Wal-Mart, the world’s largest company and private employer, recently raised the minimum wage of its employees to $10 an hour. Since the company’s announcement last year, several of the corporate giant’s competitors, including Target and TJX, announced similar base minimum wages for their employees. A $10 per hour wage is $2.75 an hour higher than the federal minimum wage.
Wal-Mart and its competitors are often criticized for paying their employees low wages and for treating them poorly. Many claim the wage increases are a public relation move and that these companies can afford to pay much more. Even at $10 an hour, these companies’ workers would still be paid far less than the typical American. The average hourly earnings of all U.S. workers is $23.23.
Wal-Mart and Target have raised wages, others in the retail and service industry continue to pay front line workers $9 and $8 an hour. Some often just pay the minimum wage of $7.25 an hour. 24/7 Wall St. reviewed the largest American companies paying their workers very low wages.
Millions of workers in the United States are currently earning minimum wage or just a few dollars above. David Cooper, senior analyst at left-leaning think tank Economic Policy Institute, discussed the difficulties these low-wage workers face with 24/7 Wall St.
“At $7.25, a minimum wage worker with one child is going to be below the federal poverty line even if they’re working full-time, year-round,” Cooper said. “There is a federal bill to raise the minimum wage to $12 by 2020. But the reality is that in many parts of the country, you would need more than that minimum wage target in order to have a decent quality of life. In most cities in the U.S., you would probably need at least $15 an hour in order to have a basic decent income.”
Cooper explained that because of the nature of the service sector, companies employing these low-paid workers tend to view them as exhaustible resources. This explains the low pay and high turnover that can sometimes reach nearly 100% in a single year.
Further, these companies have a high share of part-time workers. Indeed, a massive share of frontline workers in the service industry is employed part time. Of Dollar Tree’s 167,800 employees, about 112,00, or two-thirds, are employed in a part-time capacity. Of the 140,000 workers employed by Kohl’s, 77% are part-time workers.
Companies, he explained, do this to be cost-effective, as part-time workers allow for greater flexibility, and also typically do not need to be paid benefits like health care. In addition to missing out on these benefits, Cooper explained, these workers face other problems. Such workers are typically forced to find another job to make ends meet, but if their employer requires them to be flexible, maintaining a second job can be impossible. Cooper added it can also hinder professional development. “if they’re constantly shifting from job to job, they’re also never really focusing on building their skills.”
The federal minimum wage of $7.25 an hour does not apply to tipped employees. While fast food companies on this list, including McDonald’s and Yum! Brands, do not employ tipped workers, fast casual dining companies such as Darden, which is on this list, do. Companies that employ tipped workers are only required to pay them $2.13 an hour if workers earn the federal minimum wage through their tips.
The companies paying their workers so little are mostly not struggling — they pay executives very high salaries and often report large and increasing profits. Wal-Mart raised its minimum wage at U.S. stores to $10 an hour, but it would take 952 full-time employees working year round to match the salary of CEO Douglas McMillon. The profits of most of the companies on this list rose last year. Even among the companies that reported lower net income, most still posted hundreds of millions, if not billions of dollars in profits. Low- and minimum-wage workers involved in last year’s fast food strike point to these figures when demanding an increase in wages.
Opponents of raising wages in the service sector explain that asking companies to raise wages is counterproductive for employers and employees alike. allowing companies to set the wages they prefer to pay allows them to hire as many workers as possible. This will likely be more common argument as automation becomes an increasing factor in low-skill work, and employers need to weigh higher salaried employees with potentially cheap and more effective machines. minimum-wage jobs, it has been argued, also create opportunities for young adults or college students entering the workforce for the first time.
Editor’s Note: A previous version of this piece reported Dollar General CEO Todd Vasos’ annual compensation as $8.72 billion, when in fact it is $8.72 million.