How the "Wal-Mart Syndrome" Pushes Millions More Onto Food Stamps

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Call it the "Wal-Mart Syndrome".

Entire industries — such as low-end retailers like Wal-Mart Stores Inc. (NYSE: WMT) and fast food chains like McDonald's Inc. (NYSE: MCD) – pump up their profits by paying employees extremely low wages.

But thousands of Americans who need to support a household on such low wages – either the federally mandated minimum wage of $7.25 or just a bit above it – can only do so with public assistance.

In other words, with the help of welfare.

"When low wages leave Wal-Mart workers unable to afford the necessities of life, taxpayers pick up the tab," said a report released last month by the Democratic staff of the U.S. House Committee on Education and the Workforce.

That report estimated that a single 300-employee Wal-Mart Supercenter store in Wisconsin cost taxpayers at least $904,542 a year in public assistance payments.

And Wal-Mart employs 1.4 million people nationwide.

And according to a study by the National Employment Project last year, 26% of the private sector jobs in the U.S. – 29.6 million jobs — pay less than $10 per hour.

A few back-of-the-napkin calculations put the national taxpayer cost of the Wal-Mart Syndrome well into the tens of billions of dollars.

The True Cost of the Wal-Mart Syndrome

The Congressional staff report based their $904,542 figure on an average of $3,015 of state and federal benefits per employee.

Keep in mind though, that's just an average.  Some people will receive more benefits than others (particularly if they have children), and surely many receive none.

But using $3,015 per year as the average per employee is not that outlandish a figure. Depending on which state they live in, people making $10 an hour or less are usually eligible for benefits worth $10,000 a year, $20,000 a year or more.

In addition the Congressional report did not count everyone eligible to receive benefits in its estimate, but used actual Wisconsin Medicaid participation numbers. (Counting everyone eligible resulted in an average of $5,815 in annual benefits, for a total cost of $1.745 million just for the one Wal-Mart.)

But if we take that somewhat conservative figure of $3,015 and multiply it by the number of Americans making $10 an hour or less, we get an aggregate cost to U.S. taxpayers of $89.2 billion a year.

And that's probably a low ball number when you consider that state and federal assistance programs together cost nearly $1 trillion each year.

Trapped in the Wal-Mart Syndrome

One way to fix the Wal-Mart Syndrome is to dramatically increase the minimum wage, though it's an imperfect solution at best.

Join the conversation. Click here to jump to comments…

  1. wandamurline | June 14, 2013

    Crazy…if you up the minimum wage, then the government will just up the total amount that would be given for welfare…until this country gets the communists out of power in Washington and allows the free market to run by itself and capitalism to work, it is just going to get worse.
    Besides increasing minimum wage will hurt the small businesses across America and they are already hurting competing with WalMart….they don't need any more problems….increase minimum wages will cause termination or cut back on hours for their employees….in the end, a small business has to make a profit or go out of business.

  2. Gregg | June 14, 2013

    This is absolutely NOT even a way to fix the "Wal-Mart Syndrome"

    Although I do not particularly like Wal-Mart for many reasons the jobs provided prevent people for totally being on public assistance. Public assistance programs themselves perpetuate the problem more than minimum wage jobs.

    1) Minimum wage jobs are not, never have been and never will be meant or able to provide for someone with a family. Before starting a family develop a skill, trade, or other means of good income. Starting a family with a minimum wage job is not responsible and there are always consequences for irresponsibility.

    Minimum wage jobs are for teenagers/young adults entering the work force to begin their lives as self supporting adults with support from their families, not public assistance programs, until which time they learn a valuable skill, trade or complete an education.

    2) If these jobs were not available the people in them would be TOTALLY on governement assistance so taxpayers actually save on the assistance programs with minimum wage jobs.

    3) Raising minimum wage to $10.56 would not remove these folks from public assistance and would only serve to increase the price of the goods sold as the article stated. So pay more at the store or pay more taxes, whats the difference.

    4) Raising minimum wage costs the end consumer and public assistance costs the taxpayer. In any case costs go up.

