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Kellie Wagner, Ellie Kramer, Hung Dao, Dan Pauley

Auditing
March 13, 2014
CST Project Wal-Mart and Minimum Wage

At the forefront of important issues in the past year or two, has been the concern
of raising minimum wage for big companies, especially retail giant Wal-Mart. As a
group, we will specifically look at Wal-Marts minimum wage for its employees and
discuss the adverse effects it has on them regarding the cost for living, while also
looking at the CST principles Wal-Mart is violating. First, lets look at history of Wal-Mart
to attain a better understanding on their policies and principles.
Wal-Mart was founded in 1962 by Sam Walton. Wal-Mart formed its business
style of offering savings to its customers and selling through volume. Many of Wal-
Marts policies came from the type of lifestyle that Sam Walton lived. He was a very
frugal man and that made him a successful business man. Yet, this also leads to him
underpaying his employees and not providing them enough money for the cost of living.
To Walton, the most important way to cut down costs was keeping the payroll down. In
his book Made in America, he stated No matter how you slice it in the retail business,
payroll is one of the most important parts of overhead, and overhead is one of the most
crucial things you have to fight to maintain your profit margin. Not only did Walton want
to hire as little employees as possible, but he also would not pay them more than he
had to. Now that some background history on Wal-Mart and their policies have been
explained, lets look at the effects the low pay has on employees.
Wal-Mart employs roughly one percent of all American workers and pays their
workers an average of $8.81 per hour. The Federal minimum wage currently sits at
$7.25 per hour. There has been a push for Wal-Mart to raise its workers hourly wage to
$12 per hour to establish a new minimum wage. According to the Bureau of Labor
Statistics, about 3.6 million Americans roughly 4.7% of the workforce earn at or
below the national minimum wage of $7.25 per hour (Ex. jobs paying tips). About 25%
of American workers make $10.50 an hour or less. The suggested living wage is $12.50
per hour which would put Wal-Marts rate just below the average living wage. When
looking at how this will affect the shopper, sources say the raise in minimum wage
would cost the shopper just $.46 more per trip (Fairchild). This bill has been put up
before Congress and has been at great debate over the past two years.
If Wal-Marts revenues are around $475 billion in a twelve month period, with a
net income of $17.2 billion, which were some stats during the last year or so; According
to a study done by the UC Berkley Center for Labor Research and Education in 2007,
they estimated that raising the minimum to $10 per hour would have substantially cost
to Wal-Mart as it would add 2.4 billion costs to the company. They also estimated that
raising the minimum wage to $12 per hour would add 3.2 billion per year. According to
2011 study by CUNY's Stephanie Luce and University of California Berkeley's Ken
Jacobs and Dave Graham-Squire, even if this is passed 100 percent onto consumers,
store prices would only increase about 1.1%. This then raises the issue of how this
debate should be handled when you take on the multiple considerations. Does Wal-Mart
absorb these costs or does it merely pass them onto the customers? Berkeley
researchers claim that the company could boost its pay to a minimum of $12 per hour
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and cover the additional expense by a one-time price hike of just 1.1%, costing the
average Wal-Mart shopper only an extra $12.50 a year.
Overall this has been an ongoing issue especially on the financial side. Pope
Francis has even been cited with his opinion on the matter saying that, trickle-down
economies have never been shown to work, that its simply not true that the rich people,
if given more money, will spread the wealth around with increased hiring (Gehring).
Our group looks to provide the best possible solution to this problem after applying
some of the Catholic Social Teaching Principles to this topic.
Some of the principles that we found suitable for this topic were the principles of
Rights and Responsibilities and Option for the Poor and Vulnerable in the sense that it
is suggested that the appropriate living wage is $12.50 per hour and minimum wage is
well below this rate. This suggests that people are not able to perform their roles and
contribute to society because it does not have sufficient resources. Wal-Mart has a duty
as one of the largest companies in the world to allow their employees to be able to
sufficiently contribute as a human being created by God. By paying them such poor
wages it is not recognizing their employees as valuable human beings. Since human
beings are seen as valuable creatures in Gods eyes, Wal-Mart must provide them with
the necessary wages in order for them to properly contribute to the world.
Besides, as an influential national conglomerate, Wal-Marts increasing the
minimum wage could also make many companies follow suit. As one of the biggest
retail corporations, it must realize the ethical responsibility it has in regards to treating
people with the rights and responsibilities they deserve. If Wal-Mart made this change,
not only would it better the lives for their employees, but also better the lives for other
companys employees in the same spot. Wal-Mart has a chance to make a true
difference and it needs to respond to the call to action. Doing so would make the lives of
many other employees that much better and allow them to properly contribute to society
as they should. The ramifications of Wal-Mart raising their wages to $12 per hour would
allow members of society to be participating members of political and social
communities. It would enhance the living standard and would make our world a much
better place.
We also thought that Dignity of Work/Rights of Workers was applicable. It states
that all workers have the right to decent and fair wages and we want to determine if this
is being offered. Wal-Mart is clearly not treating their workers with the respect and
dignity that deserve as human beings created by God. They have been paid way under
what is necessary to live in regards to the suggested living wage. Wal-Mart is taking
advantage of these workers and depriving them of the necessary rights they have as
human beings. As one of the main leaders in the retail industry it is their responsibility to
set an example for other companies to follow. This practice will set a bad example for
other companies and they will continue to disregard the respect and dignity that their
workers should be treated with.
Finally the principle of Community and the Common Good could be applied
because everyone has the responsibility to contribute to the good and whole of society.
Wal-Mart is clearly violating this principle because of the low wages it is offering to their
employees. It needs to consider the moral issues of their business, not just the financial
issues. Wal-Mart is not striving towards the common good of others as it is not
concerned about the well-being of others. It is clear from their practices that it does not
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have much concern about whether or not their employees can even provide food and
shelter for their family. It just considers the financial ramifications of each decision it
makes, which does not allow their employees to contribute toward the common good of
the community.
We believe that if Wal-Mart raises the minimum wage to $12 per hour it will prove
to be beneficial to it and its workers. On average it would only cost consumers around
$12 more per year considering they take two trips to Wal-Mart per month because the
price per trip increase is expected to be about $0.46. This will not have a significant
impact on customers. If Wal-Mart increases their minimum wage, other companies will
likely to increase theirs too. Otherwise, they would fall behind as Wal-Mart will attract
more qualifying candidates.
The ramifications of raising the minimum wage for Wal-Mart employees would
have some small effects on the company, but nothing that would drastically change it.
Raising the minimum for Wal-Mart would likely force them to cut down on the amount of
workers it employs, which would in turn increase the unemployment rate. According to
Paul Krugman, Nobel laureate for economics and columnist for the New York Times,
was quoted as saying, the centrist view is probably that minimum wages 'do,' in fact,
reduce employment." This would cause the store to not run as efficiently as possible
while causing more of the workers to work more hours during the week. This could lead
to them being not as effective and efficient employees as they would want to be. This
ripple down effect of this would be losing some of the customers because of their
dissatisfaction with the employees.
In fact, Wal-Mart has seen the amount of employees decrease by 20,000 or 1.4
percent. This has resulted in the amount of merchandise on their shelves in the store
not being completely out. The merchandise choices have been lacking and that has
caused customers to gravitate towards their competitors. The main reason being the
poor quality that Wal-Mart employees have demonstrated in stock their shelves
efficiently and effectively. Also, Wal-Mart would have to decrease their expenses in
other places to bring down their costs. In order to balance the increasing wages
expense, it might decide to move their factories overseas or use less durable and
efficient products. One benefit of taking on this project would be the increase of skilled
workers available to hire for Wal-Mart. Raising the minimum wage would make it likely
to increase a wider-range of pool of workers for certain jobs and it would attract more
proficient employees. That could really help the productivity of their workers as workers
and help their day-to-day operations run smoother.
Raising minimum wages would also have a trickle-down effect for the wages of
every employee. If raised the minimum wage, then you would also have to raise the
wages of your lower-level and middle-level managers wages. As a result, this could
lead to even better candidates for those jobs and lead to your workforce improving even
more. Just raising the minimum wage for your workers can lead to Wal-Mart having the
ability to select from a much better pool of potential employers. In addition, wage
increase would encourage low-income people to purchase more Wal-Mart products.
According to Peter Dreier, a teacher at Occidental College, and Donald Cohen, the
chair of In the Public Interest, when poor workers have more money to spend, they
spend it, almost entirely in the local community, on basic necessities like housing, food,
clothing and transportation. When consumer demand grows, businesses thrive, earn
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more profits, and create more jobs. So by raising the minimum wage, Wal-Mart would
actually have an increase in their business.
As a result, raising the minimum wage is something that Wal-Mart should
seriously consider. Right now the minimum wage is too low for many of their employees
to live at cost for living. Hopefully we have demonstrated the negative effects Wal-Mart
is partaking in by paying their employees below the cost of living. Wal-Mart has an
ethical duty to increase the minimum wage to at least the cost of living. It is violating
many of the CST principles and as one of the biggest leaders in retail, it is their duty to
take action.



















