(2014) Big Boxes, Small Paychecks

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BIG BOXES,SMALL PAYCHECKS How the Retail Lobby Blocks Increases in the Minimum Wage

MINNESOTANS FOR A FAIR ECONOMY

MARCH 2014


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3/18BIG BOXES, SMALL PAYCHECKS: How the Retail Lobby Blocks Increases in the Minimum Wage 3

$10

2012.

$18,500

.

INTRODUCTION There are more than 15 million workers in retail stores in the U.S., 1 so it is

not surprising that the industry spends a lot of money to keep wages down.

The National Retail Federation (NRF) and the Retail Industry Leaders

Association (RILA) have been waging fierce lobbying campaigns to prevent

increases in the minimum wage.These two associations spent almost $10 million on DC lobbyists in 2012

alone.2 These associat ions are a lso extremely powerfu l at the state

level, working in conjunction with local lobbying groups to deceive

the publ ic about the impact of ra is ing the minimum wage.

The reta i l t rade associat ions port ray their members as smal l

mom and pop businesses because th is p lays wel l pol i t ica l ly and

gives pol i t ic ians cover. In real i ty, some of the b iggest corporat ions

in the country are the most inf luential members of the associat ions.

For instance, the Minnesota Retai lers Associat ion includes over200 companies, but Target is by far the largest source of funds.

Target executives have made two-thirds of al l contributions to the

Associat ion’s PAC since 2000. 3

Brands like Target and Walmart spend millions on advertising to make their

brands household names, but when it comes to things like keeping workers in

poverty, they prefer to hide behind their lobby associations. Both Target and

Walmart say they have not taken a position on increasing the minimum wage, 4

but their political contributions and leadership in industry trade associations

make it clear that the two largest retailers oppose raising the minimum wage.

The recent strikes at Walmart and by janitors who clean Target and other big

box stores have pierced the veil of these two associations and exposed the

poverty wages the retail industry pays its workers.

The average hourly wage of a Wal-Mart sales associate is just $8.86 and for

a cashier it’s $8.51. The average pay for cashiers at Target is $8.10/hour, while

the pay for sales floor

team members is only slightly higher -- $8.34/hour.5

A full-time worker at these wages earns less than $18,500 – well below

the poverty line and not nearly enough to provide food, housing, health care,

transportation and other basic needs for their families.6 However, over half

of the workers in these positions at Target and Wal-Mart don’t even earn this

much because they are involuntarily part-time.7

The situation is not much different at other retail stores. According to the

Bureau of Labor Statistics, the typical retail sales person earns just $10.29 per

hour.8 Cashiers earn even less – an average hourly wage of $9.12.9



$20

$10,000/

1,300

.

20,000

.

Benefits are also scarce for retail department store workers who say that

the health plans are too expensive or inaccessible. Only about half of

Walmart associates are covered by the company’s health plan,10 while only

about a third of Target store team members participate in Target’s plan.11

Opponents of raising the minimum wage claim that low wage jobs are

mostly for teenagers, yet more than 95 percent of year round employees at

large retail companies are ages 20 and above and more than half (54.2%)contribute at least 50 percent of their family’s total income. A large number

of them – almost 1 in 5 – are the sole earner for their family.12

Bruce Nustad, the president of the Minnesota Retailers Association, said

last year that raising the minimum wage higher than the federal amount

would force businesses to make difficult choices such as setting aside plans

for expansion or capital investments or cutting workers’ hours. “There’s this

fantasy perception that there’s this incredible amount of [profit] margin in

retail,” Nustad said. “I don’t know where that came from.”13

The perception could have come from the fact that the two largest

retailers in Minnesota and in the U.S., Walmart and Target, both posted record

profits in 2012 of $17 billion and $3 billion respectively,14 and the CEOs of both

companies received over $20 million in compensation in 201215 – about

$10,000 an hour or 1,300 times more than the minimum wage.

The NRF touts retail as a “force for strong economic expansion, job creation,

and business growth.”16 However, the combination of poverty wages and no

benefits, often coupled with part-time hours, means that many of the familiesof retail workers must rely on taxpayer-funded safety net programs.

We estimate that over 20,000 Big Box department store employees in

Minnesota are enrolled in a public assistance program for themselves or family

members, at a cost of over $150 million a year to taxpayers.

Included in this total is $45 million a year that taxpayers pay to help almost

6,000 Target store employees in Minnesota who must rely on public assistance

and $41 million a year to help 5,300 Walmart employees in Minnesota.

