Walmart’s Low Wages Are Causing the Company’s Profits to Collapse


It almost makes you wish you weren’t a Republican supporting killing jobs bills and the minimum wage, but oh well, it’s a little late for that now.

It turns out that when you starve the people with low wages and put all of your record breaking profits back into your own pocket or the pockets of your investors instead of doling out a teeny tiny bit for human capital (employees), and you drive the wages down so low that your employees are subsidized on the federal dime, eventually those people can’t afford your products.

Eventually that lower to middle class that you snuffed out with greed does indeed disappear and then—

POOF – there’s no one to buy your crap.

Walmart’s quarterly numbers reveal that the previous signs of trouble that so freaked out company executives have not resolved. Walmart U.S. comp sales declined 0.3 percent in the 13-week period from Apr. 27 and the company lowered its earnings-per-share forecast.

And yet, The company returned $3.4 billion to shareholders through dividends and share repurchases.

“Across our International markets, growth in consumer spending is under pressure,” said Doug McMillon, Walmart International president and CEO. “Consumers in both mature and emerging markets curbed their spending during the second quarter, and this led to softer than expected sales. While this creates a challenging sales environment, we are the best equipped retailer to address the needs of our customers and help them save money.

“We expect the third and fourth quarters to be better than our results in the first half, and we are working hard to deliver operating expense leverage for Walmart International,” added McMillon. Yes, Walmart hasn’t learned and they are looking for more ways to cut costs, which in Walmart-ese will most likely translate into taking more from the labor pile.

In their press release, Walmart blamed the “increased” payroll tax (again, it was not an increase) and inflation, but the truth of the matter is that these are the conditions of the market, and whining about them instead of addressing the real problem isn’t helping. If the average worker had a decent paycheck, they would have more money. This is just math.

They know this, because in February of this year a company executive asked in an email dripping with flop sweat, “Where are all the customers? And where’s their money?”

In February of this year even WalMart knew there was trouble because same store sales grew only 1 percent in the fourth quarter where analysts were expecting the same 1.5 percent they had seen in a year earlier.

Wal-Mart attributed this to a fall off in sales after Black Friday because, it said of an unusually long interval between Thanksgiving and Christmas. Another slowdown in sales hit in late January and continued into this month.
The company’s explanation for the recent flat sales was the January 1 payroll tax “increase” and higher gas prices. The former, of course wasn’t an increase at all but Wal-Mart, without a hint of irony, complained that the expiration of the tax holiday took $15 a week out of the pockets of families earning $30,000 a year.

Where are the customers? Well, According to Bloomberg they fled Wal-Mart’s poor customer service for places like Costco. You know Costco, where they pay their workers a fair wage and back legislation to increase the minimum wage.

Harold Meyerson pointed out at WaPo that these bad tidings weren’t contained just to WalMart but other retailers like Kohls and Macys were suffering as well. Why? Well, gee, “The United States leads the industrial world in the percentage of its jobs that are low-wage.”

This isn’t rocket science. In December of 2012, CNN money reported that corporate profits were stronger than ever. “But the record profits come at the same time that workers’ wages have fallen to their lowest-ever share of GDP.” Things weren’t always like this. “Until 1975, wages almost always accounted for at least half of GDP, and had been as high as 49% as recently as early 2001.” Oh, the last vestiges of the Clinton economy. (Insert longing sigh here.)

“But the downward pressure on wages is hurting consumers’ ability to spend, and thus the need for businesses to hire more people.”

“[Businesses] have a capacity to employ more people, but it makes no sense to hire more people until you have demand for your stuff,” Heidi Shierholz, an economist with the Economic Policy Institute, a liberal think tank, told CNN Money.

Corporate profits have finally pushed labor off the cliff. The disparity has been growing since the great depression, and it’s reached the point now where working Americans can’t make it fly anymore. We have no Bush bubbles (tech, housing) to cushion us from this reality anymore. Until corporate America starts putting some of their profits back into labor, labor isn’t going to have the money to buy corporate America’s stuff.

Just like corporate America threatens workers with moving offshore for cheap labor, the American worker can now tell American corporations sorry, but a) I don’t have the money and b) I can get it cheaper in China off the Internet, or c) I can buy it at Costco.

I guess workers are good for something after all in the paradigm of the sociopathic corporation. They always promised us the goodies would trickle down. Of course, they never did. Instead, the starving of the middle class is finally trickling up. It couldn’t happen to more deserving people.

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