A Study of Wal-Mart's Wage and Benefit Practices

The Economic Policy Institute has published an interesting study about whether Wal-Mart could offer additional wages and benefits and still maintain its profitable position.

According to the study (as reported last week in the Washington Post):

Wal-Mart Stores Inc. could significantly increase employee wages and benefits without raising prices, and still earn a healthy -- albeit smaller -- profit, research released on Thursday concluded.

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"The more important question for the future isn't whether Wal-Mart is a force for good or evil in the American economy, but whether the economic benefits provided by Wal-Mart can be preserved even if their labor compensation is dramatically improved," economists Jared Bernstein and Josh Bivens wrote.

They concluded that if Wal-Mart reduced its profit margin to about 2.9 percent, where it stood in 1997, from the 3.6 percent margin it recorded last year, that would free up some $2.3 billion to pay workers without raising prices. That works out to just under $2,100 per non-managerial employee, the researchers calculated.

Although I'm sure that Wal-Mart would not willingly agree to such a cut in its profit margin, it does show how much an additional 0.7 percent profit margin is actually worth in real dollars to a mega corporation like Wal-Mart.

And even though this analysis strikes me as somewhat overly simplistic (as such corporate profits are used for more than just pure company profit or labor costs), it does challenge the corprorate dogma that by raising labor costs one necessarily has to pass on such additional costs to the consumer.

Here is the Economic Policy Institute's entire Issue Brief on Wal-Mart's compensation practices.

Hat Tip: Raw Story

PS