A $24/hr wage — even a $15/hr wage — is long overdue. Wages have been held down for, well, decades, really. The reason has to do with what might be called The Walmart Effect.
In the 1960s, Sam Walton introduced a business model that was counter to the standard retail pricing model of regular prices, paired with a promotional discount calendar. Sam developed the “everyday low price” concept and did away with discounted sales. The promotional windows had been tolerable to retailers because vendors cooperated by offering special promotional adjustments that cushioned the impact on margin and bottom line.
To achieve “everyday low pricing,” Walmart merchants squeezed vendors to wring out every extra cent to secure a favorable margin year-round, rather than just in occasional windows (Back-to-School, Spring, Holiday, etc). But margin was not the only business factor squeezed under the Walmart thumb.
Two other operations factors were affected:
- physical plant — dull gray boxy stores with minimal display frills, and
- labor — hiring mostly part-time employees to avoid the cost of conventional full-time benefits — at minimum wage.
Yes, there were glory stories in the early days where founding employees were granted stock and when Walmart went public, they cashed in. But those days are LONG gone. (Yet the Walton family is among the wealthiest in the nation.)
One other aspect though is crucial to address: The Consumer. Sam’s model was so persuasive that he trained or conditioned millions of consumers to welcome his pricing scenario. And other retailers were right with him. K-Mart and Target were founded the same year as Walmart. But none delivered on the pricing promise as aggressively as did Sam and his relentless merchants. As Walmart grew in power, vendors were pressured more and more and consumers bought more and more. Employees churned, but there were always plenty more folks to step in to take their places.
Consumers tolerated minimal or non-existent service so they could buy more and more stuff, much of which we don’t really need. (Who would have ever thought that storage lockers would be a business?! Be surprised that Sam Walton didn’t start those, too!)
Low price was the mantra. Low margins and low wages were its underlying facilitators.
Then the digital age dawned. Amazon gradually became the one competitive model to stick … still driven by low price. Now there was no store at all. Shipping replaced the cost of thousands of stores and thousands of workers. Wages were still low (see recent increases in wages to $15/hr in warehouses scattered across the country). And to compete, Walmart and Target and others invested heavily to develop the same e-commerce operations.
Then COVID hit. Disruption on every front. The low wage model is broken. The Great Resignation astonishes employers everywhere. We don’t have to legislate higher wages now. Workers just have to refuse to work until the hourly wage is appropriate. Or rather, until the hourly wage is closer to that which it should have naturally grown to over the ensuing decades — had we not grown so greedy for low prices and so hungry for consumption.
The ultimate Walmart effect: Low prices mean low wages. And over-consumption.
Now, we’re all paying the cost of that model. Yes, inflation was triggered by the pandemic; mostly due to supply-chain disruption. Those problems will likely be solved. But the demand for fair wages will only be solved by higher, fairer wages. And we consumers will need to adjust. Fair wages require fair prices. And maybe a bit less consumption on our parts as consumers and as citizens of a responsible economy.