Raising the Minimum Wage for Working Men and Women in California and the Rest of America

At Walmart, Higher Wages Lift All Carts

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LAST WEEK Walmart announced a 21 percent drop in its fourth-quarter earnings for 2013, citing, among other factors, cuts to the federal food stamp program. William Simon, CEO of Walmart US, explained that reductions in government benefits had eroded the buying power of his customers. Congress cut food stamps by $5 billion when it declined to renew a 2009 increase in the program on Nov. 1, putting a dent in fourth-quarter spending just as the crucial holiday shopping period began.

Because Walmart is the nation’s largest retailer, it is a sensitive barometer for changes in the economy, in this case the stimulative effect of government spending. Most economists agree that poorer people are more likely to spend any increase in their incomes quickly — the so-called accelerator effect — giving an immediate boost to the economy. With programs like food stamps, public-sector money churns through the system and helps keep the private sector humming.

The opposite is also true: Remove $5 billion from the pockets of low-income people and a place like Walmart will feel it, especially since 20 percent of Walmart’s customers depend on food stamps. After the November budget cut, the average recipient had $90 less a month to spend on discount goods and groceries. Attention, Walmart shoppers: Congress just squeezed your wallets further, since the federal farm bill passed last month reduces spending on food stamps by another $8.7 billion.

But Walmart is also the nation’s biggest employer, and here is where the economic trade-offs get interesting. The company employs 1.3 million Americans, most in low-pay “associate” jobs, many at wages low enough to qualify for, you guessed it, food stamps. That’s the great circular genius of Walmart’s low wages and low prices: The superstores offer shoppers values they can afford, but by exerting its huge influence to keep wages low, the company also helps create a class of consumers who can’t afford to shop anywhere else.

• Category: National, Notable • Tags: Renee Loth, Walmart