America In Solidarity co-founder Todd Iverson recently addressed the City Club of Tacoma about responsible companies and living wages. Read his speech here...
City Club Speech
November 10, 2005
Living Wages, Responsible Companies and Sustainable Communities
A living wage is more than a minimum wage; it could be defined as the minimum wage one needs to earn to escape poverty. In 2003, 36 million Americans were living below the established poverty line of $18,810 for a family of four. Included in those totals were 18 million children.
Frankly, I think it would be very difficult for a single adult to exist on $18,000 in Tacoma, little less a family of four. But as America moves away from a manufacturing-based economy to a service-based economy more and more working families are facing poverty-level conditions.
In recent years, many progressive groups, sensible politicians and communities have passed living wage ordinances stipulating that the city or local government or companies awarded government contracts must provide a living wage to anyone working on that contract. For example, if the City of Tacoma were to build a giant spire atop its new convention center and award that contract to XYZ Construction Company, then all the employees of XYZ associated with the construction of the spire must be paid a living wage. Where this often comes into play is that government bodies often contract out janitorial services to companies, who then pay minimally to their employees. Now these employees have a chance at a better life.
How much is a living wage? Well it depends on the community and the ordinance but recent examples generally put the wage at $11-12 per hour and then require health insurance. Often these wages are tied into the consumer price index so they can be adjusted yearly.
Sonoma CA - July 2004 - The City of Sonoma passed an ordinance in July mandating covered employers to pay a wage of $11.70 with health benefits or $13.20 without health benefits, indexed annually to the consumer price index (7/04). The ordinance covers the City of Sonoma, companies with a city service contract worth at least $10,000, non-profits with city contracts of at least $75,000, and companies receiving loans or economic assistance worth $100,000 or more. Covered employers must also provide 12 compensated days off, as well as 10 uncompensated. Small businesses are exempt from the law.
The benefits of a living wage ordinance is that it more likely to give jobs to residents, our neighbors, rather than companies shipping in outside labor—oftentimes immigrants whose residency is in question. In turn there is more money being spent locally, everything from housing to the coffee shop near the construction site. Furthermore, if our tax dollars are being spent, we have a moral obligation to see that they are being spent on something more than minimum wages.
Obviously the idea of a living wage ordinance scares the business community on a couple of fronts. First is the cost to the company, because if XYZ Construction now has to pay helpers $12 an hour and benefits, as opposed to minimum wage with no benefits, then their profit margin goes down. The opposition to these living wage ordinances also scares the rest of the business community into believing that this is a slippery slope that will lead to similar ordinances that would affect all business.
However this has not been the case, as paying more than state or federal minimum wages has always been a company or market-driven decision. And unfortunately, the market which every year gets increasingly into far less-skilled service sector type jobs the race has been toward the bottom not up.
Which leads us to Wal-Mart.
Wal-Mart has replaced GM as the largest single private employer in the United States. Here is a few statistics about Wal-Mart:
1.2 Million U.S. Workers
3,600 stores in the United States
Net Profits of $10.5 billion which was 2% of America’s GDP
Its CEO received a compensation package of nearly $23 million in 2004.
Average pay at Wal-Mart is $9.68 per hour for all employees.
Sales clerks average $8.23 an hour and only 32 a week for a little over $13,000 a year.
48% of employees qualify for health care, but deductible costs and limits on family make it inaccessible to most associates
Has an employee turnover rate of 50%
If it were a country, Wal-Mart would be the world’s 20th biggest economy, bigger than Spain or Sweden.
The five heirs of Sam Walton, Wal-Mart’s founder, received dividend payments of $176 million last year
Wal-Mart has 19% of the grocery market and 16% of the pharmaceutical sales.
It’s hard to find anything positive about Wal-Mart, other than they are the perfect example of capitalism at its purest. They move into an area, slash prices and force the competition out. It has been documented that for every Wal-Mart that opens up, two supermarkets close down. Prices then actually increase as Wal-Mart no longer has any competition in an area.
Wal-Mart resists unions to the point that one Texas meat-cutting division of a store actually voted to unionize and Wal-Mart simply eliminated the entire meat-cutting operation. A store in Quebec voted to be represented by the United Food and Commerical Workers. Wal-Mart promptly closed the store. As a result, employees have truly become a commodity at Wal-Mart.