In state after state, Walmart, Target, and other Big Box retailers are among the

employers with the most employees receiving public assistance. This shifting oflabor costs on to the taxpayers amounts to a public subsidy for Big Box corporate

giants and provides an unfair financial advantage over others.

Raising wages for Big Box retail workers would benefit individual workers, their

families and community, and taxpayers. The more that Target and Walmart pay

their workers, the less it will cost taxpayers to provide public assistance.



OPPOSITION TO RAISING THE MINIMUM WAGE

Both Target and Walmart say they have not taken a position onincreasing the minimum wage, yet their political contributions andleadership in industry trade associations make it clear that the two largestretailers oppose raising the minimum wage at the federal or state level.

Minnesota Retailers Association

The Minnesota Retailers Association is a trade group representing over200 member businesses with more than 1,500 retail stores in the state.

Target executives have made 65% of all contributions to the PACsince 200017 -- making Target by far the largest contributor.

The Association opposes raising the state minimum wage above thefederal amount. It opposes indexing and fought last session against

both the bill that passed the House to raise the minimum wage to$9.50 and the version that passed the Senate to raise it to $7.75.

The Association’s board is made up of lobbyists from a number ofother Big Box retail stores, such as Walmart, Home Depot, Sears,JC Penney and Macys, in addition to Target. The Best Buylobbyist chairs the group’s legislative committee.

The Association’s 2014 Day at the Capitol will focus on lobbyingagainst indexing future minimum wage increases to inflation. Thelobby day’s main sponsors are Big Box corporations whose CEOS

are not only among the highest paid in Minnesota, but they alsoreceived large increases in their compensation from 2009 – 2012.

B B18 B

D

$2.4 $8.2 245%

19

G

$6 $12 100%

20 G

$16.1 $23.5 46%

Target executives gave over $115,000 since 2003 to the RetailersAssociation and other state business PACs21 that in turn spent over$525,000 in contributions and independent expenditures to supportstate legislators who voted against raising the minimum wage.

$9.5

$7.75.

2000.



Political Contributions

In March 2013, the U.S. House of Representatives rejected a bill to raisethe federal minimum wage from $7.25 per hour to $10.10 by 2015.

Rep. John Kline (R-MN) led the opposition to the bill, saying “Weneed jobs out there. The best approach right now is to get federalspending under control and government out of the way of the

nation’s job creators.”22

o Kline’s largest single source of campaign funds has beenfrom Target executives, their family members, and thecompany’s political action committee (PAC). Since 2005,they have given Kline $125,000 in contributions, more thanto any other current member of congress. 23

Walmart has contributed over $30,000 to eight USRepresentatives since 2008. Six of them voted against theminimum wage increase last year.24

Retail Industry Leaders Association

The Retail Industry Leaders Association (RILA) is a leading public policyadvocate for retail corporations. Its members represent more than $1.5trillion in sales and operate more than 100,000 stores, manufacturingfacilities, and distribution centers in the world.

RILA “opposes any increase in the minimum wage and does notbelieve that states and localities should impose a patchwork ofemployment regulations on employers.”25

Target CEO Gregg Steinhafel served as the 2013 chair of thenational Retail Industry Leaders Association (RILA).

In addition to Steinhafel, RILA’s board is comprised of the CEOsfrom other big box retail companies including Walmart, Best Buy,Lowes, Home Depot, Sears, and Kmart.

Since 2010, RILA has contributed almost two and a half times moreto the U.S. Representatives who voted against raising the minimumwage in 2013 than to the ones who voted for it.26

Minnesota Forward

In 2010 Target gave $150,000, the largest single contribution, to theMinnesota Forward PAC which was created to elect Tom Emmer governor.After coming under fire because of Emmer’s anti-gay positions, Targetexplained that it had made the contribution because it supported Emmer’splans for economic growth and job creation and that Emmer would createa positive environment for businesses. One of Emmer’s main proposedeconomic policies was to lower the minimum wage for waiters andwaitresses.27

. ,

.

2

.



TAXPAYER SUBSIDIES OF POVERTY WAGES IN MN

Low wages not only harm workers and their families – they cost taxpayers.When Big Box retail employees are unable to afford the basic necessities of life,taxpayers pick up the tab for the public benefit programs that workers need inorder to get by.

