, unequaled 130% increase in profits over the last four financial years. Whereas the employees on minimum wage do not get any increase whenever the price of a Big Mac goes up a few cents, it seems that someone in the organization does, with the top executives taking home some $4,000,000 per year.
An age old argument for lower paid work like the ones listed here is that they are vital to keep the economy ticking over, providing an entry level opportunity to young people moving in to the job market. The figure of half of all minimum wage workers being women tends to dismiss this as nothing more than a myth. Once upon a time Walmart or McDonald’s might have been the first point of employment for a teenager or young adult as they tried to work out what they wanted to do in the world; now it is clear that these businesses offer a primary source of employment and income to adults.
Companies like Walmart and McDonald’s claim that they would have to cut staff to fund an increase in the minimum wage. As already highlighted, it would seem that neither of those businesses has looked quite hard enough at ways they may be able to afford an increase in staff salaries. In the last financial year, Walmart paid over $11.3 billion in profits to their shareholders, with McDonald’s paying over $6 billion.
Would these shareholders really protest at the idea of a cut in their dividends being used to fund better wages and thus a better way of life for the employees that make them so much money? The answer, sadly, is probably yes indeed they would protest. Those with the money, and thus the power, would suggest that cutting staff and raising prices are the way to go, not cutting the earnings on their investment.
Such shareholders are of course entitled to their view, and to an extent they are of course right. If there were no reward for doing so, no one would invest in anything. I simply don’t know if it will ever be possible to alter the mindset of such investors, though, to consider the broader picture here. The minimum wage has not been reviewed for quite some time; so long in fact that it’s now considered to be in real terms worth only 70% of what it was when set. For McDonald’s executives reading this, that means your $4,000,000 would only be worth $2,800,000. Now think of the implications of that kind of cut on someone making $10 an hour from 40 or so hours of shift work, not that many get to the magical $10 figure.
Support from the general public, even those on minimum wage themselves, has usually been unlikely. Big business has always managed to convince the public that any increase in wage would lead to a higher price for products to fund it, and indeed raised the threat of making the country a “socialist state” by trying to increase the mandatory wage. The guy working at Walmart on minimum wage doesn’t want the guy at McDonald’s down the road earning more because that pushes up the price of his cheeseburger. The guy at McDonald’s feels the same as he doesn’t want his DVDs or shirts to cost more when he goes to Walmart. An impressive stalemate created by big businesses this is, believed by most but as we can see built on a dubious foundation.
What are your thoughts on the minimum wage in light of these findings? Have you consulted a workers compensation lawyer in Norfolk or other states that can help protect you against these cases? If you were a shareholder, would you be happy to see a slight decrease in your dividends in order to fund a significant increase in the salary of the staff that make the money?