Common Cents & Walmart on June 7, 2019

This morning, the Bureau of Labor Statistics (BLS) announced the US economy created 75K net new jobs during May 2019. ‘Wall Street’ had been anticipating a number closer to 175K. By this measure, and perhaps this measure alone, the news was a little disappointing.

However, the official Unemployment Rate remained at 3.6%, which is historically extremely low. Further, ‘average hourly earnings for all employees on private nonfarm payrolls’ increased to $27.83/hours, which represented a 3.1% increase over the last 12 months. So, that is kind of good news, even if we would all like to be making a lot more than 3.1% annual increases.

In a lot of ways, the weakness or strength of the report depended on whether you were looking for dark clouds or silver linings.

Now, not everyone makes $27.83/hour, and vagaries in that data set are pretty larger. For instance, average hourly earnings for folks in the ‘Utilities’ sector are $41.84/hour. Conversely, the average rate for a ‘production or nonsupervisory employee’ in the ‘Leisure & Hospitality’ arena is a relatively meager $14.44/hour by comparison. Obviously, there are underlying differences there too.

Take a relatively common position like cashiers. According to the BLS, total ‘cashier’ employment in the US in May 2017 was 3,564,920. Broader economic sector employment for this job was as indicated in the table below:

Industry	Employment (1)	Percent of industry employment	Hourly mean wage	Annual mean wage (2)
Food and Beverage Stores (4451 and 4452 only)	916,540	31.32	$10.93	$22,740
General Merchandise Stores	702,660	21.82	$10.51	$21,850
Gasoline Stations	606,880	65.42	$10.04	$20,880
Restaurants and Other Eating Places	327,170	3.11	$9.97	$20,730
Health and Personal Care Stores	205,640	19.17	$11.02	$22,920

Source: BLS

So, there are a lot of cashiers in a lot of different areas of the economy, and the pay is a little different. Notice how the average hourly wage is $9.97 in restaurants and $11.02 in health and personal care stores. One could assume the responsibilities and skill sets weren’t significantly different, perhaps. Maybe there are simply more ‘health and personal care stores’ in wealthier areas where workers demand more money, and more gas stations and fast food joints in lower rent sections of town.

Intuitively, that makes sense.

Then there is this little table (also from May 2017), which breaks hourly pay by percentiles. You know, the median person got X and the person at the Top 25% got Y. That sort of thing. Here goes:

Percentile	10%	25%	50% (Median)	75%	90%
Hourly Wage	$8.23	$8.97	$10.11	$11.51	$13.95
Annual Wage (2)	$17,110	$18,650	$21,030	$23,940	$29,020

 

So, the bottom 10% of cashiers in the country make $8.23/hour, or less, and the top 10% make $13.95/hour or more. That is a reasonably big disparity, and would certainly suggest there isn’t a one size fits all wage for this job. It cuts across a lot of geographic locations and economic industries.

With this as a backdrop, this week Sen. Bernie Sanders attended the Walmart annual meeting in Bentonville, AR, and ‘demanded’ the company and/or Walton Family pay a ‘living wage’ and put an hourly worker on the Board of Directors. His campaign made a big deal about this running up to the meeting, with Sanders talking about the need for a nationwide $15/hour Federal minimum wage and Walmart’s so-called ‘starvation wages.’

Being a curious sort, I looked up what the company actually pays its employees, and found the average hourly rate was $11.42/hour, with cashiers making the least around $9.97/hour. What is it with the $9.97? At least that is the information I found at payscale.com, and I have no reason to believe it is in error.

Whew. $9.97/hour? That isn’t even the median for cashiers across the economy, and Walmart is the largest employer in the country. Feel the Bern, huh? Well, I don’t know about that.

You see, and this is blanket statement, Walmarts generally aren’t in your higher rent districts. That just isn’t the business model. To that end, I googled “Walmart NYC” and found the company has a decent number in the greater metro area, but not a single one in midtown Manhattan. Go figure.

Taking it a step further, and maybe backward if possible, and tried to think of two kind of disparate US geographic regions. In the end, I decided to compare Walmart employment in New England relative to the Deep South. Since there isn’t an accepted definition for Deep South as there is for New England, I decided to incorporate those five states for which there is and never has been a disagreement: Alabama, Georgia, Louisiana, Mississippi, and South Carolina.

Here are the results:

Region/State	WMT Employment	WMT Locations	Size of Workforce	% Working at WMT	Straight Ave Min Wage	S Avg GDP Per Capita
Deep South	187,805	701	13,058,408	1.44%	$ 7.25	$ 38,969
Alabama	37,853	143	2,222,944	1.70%	$ 7.25	$ 37,261
Georgia	60,085	211	5,109,085	1.18%	$ 7.25	$ 44,723
Louisiana	34,039	138	2,099,698	1.62%	$ 7.25	$ 43,917
Mississippi	23,120	85	1,266,590	1.83%	$ 7.25	$ 31,881
South Carolina	32,708	124	2,360,091	1.39%	$ 7.25	$ 37,063
New England	37,778	152	8,119,263	0.47%	$10.72	$ 52,059
Connecticut	8,345	34	1,915,547	0.44%	$ 10.10	$ 64,511
Maine	6,800	25	696,531	0.98%	$ 11.00	$ 38,921
Massachusetts	11,821	49	3,840,310	0.31%	$ 12.00	$ 65,545
New Hampshire	7,305	29	767,493	0.95%	$ 7.25	$ 51,794
Rhode Island	2,362	9	553,043	0.43%	$ 10.50	$ 47,639
Vermont	1,145	6	346,339	0.33%	$ 10.78	$ 43,946

Sources: Walmart./com; BLS; 2018 Estimates Bureau of Economic Analysis

 

What does this suggest? Well, for starters, Walmart hasn’t penetrated New England the same way it has the Deep South, clearly. Secondly, and you might have to stare at the table pretty hard, Walmart has fewer employees in wealthier states. For example, Georgia is the wealthiest state in the Deep South, and it has the fewest Walmart workers as a percent of the workforce. Mississippi is the poorest, and it has the highest in the Deep South. Conversely, Maine is the poorest state in New England, and it has the highest percent of Walmart employees relative to the workforce. Massachusetts is the wealthiest and it has the least.

In fact, an Excel ‘correlation function’ suggests there is a -0.74329 correlation between the percent of the state’s workforce working at Walmart and the state’s per capita GDP (economic output). In other words, the number of Walmart workers goes DOWN as the per capita GDP goes UP. Put yet another way, there is a greater prevalence of Walmarts in poor states than wealthy ones.

As a result, Walmart likely pays lower median/mean wages than the national average since it employs a disproportionate number of workers in lower wage/cost states or areas. I mean, I suppose you could argue these are lower wage states BECAUSE of Walmart, but I think we all know the Deep South was poorer than New England long before Walmart was the dominant employer in US retail.

In the end, tying this all up, just as the wages for cashiers vary across economic sectors, so does Walmart employment across geography. As such, demanding a ‘one size fits all’ minimum wage across vast expanses and economic sectors doesn’t make a lot of sense…at all. Further, demanding a $15/hour minimum or so-called ‘living wage’ for jobs with a market clearing price of, say, $11.02, $10.11, or even $9.97/hour doesn’t increase employment. It simply increases the likelihood there will a ‘surplus’ or those types of workers available in the economy.

You can intuit one way how that might happen.

In the end, there is a lot you can learn in the Employment Situation report and other economic data releases. However, the most important thing you CAN learn is black & white numbers usually have a lot of gray.

Have a great weekend, and, by the way, those tables look a lot better in Word and WordPress than they do on the website.

John Norris