Based on the utilization rates by working families of Medicaid, Food Stamps, the Earned Income Tax Credit and Temporary Assistance for Needy Families, we

estimate that over 20,000 Big Box department store employees in Minnesota are

enrolled in one of these four public assistance programs for themselves or family

members, at a cost of over $150 million a year to taxpayers. 28

Included in this total is $45 million a year from taxpayers to help almost 6,000

Target employees in Minnesota who must rely on public assistance and $41

million a year to help 5,300 Walmart employees in Minnesota.

Big Box Employees on Public Assistance in Minnesota29

20,000

,

$150

.



OTAL

,

,

.

SUBSIDIZED HEALTH CARE

In state after state, Walmart, Target, and other Big Box retailers are amongthe employers with the most employees receiving public assistance.

MASSACHUSETTS In 2010, over 4,300 Walmart employees in Massachusetts, a quarter of the

company’s total workforce in the state, used subsidized health care for

themselves or family members, costing taxpayers $14.6 million. Over

2,600 Target employees,30 more than a third of the company’s

Massachusetts workforce, used subsidized care, costing the state $8.3

million. 31 Big Box retail chains made up ten of the thirty companies with

the most employees on Medicaid in Massachusetts.

RANK # $

BY

COSTEMPLOYER

EMPLOYEES USING

SUBSIDIZEDCARE

COST FOR EMPLOYEES &

COVERED DEPENDENTS

1 WAL-MART 4,327 $14,602,933

4 TARGET 2,610 $8,325,571

8 HOME DEPOT 1,929 $5,678.420 14 MACY’S 1,723 $4,059,919 16 TJ MAXX 1,027 $3,280,228 19 KOHLS 969 $2,743,794

20 MARSHALLS 900 $2,648,489 24 LOWES 826 $2,211,397 25 SEARS/ KMART 1,052 $2,124,144



RANK

# #

BY

TOTAL COST

EMPLOYER EMPLOYEESENROLLED

SPOUSE/ DEPENDENTS

ENROLLED

TOTAL ENROLLED

1 WAL-MART 2,306 4,993 7,299

2 TARGET 1,199 2,379 3,578

3 LORD&TAYLOR 1,008 1,945 2,953

5 TOYS R US 771 1,513 2,284 6 KMART 746 1,646 2,392 12 KOHLS 565 1,120 1,685

14 HOME DEPOT 487 1,188 1,675 18 SEARS 456 854 1,326

23 JC PENNEY 373 733 1,106 28 MARSHALLS 328 580 908

WISCONSIN

Retail Employers in New Jersey with Most Employees Receiving Subsidized Care32

In Wisconsin, over 3,200 Walmart employees are enrolled in Badger Care, the state’s Medicaid program,

accounting for a total of 9,200 enrollees including the children and adult dependents of these employees. Six other Big Box retail stores were also among the employers with the most employees receiving subsi-

dized care. 33

# # RANK EMPLOYER

EMPLOYEESENROLLED

TOTAL ENROLLED

INCLUDING ADULT

DEPENDENTS & CHILDREN

1 WAL-MART 3,216 9,207

4

MENARDS

784

2,245

11 TARGET 562 1,592

15 KOHLS 508 1,340

27 KMART 278 772

34 HOME DEPOT 242 663 46 SEARS 217 580

Retail Employers in Wisconsin with Most Employees Receiving Subsidized Care33

NEW JERSEY

In New Jersey, Walmart and Target are the top two employers with the most employees

enrolled in the state’s Medicaid program, followed by many of the same Big Box retail stores

as on the above Massachusetts list.



,

15,000

.

OTHER PUBLIC ASSISTANCE

Most state reporting has only included data on Medicaid and not other publicassistance programs. In addition, the data has only reflected the actuaenrollment in the Medicaid programs. The number of Big Box employees anddependents who are eligible to participate is likely much higher.

It is clear that Walmart, Target, and other Big Box retail store employees

must also rely on additional public benefits. For instance, in Florida, over 9,000

Walmart employees receive food stamps.34 In California, a study found that the

average Walmart worker required $730 in taxpayer-subsidized healthcare and

$1,222 in other types of public assistance, such as food stamps and subsidized

housing per year to get by.35

OHIO Data from the state Department of Jobs and Family Services shows that Walm

had more employees or household members on food stamps (14,684)

Medicaid (14,056) than any other company in the state. Target was 11th for m

employees or family members on Medicaid (2,479) and food stamps (2,383).36 The number of Walmart employees or household members in Ohio on pub

assistance almost doubled from the previous five years, and it was not relatedan overall increase in employees. There was a 74 percent increase in the numbof Walmart employees receiving food stamps and a 95 percent increase in tnumber enrolled in Medicaid, while Walmart’s total employment in the sta

declined by 10 percent during this period.37

RANK EMPLOYER

# EMPLOYEES &

FAMILY MEMBERSENROLLED

RANK EMPLOYER

# EMPLOYEES &

FAMILY MEMBERSENROLLED

1 WAL-MART 17,679 14 TARGET 2,602

16 LOWE’S 2,470 21 SEARS 2,155

33 JC PENNEY 1,631 29 K-MART 1,686 27

KOHLS 1,876 28

HOME DEPOT 1,874 40 MACYS 1,481

1 WAL-MART 14,684 13 TARGET 2,201

17 SEARS 1,860 20 LOWES 1,787

26

KMART 1,546 27

HOME DEPOT 1,546

29 KOHLS 1,494 39

JC PENNEY 1,256 40

MACYS 1,217

Ohio Medicaid Enrollment - January 2012 Ohio Food Stamps Enrollment - January 201



OTHER PUBLIC ASSISTANCE

WISCONSIN

In a report earlier this year, the U.S. House Committee on Education and the

Workforce estimated that a single 300 employee Walmart Supercenter store in Wisconsin costs taxpayers between $900,000 and $1.7 million per year – or

$3,000 to $5,800 per employee.38

The lower estimate assumes that only those workers enrolled in Badger Care

also enroll in other taxpayer-funded programs. The upper estimate assumes

that an additional quarter of a store’s employees enroll in other taxpayer-

funded programs.

PUBLIC ASSISTANCE PROGRAM

Free & reduced price lunches (under the National School Lunch Program)

Free & reduced-price breakfasts (under the School Breakfast Program)

Subsidized housing assistance (Section 8)

Earned Income Tax Credit Medicaid Enrollment under Badger Care

Low Income Home Energy Assistance Program (LIHEAP)

Supplemental Nutrition Assistance Program (formerly Food Stamp program)

Wisconsin Shares Child Care Subsidy

LOW-END ESTIMATE

$25,461

$12,938

$155,406

$72,160 $251,706

$11,414

$96,007

$279,450

UPPER-END ESTIMATE

$58,228

$29,588

$355,350

$165,000 $251,706

$26,100

$219,528

$639,090

.

TOTAL $904,542 $1,744,590



.

INVOLUNTARY PART-TIME WORK

Widespread practices of involuntary part-time work and unstable schedulingby Big Box department stores push the incomes of retail workers even

lower. Nationally the number of involuntary part-time retail workers (those

who would rather have full-time hours) has increased 144 percent from644,000 in 2006 to 1.5 million in 2010.39

The retail industry has embraced “just-in-time” computerized scheduling

systems, which are designed to cut costs by matching staff size to custome

traffic hour by hour. This gives managers increased flexibility, but for workers i

means unpredictable schedules that vary from week to week and even day

to day.

Retail workers are expected to keep their schedules open in case they

may be needed and to call in on the days they’re scheduled to see if they

should come to work that day.40 These scheduling systems allow Big Box

stores to manage a large part-time labor force working short shifts that caneasily be changed.41

According to data that Walmart reported to the Partnership for a Healthy

America, more than half of the employees hired to

work in new stores were

hired on a part-time basis.42

Target has said at different times and in different settings that part-time

employees make up between 55 percent and 80 percent of its retai

workforce. Target said that 55 percent of the workers at a proposed

Supercenter in San Rafael, CA would be part-time. However, a Target human

resource manager told the San Rafael City Council that on average 65 percenof team members were part-time. Target’s own materials say tha

approximately 80 to 85 percent of employees per store are part-time.43



BIG BOX RETAIL STORE’S USE OF CONTRACTED CLEANING COMPANIES

It’s not just workers employed directly by Big Box retail stores who are paidpoverty wages. In order to cut costs and avoid responsibility, many Big Box

stores often contract out their janitorial work. There is fierce competition among the janitorial companies for these contracts, with each company trying to underbid the other. Since labor is by far the largest and most costlyexpense in a cleaning contract, the company with the lowest labor coststends to win the contract. In some cases, the janitorial companies try toreduce their labor costs with practices such as paying below minimum wageor not paying overtime.

A number of the companies that clean Big Box stores in Minnesota have

been the subjects of lawsuits and Department of Labor investigations for not

paying their workers the overtime wages they earned.