    5) Low income/minimum wage earners on public assistance generally receive more beneifits than taxes payed.

    6) Raising minimum wage results in higher cost of goods purchased by everyone mostly impacting low wage earners resulting in the need for more public assistance resulting in the need for higher taxes and around we go.

    7) Learn a skill or trade, get a good education, establish some stability financially and then start a family. Be responsible and not dependent on government assistance. The true purpose of assistance programs is to assist those who can't provide for themselves due to illness, injury, events beyond their control. Not from the result of very poor choices and decisions.

    I could go on and on but you get the idea. "Think not what the country can do for you " (public assistance, minimum wage legislation, etc.) "Think what you can do for your country" (Learn a skill, a trade or good education and be responsible and a self supporting tax paying citizen.

  3. Jeff Pluim | June 14, 2013

    Whooooaaaaa!!!!!! You had better re-check your numbers my friend. I stopped reading when you turned 300 employees, receiving $5,815 per year into $1.7 billion instead of the actual $1,744,500.
    That is a difference of over $1.5 billion dollars.

    • David Zeiler | June 14, 2013

      Jeff, you're right. That's a typo. It's supposed to be $1.7445 million, as per the Congressional report. Thanks for pointing it out — it is now corrected in the story.

  4. Rewtired130 | June 14, 2013

    1) Welfare laws need to be fixed, repaired, redone. A recent study in my home state of PA showed that a person who craftily makes sure not to make over $29,000 a year at a job ($28,900) will receive $30,000 in welfare benefits (food stamps, Section 8 housing, utilities subsidies, etc. which comes out to a net yearly spendable amount of about $56,000, while a person working 40 hrs a week earning $59,000 a year comes out with a net yearly spendable amount of about $51,000. People are purposely playing the system so they can spend less time working & more time recreating on the backs of hard working taxpayers. The welfare system must be fixed to stop rewarding those who play the system for all its worth.

    2) In the 1960’s almost all minimum wage jobs were held by teenagers who worked after school & weekends for a few dollars of spending money to buy clothes, gas, movies, etc. without having to always hit up their parents for money as well as learning about budgeting & saving or by adults who just wanted a few extra dollars to sometimes splurge on something. The breadwinners of the family had good paying jobs that were plentiful. Today, with a severe scarcity of good jobs as US manufacturing has been decimated & the economy has lowered good job availability to 60% or less of the US workforce, the results are unemployment at 8%, underemployment at 12% or more, & those who quit looking for work at 5% or more. the result is that breadwinners of the family are being forced to take these low paying jobs as not much else is available. Jobs for teenagers are almost non-existent as the unemployed or under-employed adult breadwinners are taking the low wage jobs to survive. The fix is for Congress & the President to concentrate on the problem; jobs & the economy. Government should put everything else on the back burner for now except jobs and the economy. The only way to fix this & get back to the employment situation of the 1960s is to concentrate on jobs & the economy.

    3) Without making judgment on if the Healthcare Act is good or bad, the fact is that the way it is written, droves of employers are or will be reducing the hours of their employees to under 30 hours a week so the employers do not have to provide healthcare. This will only increase the problem of the main breadwinners of a family not being able to earn enough to live on & therefore needing taxpayer funded welfare assistance.

    Sooner or later the US is going to run out of enough taxpayers who make enough money to pay taxes & so there will not be enough money to pay for 1, 2, & 3. To quote or paraphrase Margaret Thatcher, “The problem with Socialism is that eventually it runs out of other people's money.”

  5. vincent h ghelli | June 14, 2013

    Walmart and companys like them are the new Energy Corp.(Rollerball,1975) and Soylent Corp,(Soylent Green, 1973), who make up facts to impress the children in government while feeding them the candy of campaign contributions, under the table incentives, and lucrative after office employment. In this way, the governments promote the companies and often provide financial incentives for them to grow. They employ the very people they destroy by putting small companies out of business. That said, many employees are happy at these giants of commerce, even with the low wages and citizens flock to save a few bucks. Remove government assistance and see how happy any of them remain.

  6. Retired130 | June 14, 2013

    1) Welfare laws need to be fixed, repaired, redone. A recent study in my home state of PA showed that a person who craftily makes sure not to make over $29,000 a year at a job ($28,900) will receive $30,000 in welfare benefits (food stamps, Section 8 housing, utilities subsidies, etc. which comes out to a net yearly spendable amount of about $56,000, while a person working 40 hrs a week earning $59,000 a year comes out with a net yearly spendable amount of about $51,000. People are purposely playing the system so they can spend less time working & more time recreating on the backs of hard working taxpayers. The welfare system must be fixed to stop rewarding those who play the system for all its worth.

    2) In the 1960’s almost all minimum wage jobs were held by teenagers who worked after school & weekends for a few dollars of spending money to buy clothes, gas, movies, etc. without having to always hit up their parents for money as well as learning about budgeting & saving or by adults who just wanted a few extra dollars to sometimes splurge on something. The breadwinners of the family had good paying jobs that were plentiful. Today, with a severe scarcity of good jobs as US manufacturing has been decimated & the economy has lowered good job availability to 60% or less of the US workforce, the results are unemployment at 8%, underemployment at 12% or more, & those who quit looking for work at 5% or more. the result is that breadwinners of the family are being forced to take these low paying jobs as not much else is available. Jobs for teenagers are almost non-existent as the unemployed or under-employed adult breadwinners are taking the low wage jobs to survive. The fix is for Congress & the President to concentrate on the problem; jobs & the economy. Government should put everything else on the back burner for now except jobs and the economy. The only way to fix this & get back to the employment situation of the 1960s is to concentrate on jobs & the economy.

    3) Without making judgment on if the Healthcare Act is good or bad, the fact is that the way it is written, droves of employers are or will be reducing the hours of their employees to under 30 hours a week so the employers do not have to provide healthcare. This will only increase the problem of the main breadwinners of a family not being able to earn enough to live on & therefore needing taxpayer funded welfare assistance.

    Sooner or later the US is going to run out of enough taxpayers who make enough money to pay taxes & so there will not be enough money to pay for 1, 2, & 3. To quote or paraphrase Margaret Thatcher, “The problem with Socialism is that eventually it runs out of other peoples’ money.”

  7. James | June 14, 2013

    When CEO and executive compensation skyrocket while workers' wages remain stagnant our economy suffers, government spending goes up, the debt and deficit go up and the class warfare begins. It's not the American worker that we can't afford to give a raise to, it's the CEOs.

  8. dourdan | June 14, 2013

    check out Netflix and Tesla Motors since xmas is this concern or hysteria

  9. elizabeth wesley | June 14, 2013

    The problem is unfixable. Decent paying jobs have and are going off shore. There are those who have large families in order to live well off the welfare system. Government supports a dependent society and the masses accept what is given. Everybody is happy it seems; one has to wonder how long it can go on. Even the fed printing its counterfeit money must have some consequences down the road.

  10. H. Craig Bradley | June 15, 2013

    SOCIALISM IS ONLY TRANSITIONAL

    James Tobin is correct in that welfare and entitlements do create a growing class of people entirely dependent on the Federal government. As the late British Prime Minister Margaret Thatcher once famously said: "Socialism works fine until you run out of other people's money". So, rather than just encouraging more dependency as a lifestyle, it sets the stage for a financial and social collapse someday, just like Greece and Argentina have already experienced. Once things cave-in, just about everybody left is toast. No more benefits or huge benefit reductions (austerity) and no jobs or a few jobs that only pay at best the minimum wage.

  11. mistel | June 18, 2013

    As a former employee of Wal-Mart, I can tell you that the working conditions at Wal-Mart are nothing like the naysayers would have you believe. Most of the bad press about Wal-Mart is initiated by unions. Our wages were more than comparable and benefits were out of this world. The ordinary employee would not need to ask for food stamps. I don't know what the situation is now in light of the depression, but then as now, if an employee doesn't like the conditions, then he is free to leave. Blaming Wal-Mart for a govt's ills seems a little sophomoric.

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