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Works Cited
1) Dudley, Renee. "Wal-Mart Says 'Looking' at Support of Minimum Wage
Raise."Bloomberg.com. Bloomberg, 19 Feb. 2014. Web. 26 Mar. 2014.
<http://www.bloomberg.com/news/2014-02-19/wal-mart-says-looking-at-support-
of-federal-minimum-wage-rise.html>.
2) Fairchild, Caroline. "$12 Minimum Wage For Walmart Workers Would Cost The
Average Shopper Just 46 Cents Per Trip." The Huffington Post.
TheHuffingtonPost.com, 18 July 2013. Web. 26 Mar. 2014.
<http://www.huffingtonpost.com/2013/07/18/walmart-worker-
wages_n_3611531.html>.
3) Gehring, John. "Pope, Obama have much in common: Column." USA Today.
Gannett, 24 Mar. 2014. Web. 26 Mar. 2014.
<http://www.usatoday.com/story/opinion/2014/03/23/pope-francis-president-
obama-meet-vatican-column/6796219/>.
4) "The Unofficial Paul Krugman Web Page." The Unofficial Paul Krugman Web
Page. N.p., Sept. 1998. Web. 02 Apr. 2014.
5) Lewitinn, Lawrence. "Talking Numbers." Yahoo Finance. N.p., 12 Feb. 2014.
Web. 02 Apr. 2014.
6) Lutz, Ashley. "Here's How Much A Wal-Mart Pay Increase Would Cost Shoppers
Per Trip." Business Insider. Business Insider, Inc, 18 July 2013. Web. 06 Apr.
2014.
7) Dudley, Renee. "Customers Flee Wal-Mart Empty Shelves for Target, Costco."
Bloomberg.com. Bloomberg, 26 Mar. 2013. Web. 02 Apr. 2014.