Diversified Maintenance, which is based in Florida, is the largest janitorial service provider to Target, with contracts covering over 600 stores nation-

wide.44 Last year, the company settled a lawsuit for $675,000 45 that had

been filed by workers in Minnesota alleging that:

This is not an isolated case. In the last ten years, Diversified has settled atleast nine private lawsuits as well as six investigations by the U.S. Department

of Labor (DOL), all alleging violations of minimum wage and overtime laws.

One of the DOL investigations in Minnesota found that not only did Diversi-

fied require employees to work seven days a week without any overtime pay,

but Diversified also held new employees’ pay as a “deposit” that they would

receive when they left the company.46

Unfortunately, these problems pervade the retail janitorial industry. Other

cleaning companies with which Twin Cities Big Box stores contract have also

been the subjects of similar lawsuits and Department of Labor investigations

for not paying their workers the overtime wages they earned.

,

●Employees regularly worked 56-60 hours a week without full overtime pay.

● Employees were required to work seven days a week – six days undertheir own name and one day under a “ghost name”.



,

.

BIG BOX RETAIL STORE’S USE OF CONTRACTED CLEANING COMPANIES

Prestige Maintenance, based in Plano, TX also cleans Target stores i

Minnesota. In 2009 the company settled a lawsuit brought by sixteen of it

workers who claimed the company owed them overtime pay. The workers wh

brought the lawsuit cleaned Target stores in Maryland overnight from 10:30 p.m

to 8:00 am every night.47

Prior to the lawsuit, Prestige Maintenance was investigated by th

Department of Labor at least three times, resulting in more than 400 violation

for

failing to pay overtime to workers in Minnesota, Florida, and New York. 48

The way in which Target drove the prices down so low in its janitorial con-

tracts came to light in another lawsuit brought by cleaning workers in Texas.

Target controlled the bidding process in a way that pitted its cleaning

contractors against one another, forcing them to underbid each other. Target

structured this bidding process to consist of three rounds with a rule that

each cleaning contractor could submit a lower bid – but not a higher bid – in

each successive round.49


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TAKE ACTION!

Raising wages for Big Box retail workers will benefit individual workers, theiramilies and community, and taxpayers. The more that Target and Wal m art pay

their workers, the less it will cost taxpayers to provide public assistance .

Unlike manufacturers that must compete with offshore producers that have

ower labor and production costs, Big Box retail stores compete with each other.

The low-wage structure of the industry is not due to the competitive global

market, but rather a mixture of market conditions and policy changes. 50

One of the main arguments against raising the minimum wage is that

consumers would suffer higher prices, but economic analysis has shown that even

f retailers passed the entire cost on to consumers instead of paying for it by cutting

CEO compensation or redirecting unproductive profits, raising the pay of retail

workers to $25,000 a year ($12/hour) would cost consumers just pennies more per

shopping trip. But productivity gains and new consumer spending associated with

he raise make it unlikely that stores would need to generate the entire cost If

etailers passed half the cost of a wage increase on to their customers, the average

household would pay just 15 cents more per shopping trip – or $17.73 per year.51

Pay in the Big Box industry could be increased through a variety of means.

1. Target, Walmart, and other Big Box stores should pay a living wage. The

Minneapolis and St. Paul City Councils have set $14.41/hr as their current

iving wage levels,52 almost double what some retail workers are currently paid.

2. The State of Minnesota should raise its minimum wage. Many retail

workers earn close to the minimum wage and would benefit from an increase inhe minimum wage. The Minnesota House last year passed HF 92 to raise the

minimum to $9.50/hr, indexed to inflation. However, differences with the Senate

egislation kept the bill stuck in conference committee at the end of session.

3. Target and Walmart should stop interfering with their employees’ rights tospeak out for better jobs. Big Box retail employers could listen to theiremployees’ calls for change, rather than retaliate against them for speaking out.

Last year, a federal judge set aside an unsuccessful unionization election at a

Target store in New York State and ordered a new vote, finding that Target

managers had intimidated workers and violated federal labor laws.53 Walmart

workers report regular aggressive acts of intimidation and retaliation by the

company against workers who try to exercise their rights to stand up and speak

out for fair treatment and respect at work.

4. Target and other Big Box stores should use responsible cleaning

contractors. Responsible contractors compensate workers at or aboveprevailing wages and benefits, seek to maximize continuity at workplaces,

prioritize worker safety, respect the right of their employees to bargain

collectively, and provide employees with a bona-fide grievance procedure.

,

,

,

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CITATIONS

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17/1817

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(2014) Big Boxes, Small Paychecks

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