2-23-15 – Starvation and the Socialist

by Chris Campion

Former Socialist turned US Senator Bernie Sanders, occasionally seen somewhere in the vicinity of Vermont, recently took Wal-Mart to task for the wages it pays its workers.  That Bernie is spending time attacking a company that employs 2.2 million people is probably not a surprise to most Vermonters, since he seems to earn his living by throwing mud from his comfortable office perch in DC.

Speaking of comfort, Bernie feels comfortable criticizing Wal-Mart, because he’s run multi-national corporations and understands the complexities of cost in labor, materials, utilities, insurance, compliance with local, state, and federal regulations, debt financing, corporate bond issuance, as well as asset and liability management.

Because he knows all these things, Bernie knows that wages should be $10.10 an hour, minimum, not the $10.00 an hour that Wal-Mart has raised them to.

That’s right.  Bernie just knows.  So let’s let this self-proclaimed champion of the oppressed – who earns roughly $174,000 per year, more or less triple the median household income of Vermonters – tell his side of the story:

IOWA CITY, Iowa, Feb. 19 – U.S. Sen. Bernie Sanders (I-Vt.) issued the following statement today after Wal-Mart announced that all of its workers in the United States would earn at least $9 an hour by April and $10 an hour by 2016:

“The Walton family which owns Wal-Mart is the wealthiest family in America and it is absurd that thousands of their low-wage workers are forced to use programs like food stamps, Medicaid and subsidized housing. Wal-Mart should not be paying starvation wages.”

It’s also absurd that overhead costs, including compliance, cuts into Wal-Mart margins, forcing reductions in other areas that can be controlled – like wages – in order to remain profitable, which means “in business”, so employees have a place to go to earn their salaries.  The world is crazy like that.

Speaking of margins, Wal-Mart’s profit margin as of Jan. 31, 2015, is (prepare to be outraged): 3.77%.  This is a screamingly tight margin, meaning that if variable costs go up by much at any given time (things like electricity, fuel, or wages), it directly reduces the margin.

Considering that as of Jan 2014, operating expenses for Wal-Mart were $91 billion, the bulk of which are labor costs, the company’s net income was $16 billion, something like a 10% increase in operating expenses (roughly $10 billion) would drop net income by 67%.  So bumping a salary up by 50% (moving from $10 to $15 an hour, say) could knock margins down by a third – and making the company less profitable is less likely to mean future raises and salary growth, let alone increase job security.

Now it wouldn’t work exactly like that, because not every salary is $10/hour, but since the bulk of the jobs are at that associate level, there would still be a significant reduction in margin, and a reduction in expectation of future employment.

Here’s Bernie’s math, where he puts it all together in a nice bow for all of us rubes out here in the Green Mountains:

“While this is a step forward and a response to grassroots activism across the country, this is nowhere near enough. Wal-Mart should raise their minimum wage to at least $10.10 an hour now and move it to $15 over the next several years. Struggling working families should not have to subsidize the wealthiest family in the country. Wal-Mart also should end its vehemently anti-union activities.”

Oh, so $10.10 is the correct wage as determined by the Dear Leader, er, Central Planner-In-Chief, er, the guy who sat on his hands as chairman of the VA committee while veterans died in VA hospitals?  That’s the guy who picked $10.10 out of the air?  That’s the expert we have for wage rates at retail chain stores?

A 1% raise isn’t going to net anyone anything.  The costs associated with updating hundreds of thousands of employee records to increase salaries, alone, would cost more than the 1% increase.  But let’s not let little things like reality get in the way of Captain Soundbite, in terms of his valiant charge against companies that actually employ people.

Raising the salary to $15/hour would dramatically increase operating costs, would significantly cut into an already-tight margin, and increase the likelihood that Wal-Mart would employ fewer people, while asking current employees to work even harder to cover for the people it cannot now afford to employ.  How does any of that sound like a good idea?

Oh, and one last thing:  Bernie has the 45th lowest average staff salaries in the US Senate.  Which may mean that Bernie is saving the taxpayers money, or he’s just not interested in that “fair wage” thing as much as 44 other Senators.  In fact, Bernie has a larger staff (in FY14) than Leahy did, and he’s paying them less – more people employed, at a lower average wage.

Sounds a little bit like Wal-Mart, no?

Power to the people!  Unless you work for Sanders, then it's power to the people looking to work for other Senators that pay more.

 

{ 4 comments… read them below or add one }

Wendy Wilton February 24, 2015 at 10:29 am

Great commentary Chris. I hope many Vermonters, and Iowans will see this commentary.

Reply

Marc Laurencelle February 24, 2015 at 1:38 pm

I’m confused by the average salary part of this chart. Shouldn’t the average salary be $21,195 for Sanders and $24,198 for Leahy?

Reply

Marc Laurencelle February 24, 2015 at 1:42 pm

whoops, I just saw my error. Sorry.

Reply

Peg C February 28, 2015 at 11:14 pm

If folks remember when Bernie was the mayor of Burlington and State Senator. . . .someone correct me if I am wrong, but didn’t he bounce his own personal checks? Bernie has always had a problem living within his owns means. . . .now he is in D.C. What makes you think he will be more frugal with money that isn’t his?

Reply

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