5 ms·

>We should institute a minimum wage of ~$12/hr tied to inflation to fight poverty. Can you walk me through the economic justification for this?

logn 14y ago
Sure. Take Walmart for example. They had over 100 billion (edit: I was wrong it's 36 billion) in profits in 2012. If you assume they pay every one of their 2 million workers $8/hr then giving them a raise to $12/hr would cost around 15-20 billion dollars. In my opinion this means they can afford it. It also means that the government would stop subsidizing their profits through government handouts for the working poor. Edit: realistic numbers of average pay for Walmart is approaching $10/hr making the total cost of a wage hike 10 billion.
- btilly 14y ago
  You might want to double-check your facts. Starting with the fact that Walmart's profits in 2012 were $15.7 billion, making a $15-20 billion line item not nearly as affordable as you would have us believe. Note that this is the biggest retailer in the world, in an economic climate which has been very good for them. (When people become price-conscious, sales move from higher end stores to Walmart.) What is affordable for them right now might not be for other retailers in general, or for them in a different year. (That said, if every employee cost more, prices would rise and costs would get passed to consumers.)
- jacques_chester 14y ago
  > They had over 100 billion in profits in 2012. EBITDA was $36B. Giving up ~2/3rds of the money available for dividends or reinvestment in the business is not going to fly with the shareholders.
  - btilly 14y ago
    EBITDA was $36B. I think that for this discussion Net Income is the more appropriate figure to use given that Walmart's interest, tax, depreciation and amortization add up to tens of billions of dollars.
    - jacques_chester 14y ago
      You're right. They booked net income for 2011-12 as $15.6B. So a $20B payrise would put them in the red. http://finance.yahoo.com/q/is?s=WMT+Income+Statement&annual http://finance.yahoo.com/q/is?s=WMT+Income+Statement&ann...
      - logn 14y ago
        Yeah you're all probably right. However, with average walmart wages of $10/hr I think that's a realistic target for minimum wage. Also I think it's a shame that we charge any tax to people making minimum wage. I plugged $14500 into the ADP pay calculator, and in my state you walk away with just over 10k per year.
  - logn 14y ago
    You're right. Sorry my numbers were wrong. Anyhow their average pay is actually closer to $10/hr anyway making the total cost more like 10 billion dollars. Their dividend payout ratio is around 30%. A payout ratio of 60% would still be okay with most investors, though I'm sure it would hurt the investment opportunity. But when we recognize that we have a growing income disparity this would be the price we pay to fix that.
    - jacques_chester 14y ago
      In 2011-12, Walmart paid $5B in dividend and bought back $6.2B of stock. They also spent around $13B on capital expenditure -- new stores, equipment, warehouses and so on, all of which would be employing new people. People latch onto Walmart because of the amazing numbers involved. Hundreds of billions of dollars in revenue! Thousands and thousands of stores! Millions of employees! But the thing is, retail is a really tough business to turn a buck on. After this massive machine has sprint through a year, the result is ... about a 3% profit on revenue. Compare that with Google: On ~$50B revenue Google walks out with ~$10B of net income. For eight times less revenue Google is still managing to make more than half as much profit as Walmart. Where are the picket lines outside Google HQ?
      - neilcj 14y ago
        Where are the Googlers qualifying for SNAP?
        jessaustin 14y ago
        This cuts both ways: if Google had a use for less skilled employees (I'm not saying they do, but anyone looking for customer service on her Nexus order might), they might still decide not to hire such employees specifically to avoid the regulations (and protests, apparently) involved with that. Wal-Mart has to hire these workers, but we can be sure if they had any reason to hire fewer of them they would.

logn 14y ago

Sure. Take Walmart for example. They had over 100 billion (edit: I was wrong it's 36 billion) in profits in 2012. If you assume they pay every one of their 2 million workers $8/hr then giving them a raise to $12/hr would cost around 15-20 billion dollars. In my opinion this means they can afford it. It also means that the government would stop subsidizing their profits through government handouts for the working poor. Edit: realistic numbers of average pay for Walmart is approaching $10/hr making the total cost of a wage hike 10 billion.

btilly 14y ago
You might want to double-check your facts. Starting with the fact that Walmart's profits in 2012 were $15.7 billion, making a $15-20 billion line item not nearly as affordable as you would have us believe. Note that this is the biggest retailer in the world, in an economic climate which has been very good for them. (When people become price-conscious, sales move from higher end stores to Walmart.) What is affordable for them right now might not be for other retailers in general, or for them in a different year. (That said, if every employee cost more, prices would rise and costs would get passed to consumers.)
jacques_chester 14y ago
> They had over 100 billion in profits in 2012. EBITDA was $36B. Giving up ~2/3rds of the money available for dividends or reinvestment in the business is not going to fly with the shareholders.
- btilly 14y ago
  EBITDA was $36B. I think that for this discussion Net Income is the more appropriate figure to use given that Walmart's interest, tax, depreciation and amortization add up to tens of billions of dollars.
  - jacques_chester 14y ago
    You're right. They booked net income for 2011-12 as $15.6B. So a $20B payrise would put them in the red. http://finance.yahoo.com/q/is?s=WMT+Income+Statement&annual http://finance.yahoo.com/q/is?s=WMT+Income+Statement&ann...
    - logn 14y ago
      Yeah you're all probably right. However, with average walmart wages of $10/hr I think that's a realistic target for minimum wage. Also I think it's a shame that we charge any tax to people making minimum wage. I plugged $14500 into the ADP pay calculator, and in my state you walk away with just over 10k per year.
- logn 14y ago
  You're right. Sorry my numbers were wrong. Anyhow their average pay is actually closer to $10/hr anyway making the total cost more like 10 billion dollars. Their dividend payout ratio is around 30%. A payout ratio of 60% would still be okay with most investors, though I'm sure it would hurt the investment opportunity. But when we recognize that we have a growing income disparity this would be the price we pay to fix that.
  - jacques_chester 14y ago
    In 2011-12, Walmart paid $5B in dividend and bought back $6.2B of stock. They also spent around $13B on capital expenditure -- new stores, equipment, warehouses and so on, all of which would be employing new people. People latch onto Walmart because of the amazing numbers involved. Hundreds of billions of dollars in revenue! Thousands and thousands of stores! Millions of employees! But the thing is, retail is a really tough business to turn a buck on. After this massive machine has sprint through a year, the result is ... about a 3% profit on revenue. Compare that with Google: On ~$50B revenue Google walks out with ~$10B of net income. For eight times less revenue Google is still managing to make more than half as much profit as Walmart. Where are the picket lines outside Google HQ?
    - neilcj 14y ago
      Where are the Googlers qualifying for SNAP?
      - jessaustin 14y ago
        This cuts both ways: if Google had a use for less skilled employees (I'm not saying they do, but anyone looking for customer service on her Nexus order might), they might still decide not to hire such employees specifically to avoid the regulations (and protests, apparently) involved with that. Wal-Mart has to hire these workers, but we can be sure if they had any reason to hire fewer of them they would.