Because their health care to associates is so costly and difficult to attain with lengthy waits, Wal-Mart is the number one employer on state Medicaid lists including the State of Washington. There has been much documentation of new hires being given copies of the state’s Medicaid form upon hiring. A UC-Berkeley study showed that in California alone, $86 million in public assistance including health care, welfare and school lunches were given to Wal-Mart employees.
I really could spend hours listing the Wal-Mart approach and why it’s bad for a local community from their labor violations, history of discrimination, and actual long-term cost in higher taxes and overall decrease in a standard of living to a community. And if you are further interested, I would recommend reading the report by California Representative George Miller which is available on his website.
I think a more rewarding conversation would be to contrast what can be a good responsible company.
Two locally based corporations are a good example of what a socially responsible company can do without a union contract forcing them to do it.
REI just announced in October that they are rewarding health care benefits to all part-time employees and their families starting in January. This was a rather unprecedented move in the retail industry just as the previous week Mervyns had announced it was cutting all benefits to its full-time employees.
Costco is another company that is often pointed out as a responsible employer. While about a tenth of the size of Wal-Mart, Costco pays its employees an average of $16 an hour and over 80% of its employees are covered by the company health care plan. And it’s a far superior plan to Wal-Mart’s in that it is comprehensive and employees pay 5-8% of the premiums whereas a Wal-Mart associate pays 34% of the premiums with deductibles of $350-$1000.
Not surprisingly, Costco has received a healthy dose of criticism from Wall Street that insinuates that lower wages and benefits would result in a higher stock price and profit margin.
Costco CEO Jim Senegal has said: “We pay much better than Wal-Mart. That’s not altruism. It’s good business.” Chief Financial Officer Richard Galanti explained: “From day one, we’ve run the company with the philosophy that if we pay better than average, provide a salary people can live on, have a positive environment and good benefits, we’ll be able to hire better people, they’ll stay longer and be more efficient.”
And the results show that. Costco’s employee turnover rate is 24% a third less than the industry average and its labor costs are less than 10% of its revenue as compared to Wal-Mart’s 17%. Meanwhile Costco had record profits and revenues in 2004 while only paying its CEO a modest $350,000.
Henry Ford once said “There is one rule for the industrialist and that is: Make the best quality of goods possible at the lowest cost possible, paying the highest wages possible.” His philosophy was that if his employees cannot afford the cars they were making, then no one would buy the car.
On a local scale this could be looked at that money kept in the community will be spent in the community. When people are paid $16 an hour instead of $8 for roughly the same job, when they are not saddled by the growing costs of health care, which is the leading cause of bankruptcy in America, they can spend. They can afford to buy houses and cars, have a few extra bucks for that overpriced $3 latte, or all the little luxuries in life.
Unfortunately, America circa 2005 isn’t the same place Henry Ford helped build where one income could provide for a family of four. I think we look back the 1950’s with this aura of nostalgia and Dad would work and mom would stay home and keep house and the only troubles was what Eddie Haskell dragged Wally and the Beav into. Now it’s rare if not impossible for a middle income family to exist on one income, little less anyone not making a living wage.
We have this culture of greed that permeates are business and lifestyle. We make celebrities out of the $20 million a year CEO’s and children of capitalism’s success stories. There was barely a peep when MobileExxon announced record profits with gas approaches $3 a gallon. You’d think that enough people would be rioting in the streets over this, but we just continue to go to the pump and fill it up and head out to Wal-Mart for cheap Chinese made goods. We have a whole section of this country claiming the importance of Christian values, yet ignore the fact that 50 million Americans lack health care insurance, one in eight Americans live in poverty, and the numbers of starving and homeless have gone up dramatically in the last five years. The gospels I was taught sure pressed an importance on providing for the sick, the hungry and the poor. But we turn a blind eye toward corporate greed and the politicians that pander to them.
Which leads me into America In Solidarity…
Started in 2003 in response to the ILWU Lockout when we saw our perceived political allies calling for the Taft-Hartley Act.
Non-profit, non-partisan organization based here in Tacoma
Three main components, community events and education, political activism and scholarship program.
Put on Tacoma’s first May Day celebration in generations, Labor Day event at Wright’s Park, Iraq War Forum
Our political activism is centered around getting volunteers to politicians who have signed our pledge to support working families. Over 50 politicians have done so and in 2004 we had about 500 volunteers give thousands of hours in these races. We do not endorse nor give money.
And this last year we gave $2600 in scholarships to local high school students who had to write an essay about working families.
