r/theydidthemath • u/DevilishDisciple • 6h ago
[Request] Could Walmart reasonably afford to pay EVERY employee 5 dollars more an hour?
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u/schannoman 6h ago
Well since everyone is doing it wrong I guess I have to step in.
US employment: 1.6million
US net profit: 22billion
US full time worker percentage: 67%
Full time defined as 34+ hours. Assuming base 40 to account for overtime as well, since they do not like overtime.
Assuming $7/ hour total costs (taxes, insurance on top of base rate)
Full Time: (1,600,000×0.67)×2,080×7=15,608,320,000 Part Time: (1,600,000×0.33)×1,040×7=3,843,840,000
Total: 19,452,160,000
This number would also decrease their tax burden since those are all expenses that are written off. Leaves 2.5 billion in profit before tax write offs are calculated
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u/Beast_Chips 1h ago
You: here is the raw math.
Everyone else: yeah but have you considered that your basics math is wrong because of my pseudo economic opinion?
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u/schannoman 1h ago
Thank you. I needed some sanity
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u/Sarik704 19m ago
But my pseudo economic opinion!!!!
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u/schannoman 18m ago edited 12m ago
I have plenty of them, but you'll notice for everyone's sake I left them out of my math
If only more people could
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u/IntolerantModerate 42m ago
Excellent analysis. I would argue that it could increase their market share as paying their employees more would potentially take labor away from other stores, especially trad brick and mortar, driving their costs higher and putting them at more of a disadvantage.
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u/boredidiot 44m ago
Figures I got assuming the minimum wage being raised by 5ph is a little different.
That means only about 1.3 million are non-exempt hourly associates subject to minimum wage baseline hikes.
Also the industry average is 31hrs, not 34hrsYou used $22 billion as "US Net Profit.", but that is before paying corporate interest expenses, global overhead, and income taxes. Walmart's actual global Net Profit ranges between $15 billion and $18 billion.
You noted that expenses are write-offs, wages are 100% tax-deductible operating expenses, a $19.45 billion expense saves Walmart roughly 24.5% in corporate income taxes (~$4.76 billion saved). The actual after-tax cost your calc would be $14.69 billion, not $19.45 billion.
In mine though I am getting $11.32 Billion before tax cost, but after tax I get 8.55 Billion (w/ 24.5% tax shield), then assuming the increase in spend of Walmart staff instore (assuming 30% of wage spent instore, with average margins, should give an addition profit of 620M.
That leaves just under 8B in profit spent on this increase.That then means it could be absorbed by increasing all prices instore by about 1.6%.
Then there is the government benefits in the welfare costs going down with pushing some out of the threshold for some payments... Not sure how to calculate that.
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u/GuiokiNZ 6h ago
Which for a 900B company is roughly .2% per year. If I was an invester I would be out.
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u/VampireDentist 3h ago
The claim was not whether it would be good for investors but whether they would go bankrupt.
Also an investors point of view will always be to minimize costs and that includes paying people as little as possible. That is the point of this kind of critique of capitalism.
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u/DocPhilMcGraw 2h ago edited 1h ago
Well I also don’t think it would be a total negative for investors either. If those employees have more take home pay, that just means they also have more money to spend at places…like Walmart. So there is a chance that you would perhaps see a slight increase in profits too that could offset at least some of the expenditures on salaries.
Edit: I am not suggesting it’s not still a negative for investors, but to me a “total negative” would be increasing an expenditure with absolutely no benefit in return. I am merely stating there would at least be some small benefit here.
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u/Lunar-Bill 1h ago
Honestly the attitude towards workers, particularly in the US, is absolutely shocking. They're treated as an inconvenience and not profit drivers, not business partners and not the public faces of the company.
I was told I'd get more conservative as I'd get older, but I'm in my 40s now and I'm fully on board with eating the rich
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u/gmishaolem 1h ago
I was told I'd get more conservative as I'd get older
That's based on the presumption that you accumulate wealth like property and pension as you get older. Conservative views are often generated by triggering the hoarding impulse.
The reason there is something of a progressive swing among the more-recent generations is we're not being allowed to accumulate that wealth.
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u/Demoliri 50m ago
While you are probably generally correct, I'm pushing 40 with a net worth of around a million euros in Germany. Not super wealthy, but I own 5 apartments and I'm doing pretty good.
My view on the ultra wealthy? Nom nom nom nom.
And I'm generally pretty far left on the political spectrum (European left, not US Democrats "left", on the US scale I'm a crazy radical socialist commie).•
u/koopcl 15m ago
>Not super wealthy
Mate I know this is just sad circlejerking on my part but I also live in Germany pushing 40 and I would literally kill to own a single flat or a net worth of 100K Euro.
Congrats on doing well though, and double congrats on not letting it ruin your sense of empathy or social responsibility.
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u/Legeo-dude 1h ago
Same feeling honestly. I was always the purple sheep compared to my red family as a child. Honestly as I get older I’m getting more and more blue.
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u/Sea-Feedback-2424 55m ago
Honestly the attitude towards workers, particularly in the US, is absolutely shocking
Honestly the workers attitude in the US is more shocking. No one wants to unionize, one wants syndicates or works councils. You're living in the country where people used to get in shoot outs eith the feds over pay and now workers just sit down and take it.
These shootouts happened before universal education and supposed "liberal and communist kndlctrinstion" of high-school and college students.As the saying goes - "Workers of the world unite, you have nothing to lose but your chains." Nkt "Workers of the world unite, you have nothing to lose but your minimum wage job, no benefits and SNAP card from the government."
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u/JustAPotato38 6h ago
but walmart doesn't make 900 billion they make 22 billion net
so this would mean they make a tenth as much profit and if business declines they're much more likely to make a loss
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u/TheNemesis089 5h ago
The $900 billion refers to their market cap. $22 billion on a $900 billion company is all of a 2.4% return on capital, which is shit.
And you want to knock it even lower. To keep the same return, Walmart’s stock price would drop to about 11% of its current rate, costing investors (read: mostly 401(k)s, pension funds, mutual funds, etc.) about $800 billion.
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u/sigusr3 4h ago
So basically, underpaid workers lead to higher profits which lead to a higher stock price, which you use to justify continuing to underpay workers, because if the stock price falls, people mostly in a better situation than Walmart workers would lose money.
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u/HiImNickOk 4h ago
Won't anyone think of the poor shareholders??
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u/Vegetable-Block-5351 3h ago
Shareholders gotta eat. I'll pray for the poor things.
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u/Which-Towel5826 3h ago
They gotta be eat, but I guess we aren't ready for that yet.
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u/Monoliithic 2h ago
...? the shareholders are your grandparents (and hopefully yours/your parents) 401ks, retirement/pensiona ccounts etc etc.
Not everything (or even most) is big corpo, in these situations
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u/FrontLongjumping4235 2h ago
The richest 10% own 93% of the stock market, and that's a 2 year old stat. It's slightly worse now due to rising inequality (the question is how much worse).
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u/ZarathustraWakes 2h ago
This is circular logic. We are forced rely on a broken, late capitalist system, and you use that reliance as proof that’s it’s a good system.
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u/fractalife 2h ago
Virtually none of your grandparents' retirement savings are in the stock market. Once you reach the point where you're withdrawing from it, you should be taking most if not all out of the stock market and transferring it to low risk options like bonds. Slower growth but far less risk.
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u/fistofdoritos 4h ago
If we assume this commenter is correct, than yes. But I also think it illustrates the point of how much the deck is stacked against workers. To increase wages for one group of workers takes away from another group.
Whether you raise wages or maintain a stock price one group of workers is being hurt, and there is absolutely no effect on the 1%. They’ll sell there shares before the dip, and even if they didn’t they’d be just fine.
Remember 2008? All those bank bailouts were done under the guise of too big to fail, and protecting average Americans. And they were!!! But there was no changed behavior. This is the same thing. No changed behavior
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u/ResponsibleHeron9452 2h ago
Takes away from another group who are not workers and are holders of capital.
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u/Wolf_Protagonist 3h ago
Whether you raise wages or maintain a stock price one group of workers is being hurt
It should be the people who who do the work who gets the benefit, they are the ones that created that wealth.
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u/another_thyme 2h ago
There are many situations where had there not been investors there would be no workers
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u/Wolf_Protagonist 2h ago
And there are the exact same number of situations where had there been no workers there would be no profit.
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u/Alert-Ad9197 2h ago
Any time there are investors, workers are needed. The inverse is not true though.
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u/another_thyme 1h ago
So how do you start a business with paid workers with no investment?
And if you meant already established companies that exist on the stock market, you do realize how rare it is for a company to have enough cash on hand to go private?
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u/toru_okada_4ever 2h ago
It's almost like making the stock market the ultimate measuring stick of everything was a bad idea.
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u/Delicious_Solid3185 2h ago
What other measure should we force people to use
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u/toru_okada_4ever 2h ago
There are other countries in the world that have a fundamentally capitalistic economy, but with a *little bit* more regulations than the "do whatever you want" system you have. Just saying.
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u/Baharoth 3h ago
I mean they certainly can just do it anyway. Once all the shareholders withdraw their money and the company is closed there won't be any more underpaid workers. Win for everyone.
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u/SMK_12 4h ago
No if the stock price falls because the company is barely scratching a profit that means no money for further investment, expansion, all those employees 401k, pensions, etc are worth nothing, stores close, people lose their jobs and end up making $0
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u/free_based_potato 3h ago
If all companies were forced to pay a living wage then Walmart's gains would still be higher than the gains of other companies, making them a better investment. And the % invested in them wouldn't change.
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u/disaster_incomin 3h ago edited 3h ago
That's why it needs to be a law increasing minimum wage, so that all companies have to do it
(Edit typo)
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u/3DBeerGoggles 3h ago
"… no business which depends for existence on paying less than living wages to its workers has any right to continue in this country."
-FDR, the reason the US even has minimum wage.
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u/BobbyRayBands 4h ago
“Barely scratching a profit” - said about 2.5 BILLION dollars in profit every year.
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u/Mandingy24 3h ago
Scale matters.
So does reading comprehension, as multiple other comments in the thread you are responding in, have already elaborated on exactly how an amount of $2.5 billion for a company the size of Walmart is substantially small.
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u/CaptainCarrot7 3h ago
The most important part is that wallmart as a company would shrink and they would abandon locations which are less profitable and make everything more expensive.
If you want higher wages thats fine, but dont pretend that all the consequences would only hurt rich people.
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u/Property_6810 2h ago
Now you're getting it. For 50+ years politicians have been robbing the future for short term gains. At this point the economy is completely disjointed from reality. And to suggest a correction is evil because it would destroy the 401(k)'s and pensions of the poor old people who voted their whole lives for this.
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u/bigpunk157 4h ago
It's more that the margins are incredibly thin already. It's just a big number because it's such a wide business. Every retailer has this issue. We thought Sears was too big to die.
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u/coffeewithcake 3h ago
Isn’t Walmart owned about 50% by the Walton family and trusts?
If the stock is propped by a very low labour costs, and action is taken to correct this labour-capital balance, I’d be ok with it.
In fact, we should be aiming for it. There’s no global axiom that says walmart should be worth 900bn based on low labour costs.
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u/GroundbreakingRun186 3h ago
That’s not how you calculate return on capital and that 2.4% doesn’t really give you any meaningful information in this situation.
Earnings per share (eps) and price/earnings ratio (P/E) are the metrics that would actually be used by investors.
EPS with a 22b and 2.5b net income would be $2.76 and $0.31 respectively.
P/E is about 40 right now with a stock price of ~$111.85
To maintain a ~$40 P/E at a 2.5b net income, the stock price would need to fall to about $12.70, or 88% drop from today’s valuation. Market cap would also drop to about $101b
But Walmart trades at a premium cause of scale and cause their profit is much higher then comps. Target is its closest comp, and has a TTM net income of 3.45b and p/e of 19.7.
If Walmart had a 2.5b net income it would probably go close to targets p/e. That pushes stock price down 94.5% to $6.18 with a ~$50b market cap.
In other words it would destroy the stock price.
That’s important cause if they ever need to raise money by selling stock, they’re fucked. They haven’t had to do this in a long time cause their a cash flow positive company with cheap cost of debt (ie issue bonds, which they do all the time). That might change if their operating cash flows decrease $19b.
Also it’s important for their stock grant program (which store managers can get up to $20k/year in stock) is worthless. If a manager worked 40hr/wk the extra 5$/hr would be $10k a year, so they’d only see total comp decrease by $10k/year. For hourly & salary cashiers, greeters, warehouse workers/et, their stock option plan would also worthless (option to buy stock at a discounted price w/ 15% match). That’s not c suite stock packages, that’s stock comp for employees you see in the store, that is now worthless
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u/andouconfectionery 2h ago
This is a super strange analysis. You're analyzing the PE ratio as if it's the profit margin. It isn't. This scenario corresponds to a PE ratio of about 41. Unusually high, especially for a more stable sector, but not at all "bad". It also completely ignores that a good chunk of the labor expenses would flow back in as revenue. Dividends wouldn't pay out as much, but they wouldn't drop as much as you'd think. Plus, you'd get to live in a society where Walmart employees aren't destitute. That's gotta be worth something to you.
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u/The_Funky_JJ 3h ago
Oh well, don’t agree money should make money anyway it’s why the world is broken… hey take my money and give me more money for free 😂
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u/Collin389 3h ago
It would be no different than if we still bartered/traded. Let's say you life in a village that primarily farms, but you believe there is going to be shortage of crops. If you trade for a bunch of fishing nets ("take my money"), then if there is a food shortage then people would be willing to trade you a lot more than they would have for those nets ("give me more money for free").
Basically the goods you have became more in-demand, so they become worth more. Nothing really changed except what other people are willing to pay/trade for them.
This is just one aspect. Obviously there's monetary policy that would factor in to a currency, but doing nothing and profiting off of money you already have is just a consequence of free trade.
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u/Odd_Road3185 3h ago
Millions of people should have worse lives so that a small group of old dudes have even more money they don’t need. You’re right that makes alot of sense
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u/Euphoric-Excuse7037 3h ago
Implying a higher paid workforce won't spend more which in turn helps balance their spresdsheet..... You can't assume one cause and effect and not the other immediately obvious one.
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u/Wuhaa 4h ago
The problem with the American way. We can't improve poor workers lives, it would affect the stock market, which means the pensions, so no can do.
Nevermind decades of suffering to get to that pension, if at all.
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u/OG_Squeekz 4h ago
ya i got into an argument with a lady on a flight about this. Like, youre still turning a profit and improving the life of everybody, but she insisted companies(particularly specific individuals) need to make billions so that they can advance society. To which i rebutted never in history has a class of super wealth private individuals advanced society to a better more egalitarian future.
But she very much dreams of returning to serfdom if that means she gets to work for Elon musk on mars.
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u/SignoreBanana 3h ago
Congratulations, you've explained exactly why the stock market is a pile of shit.
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u/StickGuyAtWorkToK 2h ago
lol at trying to put any kind of logic behind what a stock is worth based on earnings in the year of our lord 2026.
Stock prices are just made up nonsense now a days and this is proven by the spacex ipo.
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u/737Max-Impact 3h ago
Second comment from the top and we've already got someone conflating market cap with cash. Oh yeah, we're on reddit.
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u/Sharden3 2h ago
Honestly, investors can fuck off. That whole system is a scam and a half.
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u/Sweaty-Willingness27 3h ago
Perhaps all the more reason to have state-owned grocery stores. Just take the profit out, we're paying for much of their support anyways so investors can stay in it.
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u/GuiokiNZ 2h ago
Why stop there? Have state owned everything if you trust the state.
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u/twilight_hours 2h ago
Because there's probably a happier medium between full blown communism and robber baron capitalism but then you wouldn't be able to 1) build a straw man and 2) enrich yourself in a fraudulent market
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u/UghImRegistered 4h ago
Don't worry they'd stop being a 900B company pretty fast so the cap/earnings ratio will correct itself /s
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u/Ok-District8876 6h ago
And the original question was EVERY employee, not every FT employee, so it looks like they'd be in the red.
I'm sure they're looking at which hourly employees can be replaced with robots too...
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u/schannoman 6h ago
I did every employee though
As for the robot: you are the robot doing self checkout already
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u/_raydeStar 5h ago
For real Every time I go to self checkout I'm like man I'll take as long as I want, I'm not getting paid for this crap
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u/MaddMan420 5h ago
The registers are a crapshoot. The employee is either talking shit with another employee or scanning items at a movement speed perceptible only by microscope.
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u/JakobExMachina 5h ago
and thus exposing the one of the (many) issues with capitalism. the need for a company to grow means that over time, the product gets more expensive whilst also worse, the people making it and selling it get paid less (in real terms), all whilst the people in the board room get richer. we’re being held hostage by a system that is at war with humanity.
it feels like we’re rapidly snowballing to the endgame now. an economic system predicated on infinite growth in a planet with finite resources is fundamentally unsustainable.
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u/fidgey10 4h ago
A company can continue to grow by expanding total volume or by making gains in efficiency. It is not necessary to charge more.
Companies already charge as much as the market allows. Because they want to make money.
There this interesting thing people seem to think which is that companies get "greedier" so they choose to charge more. This isn't how economics works at all. The companies price is based on the market. If they charge too much they will lose profits to competitors. That's why price is constrained.
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u/dugg117 3h ago
Trying to apply free market economics to places where markets are largely controlled by monopolies that hide behind the large number of brands they've purchased and can block new competition through regulatory capture is dumb.
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u/horoyokai 3h ago
Those aren’t exclusive
A company can charge more because they’re greedy and that’s also what the market can allow.
Also that’s not good for a society. If you can charge twice as much for food but 40% less people by it then you are doing what the market allows and making more money. But you’re just saying you don’t care about the 40% of people unable to buy that food now. And I know you’ll say that some other company will come and sell that food at that price but that’s not the way reality works
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u/Kripkenstein_ 4h ago
The competitors raise their prices too. Also in many sectors there isn't much competition to begin with
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u/Duke-of-Edinburgh 2h ago
which just proofs again, that the current system of investors benefits only the rich while robbing the worker
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u/scalyblue 22m ago
Last time I considered this I had more internal numbers and it turned out that the store could have charged something like 8 cents a pound more on bananas to break even on giving every non exempt employee a 5 dollar increase
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u/Larry_The_Red 6m ago
they do not like overtime
I wish...
walmartemployeeassociate here. my facility has had mandatory overtime every week since around february . I'm tired, boss→ More replies (1)•
u/epitome1986 5m ago
I would adjust the math slightly, 1.6 million is total employees in the us which includes corporate and retail. retail is 1.26 million employees (store managers and below) which would drop it to about 16.1 billion.
Profit lands around 5.5 billion.
while the stock price would certainly suffer, im certain if employees received a 5 dollar raise there would be somewhat of a productivity increase. I highly doubt that increase would fully erode away 17 billion but the impacts of lower turnover and increased productivity would be hard to measure.
But the other aspect is Walmart spent over 8 billion in stock buybacks, which that alone would cover 3.50 of the 7 dollar cost increase, so in reality it would only cut profits by 8 billion to give all employees a 5 dollar raise.
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u/trevorp210 0m ago
Thank you for your contribution, the truth is a nice change regardless of opinion.
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u/insbordnat 5h ago
I got a little less than you ($15B) but that was doing some math excluding salaried employees since we're talking about $5/hour raise.
I think what people don't fully understand is the sheer magnitude of numbers. Sure, their US operating profit was 27.6B (both US Walmart and Sam's Club, excluding international). Let's say it costs $17B more. That takes their operating profits down to $10B. Yes, it's a lot of money, but relatively speaking, it isn't.
$10B on $581B is 1.7%. Operating margin of 1.7% - that's like telling someone "hey, you sold $1M in products, but you get to pocket $10,000". Walmart's model thrives on low prices, and assume they have the most purchasing power out of any large corp - they can't squeeze any more money out (well, ignore exec salaries, but relatively speaking those aren't shit).
I absolutely think they should pay more, but something has to give then - a 1.7% operating margin is in the "not fucking worth it" territory.
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u/Jealous-Report4286 1h ago
You would have to calculate turnover rate and retention rates. With the new higher salaries as well. I suspect you could try and estimate the cost of replacing the employee and compare retention rates at say Costco. They might also begin to get better more skilled labor at those rates that increase productivity and efficiency.
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u/WillDill94 6h ago
Not accounting for the increase in spending at Walmart that the employees would be doing with more income
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u/UnnamedRealities 5h ago
True, but that would have minimal impact, only offsetting roughly 1% of the net income drop from the wage increase.
Walmart's net income would drop over 40% from $22 billion to $13 billion. Employees will have a $11 billion gross pay increase, which is about $9 billion after taxes. I'll be generous and say 25% will be spent at Walmart - $2.25 billion. Operating margin is under 5%, but using 5% of $2.25 billion gives $112 million in increased net income.
$110 million increase in net income is a drop in the bucket compared to the $9 billion drop in net income from the wage increase - barely 1% offset of the impact of the wage increase.
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u/iwearstripes2613 5h ago
Some amount of the increase in purchasing power would be offset by employees dropping off of various public assistance programs. That’s obviously good for society as a whole, but it reduces the extent of the greater purchasing power.
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u/TheNemesis089 5h ago
And some of that loses would also mean less revenue in capital gains taxes, reduced taxes among investors who would report dividends as income, and so on.
You’re only looking at a portion of the tax implications.
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u/Maximum-Style2848 4h ago
CEO would be fired immediately and likely be prosecuted for purposefully decreasing shareholder value of a public company.
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u/Individual_Bell_4637 6h ago
One thing the math must consider is that payroll taxes and insurance premiums scale with the increase. An extra $5/hour to the employee is a cash cost to the company of about $7/hour.
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u/hiromasaki 6h ago
Payroll taxes are 7.65%. Unemployment Insurance premiums max out at about 10%, but vary by state.
So $5/hour cost to Wal-Mart still is a $4.25 increase to the employee. Or vice-versa, $5/hour to the employee is a cost of $5.88/hour to Wal-Mart.
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u/schannoman 6h ago
Add in additional workers comp 6% and additional benefits payments that also scale (AD&D, STD, etc)
I assumed $7 to make the math cleaner
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u/IH8Miotch 5h ago
Leave Advanced Dungeons & Dragons, and sexually transmitted diseases out of this please!
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u/schannoman 5h ago
I realized that too when I was writing it. They've corrupted my boy
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u/IH8Miotch 5h ago
Well the dungeon master appears to be hiding herpes behind the dm screen.
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u/thirdeyefish 5h ago
You have to roll an 8 or higher to beat the herpes.
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u/IH8Miotch 5h ago
Cure desease and greater restoration will not remedy it though. Also don't try to burn them off with fireball.
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u/hiromasaki 5h ago
Does Wal-Mart even offer those benefits? Neither is legally required.
ETA: Looked at the website, and "Eligible" employees can opt-in to those coverages. So those costs only go up if Wal-Mart actually pays any of the premiums vs. just passing on bulk discounts, and if the employee qualifies.
The 5% 401k match would be worth including, though.
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u/schannoman 5h ago
Workers comp is legally required.
As for the others? Maybe? But it's easier math to just assume a higher number and we've accounted for all the possibilities
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u/XnFM 6h ago
That's why forced tips exist. Restaurantours evading payroll taxes.
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u/Charming_Society4400 6h ago
Employers pay payroll taxes on tips
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u/XnFM 6h ago
So cash tips are tax evasion at all levels?
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u/Charming_Society4400 6h ago
Pretty much. I mean technically people should report their cash tips but doesn’t happen much in practice.
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u/hiromasaki 6h ago
They're supposed to be recorded and reported, same as a tip on a card.
I'm sure less than half actually are.
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u/Individual_Bell_4637 6h ago
If it were even 10% of cash tips that got reported, I'd be amazed and impressed.
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u/lminer123 5h ago
A whole lot of people certainly report SOME of their tips. Reporting none isn’t a great long term idea
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u/DeadEnoughInsideOut 5h ago
Id worked at a starbucks and i'd report like 150$ ish each year just so I had something put down, in reality I made a lot more than that in tips. Not to long before I left they started auto reporting all cash tips
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u/se7en41 6h ago
After a few years of serving like that, you realize "oh shit no one will EVER finance me a car with this reported income" and begrudgingly start keeping better track.
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u/Individual_Bell_4637 6h ago
True, the whole financial system is intertwined enough now that it would be more difficult than it used to be to simply ignore them.
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u/manuscelerdei 4h ago
Yup. This is why the service industry loves the tip system so much -- the vast majority of their earnings are from tips, which are not accurately reported to tax agencies. The restaurant owners don't want to pay an actual wage, so they pass that burden on to the customer and then maybe just "forget" to report the tips in excess of minimim wage on their employees' W2.
It's win-win-lose. Employers pay a pittance in wages, employees get tax-free income, and the customer foots the bill for this tidy arrangement. The odds of being audited are astronomically low. So of course every effort to make restaurants reflect their actual costs in pricing has fallen flat.
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u/dizastermaster7 5h ago
Yes... you have to report them. There are state to state differences, but federal wise they need to be reported and paid if necessary
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u/Corlegan 5h ago
You left out the word declared. That is a fantastically important word in this context.
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u/CallMeNiel 5h ago
Fun fact, the weird restaurateur isn't downed with an n. It's a person who provides rest and restoration to their customers, and their place of business is a restaurant.
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u/Unlucky-Cook2578 5h ago
It also reduces their tax burden, and let's be honest this is intended to apply to their lowest paid workers. They'd still be totally fine
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u/ghostoftheai 6h ago
We need t stop making every excuse possible as to why these companies CANT do things. I’m not saying you’re wrong about the numbers but at somepoint if a substantial amount of your employees are getting subsidized by the government for healthcare food etc., why do we not look at that cost and say the company that made however many billion help front some of that? It’s like we give businesses the the right to exist over people and that’s quite honestly evil.
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u/Individual_Bell_4637 5h ago
The sub is about the math, so it's literally just about accurate numbers, not an excuse or argument for or against anything.
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u/psychot-princess 5h ago
I'm with you! If folks can sit with a straight face and say SNAP is too expensive, they should be asking why so many people need it.
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u/Ambitious-Sense2769 4h ago
Also I don’t think anyone in Walmart corporate needs that extra $5/hour… sure the extra $10k a year would be nice, but it’s the ppl at the stores that need it way more…
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u/JoffreeBaratheon 5h ago
The statement "Most of that $12B would be spent back at Walmart" is particularly egregious. Who on earth spends most of their pay check at a single store? Reminder that, rent, vehicles, insurance, and taxes exist, which I'm pretty sure Walmart isn't selling.
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u/Ok-Assistance3937 4h ago
Even If they did, Walmart has an Operating marging of 4%, wich would be Cut down to 2.5% (propaply closer to 1.5% bc the 12 Billion in way to Low) so they would make only 300 Million in Profits of that 12 Billion in revenue.
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u/ForsakenPoptart 4h ago
In a lot of small towns across America, Walmart moved in and pushed a lot of the other businesses out of town. If they want groceries and other home goods, Walmart is the only choice.
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u/Leverkaas2516 1h ago
They're already buying food. If they make more money, they wouldn't spend most of it buying MORE food.
Most people use pay increases to improve their lifestyle - nicer car, better apartment, more recreation and eating out... and if they're wise, saving more.
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u/emli317 22m ago
Poor people would absolutely use the extra money to buy more food. There are 14k+ Walmart workers on food stamps across 9 states. Many Walmart workers live under the poverty line and qualify for both food stamps and medicaid. Those people would not be spending the precious little income they have on nicer cars and eating out more.
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u/IrishBear 1h ago
Eh you'd be surprised. Groceries and other home goods still aren't a majority of paychecks, utilities, rent/house payment, car payments and gas is where "most" paychecks go. Sure most people are going to ship there for groceries but if you give someone making 8 an hour 15 an hour it's not like that extra 7 an hour is going back to Walmart, most employees probably have debts and bills they need to pay, or maybe need a new car.
I think it's a silly argument to make. Though I do think Walmart should pay its employees more.p
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u/ardarian262 4h ago
It's statistically not wrong. People who go from poor to less poor keep their routines and habits according to research into patterns with this and since they are Walmart customers mainly, that will likely lead to more spending at Walmart. Their rent won't eat into it unless their landlord gets greedier, and taxes won't really apply since most of them would still be below the poverty line and so able to not pay anyway because they would still be poor. The average Walmart employee also doesn't drive because cars and insurance and licenses all cost time and money they do not have.
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u/FederalChocolate456 2h ago
but would they start driving if they made $5 more an hour? now many of them would have the money
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u/DaFuzi_J 3h ago
Pretty sure they're talking about the extra $5/hr the people are getting and not their entire fucking paycheck.
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u/Martino231 1h ago
But it's still a completely baseless claim. As if the majority of peoples' response to getting a $5 raise would be "I'm going to exclusively expand my grocery spending".
Some people might do that, sure. But others are going to spend it on a better car, a bigger apartment, more savings, or just more fun little luxuries. Or some kind of combination of the above.
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u/TapEarlyTapOften 4h ago
So Walmarts net income gets cut by more than 50% - 22B to less than 10B. Their stock price is based off of earnings, so that drastically shrinks their market valuation. Their dividend goes to shit, which would trigger a ton of forced selling from income and index funds that have dividend mandates. Which leads to more forced selling and more share price declines. Walmart takes a mammoth hit to the face of profit (which you're implying is a non-event) and share price valuation, which raises their cost of borrowing, which adds more pressure to cut costs elsewhere. The result is that they'd be forced to cut costs in other areas, with layoffs, closing marginal locations, less hiring, less capital investment, and less expansion (less new stores opening). That's the opposite of "they'd be just fine".
People seem to think that its as simple as profit minus some extra number, but they completely ignore all the unintended consequences that arise.
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u/zxzzxzzzxzzzzx 3h ago
On the other hand, they'd likely save a lot on employee turnover and have increased productivity. For example, Costco's model of paying employees well and giving them opportunities for raises and growth means that they have very low employee turnover compared to other retailers. In return, they get loyal, experienced employees who know their stuff and work hard.
People like to say that paying employees more and treating them well is financially impossible, but Costco does it very effectively. And they don't do it out of charitability, they do it because it's very effective in the long run.
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u/Simple-Ad-1506 2h ago
Increased productivity doesn’t matter for people who stock shelves and bag groceries. What you’re saying also has been proven to be not true, there is no indication that people intrinsically work harder if you decide to pay them more
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u/schniunderforhuden 2h ago
Wages in general are a very weak motivator past a certain point, the diminishing returns on motivation and productivity is insane.
There’s a reason companies do shit like buying ping pong tables and hosting pizza fridays instead of putting it towards wages. No matter what Reddit insists, all the research points to the ping pong table having a bigger effect on morale than a small wage increase
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u/XJR15 1h ago
past a certain point
This is doing a lot of heavy lifting in your reasoning lmao
This applies when you're getting paid 100k+, not when you're at the edge of starvation at minimum wage having to work multiple jobs or choosing whether to eat or pay the rent. I could think having workers unconcerned with the basest of survival is good for productivity, but I'd be speculating
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u/Various_Mobile4767 2h ago
Its because people aren’t motivated by current pay. They are motivated by the potential reward of future higher pay.
Aside from that, most people work at a base “minimum” effort level that doesn’t change regardless of current pay level.
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u/PronounceMemeAsGif 6h ago
Walmart gets subsidized by the federal government to underpay their employees. Many people working for Walmart are also on SNAP benefits. Where do they spend those benefits? At Walmart of course. Isn’t the US fun?
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u/graderscrapp 5h ago
My understanding is that was more common in the 2000s, and that Walmart currently pays wages where no full time employee would qualify for SNAP anymore.
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u/fireky2 5h ago
I mean out of college in 2018 i was making 10 an hour, unless it like tripled i dont think so, I also wasnt the lowest paid
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u/butthole_surferr 4h ago
Depends on the state. I make 16.50 an hour and make almost 2x the maximum income to qualify for snap in my state it's ridiculous
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u/glassisnotglass 2h ago
It's more than that: As of data from a few years ago, Walmart's annual profits are approximately the same as the amount of federal aid given to Walmart employees.
That means that Walmart IS NOT ACTUALLY PROFITABLE, it's just a very elaborate scheme to siphon money from taxpayers.
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u/DogDogDogDogog 1h ago
I am amazed how adamantly against americans are to other people living a decent life. They'd rather have as many people suffer as possible to make themselves feel richer.
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u/PenStreet3684 5h ago
Walmart should pay better but they are not being subsidized in the form of public support. The American public is receiving benefits from taxpayer funded programs. Your logic is like saying that my employer is paying my light bill. That logic doesn’t keep the lights on if I forget . If Walmart goes out of business , the government programs still exist, function and continue under the same rules.
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u/hi_jack23 4h ago
When a business purposely pays low enough amounts that keep full time employees reliant on federal benefits that are intended for those that are less or un able to support themselves, I’d argue that the business is causing an undue burden on the public.
I’d also argue that Walmart keeping these full time employees that could be better paid reliant on support results in strains to the benefits systems in that there are more applicants and more work to process, lower chances for an individual to be accepted, longer wait times to receive assistance, and/or even the potential tightening of qualifications if there are deemed to be too many applicants to where the system is overwhelmed.
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u/jimmychitw00d 5h ago
Aren't we kind of splitting hairs here? If a company's wages are low enough that its employees qualify for public assistance, what difference does it make if the US government pays the employee or the company? At the end of the day, it's still the taxpayers picking up the slack, no?
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u/FederalChocolate456 2h ago
no, it's not. if the government pays, it's the taxpayers paying, if the company pays, it's not the taxpayer paying. Your argument is not clear at all. Saying the government subsidizing walmart frames it like the government shouldn't be providing these subsidies to it's citizens when it absolutely should. it shouldn't be walmart's responsibility to provide healthcare or basic survival needs. That should be the job of the government, not private employers.
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u/JayTheSuspectedFurry 5h ago
The point is that Walmart doesn’t have some deal with the government to let them continue doing this. They’re just doing it on their own
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u/AdCurious7831 1h ago
yes, people are generally brighter and more helpful when they're not suffering poverty. they tend to be less "ghetto," too, since ghetto is just another word for poor.
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u/locontendere 2h ago
The funny thing is, Walmart's former CEO Doug Mcmillion (yes that is this actual name) who just retired this year, supports raising the federal minimum wage.
https://www.cnn.com/2019/06/05/business/walmart-shareholders-meeting-minimum-wage
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u/TawnyTeaTowel 2h ago
Because a federally mandated (rather than elective) rise a: causes less panic in shareholders and b: can be used to justify increased prices.
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u/Ok-Assistance3937 27m ago
Theire lowest payrange starts at $14/h, so why wouldnt he be infavor of increasing minimum wage? I mean yes, increasing the wage floor would also create some upwards preassure on the lowers of their wages, but the impact of the higher purchase power of low income people would be way higher.
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u/The_Ironthrone 6h ago
The problem is not that last year they could have paid more, but that next year they may not have those profits. You’re thinking of profit sharing a different concept where the payments can vary year to year, and can be decided based on what the profits are. Salaries are agreed on ahead of time and are not profit dependent, and (typically) are not reduced based on company or the economy’s performance. Instead, if employee costs outstrip revenues, people are laid off. The most equitable distribution of profits would be more like profit sharing, not increased salaries to maintain steady employment during economic down turns or corporate decline. Under our current system, profits exit the company to shareholders and little to none of the ‘extra’ money is retained for future corporate buffering, leading to layoffs not only in economic declines, but even dips in profitability.
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u/ProperGanderMachine 6h ago
I wouod be extremely surprised to find out that a majority of walmart employees are salary instead of hourly.
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u/roboboom 5h ago
Why are people treating this as a serious question S if Walmart should pay their employees an amount that zeroes out their profits?
That’s not how business works, nor should it be
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u/No_Presentation9490 5h ago
If you think a company will "be just fine" if they give 12B of their 22B profit to employees, you have zero understanding of economics
Companies have been completely destroyed for far less
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u/schannoman 5h ago edited 5h ago
If you think that 12B in expenses doesn't offset a part of the effect to the profit margin in decreased tax burden you also have zero understanding of economics
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u/NonSequiturDetector 4h ago
If you think that 12B in expenses doesn't offset a part of the effect to the profit margin in decreased tax burden you also have zero understanding of economics
Something that someone wrote on Reddit for Reddit karma.
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u/Maleficent-Drive4056 3h ago
'They can just write it off' is Reddit's way of making any sum add up.
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u/PilesOfRavioli 5h ago edited 5h ago
Naw. Man you’re trippin.
If anyone shuts down a business because the business is making merely $10,000,000,000 in profit (rather than $22,000,000,000) per year?
That person would be a total moron.
Closing because we’re only netting $10B in profit. GTFOH.
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u/great_apple 4h ago
Do you think there's like, one guy who owns Walmart making $10b a year? Dude there are 8 billion shares, they earn barely over $1/share. You have absolutely no idea how this works.
To really dumb it down for you: Let's say a small business earns $200k/yr. Wow, that's an awesome amount of money! Owner must be rich! And if there's one owner, and it's a service company with very low overhead, yep that owner is doing well. Now let's say there are 10 owners, and they all had to invest $500k to keep the business up and running. Is each of them earning $20k/year while having half a million invested in it quite as good as one guy with no overhead earning $200k?
No, obviously. A chicken could figure that out. One share of Walmart stock is $110, a profit of $1.25 per share is tiny compared to the investment required. Their operating margin hovers around 3-4%.
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u/schniunderforhuden 2h ago
Honestly the lack of understanding of basic economics on reddit is terrifying
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u/futbol2000 1h ago
The amount of political hacks on this site only furthers my belief that accounting and general business courses need to be mandatory in public education.
Christ, some of these people are grown adults? They think money grows on trees and know nothing about how a business gets started
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u/reklatzz 5h ago
The stock would crash because the net profit was cut in half or worse. The board of directors would fire the CEO and hire a new one to revert the changes.
It's all about the stock price. That's how publicly traded companies operate.
Could they do it.. sure.. would they? Never, not as a publicity traded company.
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u/Thvenomous 5h ago
No no, you don't understand. Your business is a complete failure if you're not making exponentially more money than you did the year before, every year. Money is an infinite resource, don't you know this?
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u/Birdybadass 4h ago
No they cannot, and they do not need to. Walmart has employees and receive thousands of new applications every day. You are working the rate of which your labour is worth in the market. If you disagree, find new employment with the skills that you feel make you worth more than that.
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u/RichardFarter 2h ago
I hate when someone makes a really good point, but in the middle of it they say some insane shit like "MOST of that would be spent back at Walmart"
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u/Exact_Risk_6947 2h ago
I didn’t see anyone mentioning the fact that… that’s just not how profit works. It’s not a pile of cash they add to. That’s just the money left over after immediate costs are paid (probably not the economists approved term). But that ~$22B in “profit” is 100% already earmarked for other projects, improvements, growth. On top of that, if the profit doesn’t come close to or exceed their capital investment then it’s instantly more profitable to simply sell assets then try to squeeze money out of a stone.
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u/Pentupempathy 6h ago
But, it would make a lot of their employees fall off the “benefits” cliff. They would make just a little too much to qualify for food stamps and Medicaid benefits but certainly not anywhere well off enough to afford these things outright. Walmart has lobbied to keep minimum wage right where it is. Right in the sweet spot of their employees being too poor to quit and not well enough off to do better or break the cycle of poverty…cuz you know working 40 hours a week with kids leaves very little time to “bootstrap” yourself.
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u/GamerNerdGuyMan 6h ago
I hate welfare cliffs so much.
It'll probably never happen, but it's 1/2 reasons I'd be a big proponent of replacing all current welfare with an NIT (Negative Income Tax).
The other reason a massive cut to the bureaucracy involved. Gov bureaucracy eats up a ridiculous % of social spending.
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u/Simple-Ad-1506 2h ago
Sure, they could do that. But then their stock price that literal tens of millions of Americans own would crater into literal biblical hell and everyone would either sell it at which point it gets bought by private equity and fixed or asset stripped or the shareholders vote to fire the board who allowed this to happen and then hire a board who will do what they want. I’m not even sure what the point of these conversations is
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u/LadyFoxfire 3h ago
It’s really funny how people act like raising wages is some insane thing that’s never been tried before and will clearly destroy the economy, when there’s mountains of historical evidence that it is, in fact, fine and just makes the workers less poor.
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u/exactdream_ 1h ago
Personally I'm not okay with socialism for corporations where employees need SNAP in order to survive when the corporations could be paying their employees more instead of costing taxpayers. I'm not sure why you think paying people a little more would destroy the economy when our minimum wage has not matched inflation and the purchasing power of the dollar has fallen.
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u/Commercial_Rule_7823 6h ago
Thats 12 billion that went to stock holders, who are owners of the company....which also include a lot of their employees.
So what happens when they increase wages and they take a loss? Layoffs.
Cant have it all ways.
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u/Flamingturac 6h ago
Walmart would raise prices to cover the cost than everyone applauding Walmart would shop somewhere else. Also Walmart's stock would crater
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u/mb97 5h ago
They don’t have to though. They can cover the costs without raising prices.
And from an economics perspective you’re also wrong. All of the marginal costs, and the demand, are fixed. If they raise prices, they lose customers, and ultimately profit. You can break labor out into marginal cost, but you wouldn’t in this case- the fact that a particular item might no longer be profitable to sell in a vacuum doesn’t really change much, because stores like Walmart have loss leaders anyway.
In fact, if we taxed Walmart at 90% on their profits in the highest bracket, like we did for decades after WWII, they’d be incentivized to do exactly this- reduce profits that mostly get taxed anyway to put gains back into growth and/or payroll.
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