This Week In The Other America

Be notified of updates to this site via:

February 28, 2005

The high cost of low wages

On my way past one of Manhattan's ubiquitous gourmet supermarkets this weekend (I think it was a Garden of Eden), I was handed a 12-page xeroxed booklet with the eye-catching headline: "Is your Gourmet Grocery a Sweatshop?" It turned out to be a summary of the findings of a study by New York Jobs with Justice (a coalition of unions and other good-jobs organizers) and researchers from Queens College and NYU Law School, and had some pretty eye-opening figures inside as well:

A survey of workers at 100 Manhattan gourmet grocers found they earned an average wage of $7.50 an hour, with cashiers starting at just $6.50 an hour and topping out at $9.00. Very few workers had health benefits, and many were denied overtime pay despite working as many as 60 hours a week. At other, non-gourmet supermarkets, meanwhile, workers typically earned about $11 an hour, with benefits.
The cost of all these low-paid employees ends up hitting not just workers and their families, but New York taxpayers as well: "Consider a cashier who supports a family of four and earns $6.60 an hour. At this poverty wage, she qualifies for public assistance, food stamps, Medicaid, Family Health Plus and housing subsidy - all of which are paid for with public dollars. ... A recent report [by the Economic Policy Institute's Moshe Adler] estimates that in 2002, about $1.1 billion in public benefits was spent on low-wage retail workers in New York City."

This made me think, naturally enough, of Wal-Mart. As you may recall, not long ago the retail giant got a flurry of bad press when it was reported to be giving its workers instructions on how to apply for food stamps and Medicaid, to supplement their meager wages. (Wal-Mart denied the charges, but not very convincingly.) By passing off its labor costs on the public, critics pointed out, Wal-Mart was effectively forcing taxpayers to subsidize its operations - and this for a company that's already gotten $1 billion in direct subsidies for its mission of squashing other retailers like bugs from sea to shining sea.

I already had Wal-Mart on the brain, thanks to a recent article by New Yorker economics columnist James Surowiecki, in which he insisted that the Wal-Mart hegemony is actually a victory for you, the consumer:

American consumers now consider it their due to have access to a wide variety of cheap, reliable goods. Their allegiances are fickle; brand loyalty is in fast decline. Wal-Mart is often spoken of as the most powerful company in the world, but it earns less than four cents on every dollar of sales, and its profit margins have stayed roughly the same year after year. ... In a sense, Wal-Mart is the elected representative of tens of millions of hard-bargaining shoppers, and, like any representative, it serves only at their pleasure.

This is the standard free-marketeer defense: Consumers are voting with their wallets, and companies like Wal-Mart are just giving us what we want. (Robert Reich has an op-ed in today's New York Times arguing much the same thing.) But what, exactly, are Wal-Mart shoppers voting for? Low wages for their friends and family members? High taxes to pay the health care costs of the kids of Wal-Mart cashiers? These are costs that don't get listed on the price tags on store shelves - much as McDonald's french fries don't come with an invoice for future cholesterol treatments, and gas pumps don't spit out receipts for the cost of global warming - but consumers, who are after all also workers and taxpayers themselves, should care very much about them.

Phil Mattera, who unearthed the $1 billion Wal-Mart subsidy figure in his research for Good Jobs First (and recently published a survey of other companies that rely heavily on state health care for their workers), says he sees "a grain of truth" to arguments like Surowiecki's, but that's about it. "U.S. consumers have been brainwashed into thinking that the lowest possible price is more important than anything else. But first of all, Wal-Mart is not always the lowest price - once they control a local market, they have a tendency to start raising their prices, in typical monopoly fashion."

As for whether people are capable of taking employee-wage and public benefit costs into account when they go to buy lawn chairs, Mattera notes: "We recently heard about some polling numbers, suggesting that a significant portion of the population just hates Wal-Mart, for all those reasons. Then you've got another significant portion who love Wal-Mart because of what they see as cheap prices. Then there's a big group in the middle that can go either way. And that's what a lot of these campaigns are about: Swaying those people in the middle."

Speaking of reports, the Center for Law and Social Policy has a new one on Bush's proposed cuts to adult education (PDF file here), which are bleak even by the standards of the new budget-slashing regime: An astounding 74% cut in federal GED, literacy, and ESL funding, which CLASP researchers estimate will cut off 470,000 people who are currently using these programs.

It's cuts like these that make anti-poverty campaigners tear their hair out, because funding education and training is about the cheapest, most effective way to lift people out of poverty not just for the moment, but in the long run: A GED or high school diploma has been shown to lead to a 30% jump in a person's earnings, while with a vocational or bachelor's degree, income nearly doubles. Yet recent "reforms," especially the 1996 welfare law that capped schooling at one year while receiving benefits, have made it much, much more difficult to get out of poverty by getting an education.

The nexus of education programs and poverty is an important topic, and one I don't have time to do justice to now. Maybe next week, assuming the President doesn't find something even more appalling to hack away at in the meantime.

Word out of Washington is that the long-delayed TANF reauthorization bill (aka Son of Welfare Reform) is more likely than ever to finally be acted on by Congress this month, with hearings possibly beginning as early as this week. The intent is to avoid getting welfare caught up in the ham-fisted meat axe of budget reconciliation (as discussed here two weeks ago), which is certainly an admirable goal; on the other hand, the last Senate version of the bill that was kicking around last year at this time involved big increases in both mandatory work hours and those participation rates that we also discussed here two weeks ago - making it, among other things, even more difficult to go to school while poor. That bill died at the last minute when Ted Kennedy attached a minimum-wage hike amendment that was unacceptable to Republicans, but with budget reconciliation looming, this time it could be the frying pan or the fire.

COMMENTS

Eventually, this column will include links to resources on poverty and the economy, recommended readings, and other goodies. For the moment, though, it's just other articles by me on the topic.

Recent writings: