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Peter Schiff: Will Walmart shoppers support "Every Day High Wages?"



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Defend Liberty!

What percentage of wage does the government steal and waste?

Repeal and prohibit all taxes and reporting for under $100,000 or 100 oz gold per year.

In 1977 that would $4,000. I made $13,000 that year, equiv to 325 oz of gold.

Free includes debt-free!

I love Peter though he can be a tad overbearing at times...

but this time he was spot-on! And funny! hahahahahahahaha!

And the best part is the cheesy 'worker' image that looks like it was designed on paint 1.0 running on MS-DOS and printed on a Dot-Matrix printer.

Defeat the panda-industrial complex

I am dusk icon. anagram me.

I've Ran The Math 100x

You could take the entire pay of the top 6 executives and 100% of last years profits and only raise every Wal-Mart employees wage by $3 an hour.

So unless both consumers are willing to pay more and shareholders are willing to take less, nothing is going to change at Wal Mart.

That being said, it pisses me off as a business owner (who pays his employees well) that I have to subsidize their payrolls through food stamps, rental assistance, welfare, etc. On top of that local tax subsidize they get to set up shop.

Wal Mart is not a good business model and should the government pull the rug from all the help they get they would probably go out of business.

Sounds like your issue is with a massive welfare state.

Not walmart.

I have no issues with Wal Mart Per se

and Im not even making the case for raising the wage. I'm just making the point that without the local, state, and federal government subsidizing Wal Mart they would probably be out of business. If they need to survive and make profits because of the government then they probably have a crappy business model and should be allowed to fail. I shouldn't have to fund them through the tax code.

Listen

Walmart are no angels....this being said, I believe they do provide excellent value for some of their products in fighting price inflation. The service is obviously what you pay for. I do recall people telling me that retail jobs paid a much more decent pay in the 80's and 90's relative to the standard of living and there was much less consolidation in the industry.

If they are going to pay that they better get a much more professional and knowledgeable staff. Getting rid of those cheesy vests and getting a formal approach would I also recommend.

I think it is too late anyway because inflation is due to compound in the future and huge retailers will not be able to justify and deal with rising energy and taxation costs and insurance other than companies who provide their own insurance. If Walmart is allowed to go into banking....how would this issue change?

Even buying online will not thrive eventally. If so catalogue stores would of done better apart from very professional, well established, and specific ones like LL Bean.

Unless they get agreements like GM of course lol

donvino

Such a stupid question...

.

The individual has always had to struggle to keep from being overwhelmed by the tribe. If you try it, you will be lonely often, and sometimes frightened. But no price is too high to pay for the privilege of owning yourself.
Friedrich Nietzsche

maybe that grimace on his and

maybe that grimace on his and that traveling wraith's face would clear a bit if he spent some time around christmas helping the needy instead of harrying the stupid with his seemingly meth induced behavior. wouldve been funny if he got knock out gamed.

Why does Peter imagine

Why does Peter imagine Walmart shoppers are capable of the mathematics required to form such opinions? And isn't Peter always jawing about how we shouldn't be depending on Chinese and third world labor for imports because we need an economy that produces? Oh thats right he thinks Americans should just work for the same wages and conditions as the slaves of China.. to promote freedom.. or something.

The exercise isn't for the

The exercise isn't for the benefit of the Walmart shopper, it's for the person watching the video. The obvious point is that the Walmart worker is paid a wage that represents the value of their labor. Both parties agree. Walmart thinks the labor is more valuable than the wage and the worker thinks the wage is more valuable than their labor. Otherwise, neither party would participate.

Peter is indeed always arguing that we need to be producing and exporting and saving more, but one (among many) of the core reasons why so much manufacturing has left American shores for China, etc. is because of things like the minimum wage and the natural consumer demand for lower prices. You can't have your cake and eat it too, unless it was made in China.

The market decided, not Peter Schiff, that we prefer to buy all our stuff from China, pay our shelf-stockers and cashiers $8/hour, and to do our shopping at Walmart with everyday low prices.

The bottom line is it's not that difficult to operate a cash register and it's not that difficult to stock shelves. It's not a $15/hour job.

your confusion is that a wage

your confusion is that a wage reflects the worth of the labor in some objective sense. clearly not. if you dumped 20 million poorer people into the labor market, the wage would go even lower. clearly supply and demand, and the environment in which the wage is bargained for, determines its level. the idea that adding a few dollars to the walmart employee wage would make their labor unprofitable to wal mart is just an urban legend. i'm not saying what is and what isn't smart policy, but this video is full of fallacious ideas. the market is not going to bear a higher price just because a cost goes up for labor. if the market could bear such a cost it would already be that much higher. schiff has become a parody of himself especially since he spent like 4 years hanging on like a drowning man to his erroneous hyperinflation predictions.

So most studies seem to agree

So most studies seem to agree that American workers are so much more productive than their Chinese counterparts, that the American worker is a bargain in comparison. The hourly wage is actually a small part of the equation. For things like steel high tech or most manufacturing that is heavily capital intensive the labor impact is minimal.

I mean, the average German factory worker is way more well-compensated than the average American worker (I think more than 40%.) Yet Germany has great employment and has balanced trade with China.
America obviously has a giant trade deficit. It has everything to do with our trade policies, infrastructure policies, tax policies and investment in skills, and very little if anything to do with the cost of labor.

Plan for eliminating the national debt in 10-20 years:

Overview: http://rolexian.wordpress.com/2010/09/12/my-plan-for-reducin...

Specific cuts; defense spending: http://rolexian.wordpress.com/2011/01/03/more-detailed-look-a

the people of walmart

are always entertaining.

Official Daily Paul BTC address: 16oZXSGAcDrSbZeBnSu84w5UWwbLtZsBms
Rand Paul 2016

Ha Ha, Love It!

Good one Peter Schiff!

To be fair, I wonder how many

To be fair, I wonder how many people didn't want to give their money to an unofficial guy like that. They may be thinking he's going to run away with their money.

Plus, as always, Schiff pretends that capital can't take the hit. It is possible that wages go up, prices stay the same, and investors take the hit in terms of lowered returns.

I mean, that is what has happened in American history. We've seen it with tax increases...it is simply absorbed by capital while wages continue to go up and prices continue to go down.

Plan for eliminating the national debt in 10-20 years:

Overview: http://rolexian.wordpress.com/2010/09/12/my-plan-for-reducin...

Specific cuts; defense spending: http://rolexian.wordpress.com/2011/01/03/more-detailed-look-a

$8 To $15 Is A Big Jump In Wages

>Plus, as always, Schiff pretends that capital can't take the hit. It is
>possible that wages go up, prices stay the same, and investors take the
>hit in terms of lowered returns.

I would think Walmart makes low profit margins but does huge volume. I would imagine they'd have to raise prices in order to almost double their worker's wages.

My only issue w/ the video was when Schiff mentioned "Romney voters". Schiff shouldn't be promoting that RINO, nor the left/right paradigm.

Nonsense


The huge volume that Walmart has is a constant -- unless (and only if) they raise the prices on their stuff significantly.

Therefore the large volume and large Corporate profits are assured (as is) regardless of whether or not they raise the wages for their employees (who are making only breadcrumbs to begin with).

So the business model and profitability is not jeopardized here. The only thing on the line here is whether or not slave labor is the norm in American Society.

I say no. People should all get behind the concept of a real living wage (as this benefits everybody).

Working 40-50 hours a week, and then starving to death is not Liberty folks.
It is slavery.

Or Walmart can layoff a large

Or Walmart can layoff a large percentage of the workforce and increase the responsibilities of the remaining employees.

"Villains wear many masks, but none as dangerous as the mask of virtue." - Washington Irvin

Or Walmart can split up into several companies

Like AT&T did....It always bothered me how large these corporations stay.

They don't realize the extreme harm...and abominable nature of that action. Split up the corporation into ten separate pieces.

RE:

"I would think Walmart makes low profit margins but does huge volume. I would imagine they'd have to raise prices in order to almost double their worker's wages."

If Wal Mart has a net income of ~ 13B and 2M employees and if all of the profit went to employees that would only be ~ $6500 per employee. I don't think there is any question they would have to raise prices because $8/hr ~ $16k/yr whereas $15/hr ~ $31k/yr.

Well, Walmart made about 17

Well, Walmart made about 17 billion 2012.

I would argue that if Walmart paid its employees more, they would work harder and stick around longer. The more they make, the more they can spend at walmart to.

Let us not forget that Walmart is a public company. They have a legal obligation to satisfy their shareholders...they aren't a private company that has the ability to "do the right thing". Walmart has to give back to its shareholders, its bondholders, and then its employees.

That being said, Walmart has a lot more power than it realizes; it can give its employees a higher wage. Conventional wisdom, of course, is that wage increases would be met with its stock tanking. That may not be true. Costco announced raises for its workers with no drop in stock price. Apple and Google have given announced wage increases with no drop in stock price. Caterpillar, AA, etc. Some might drop the day of, but recover very quickly.

Let us first look at things at the quarterly level. Start with Wal-Mart's sales, and then subtract what it has to pay the suppliers (28.7 billion). What remains is Wal-Mart's gross profit. So, Walmart's interest payments are easy to calculate: about 550 million (2.2 billion/year) to its bondholders. That is an agreed upon rate with the bondholders; no issue there. So we have $112.8 billion a year left.

Stock market valuations and ROE tend to go hand in hand. Investors are willing to pay more for companies that can produce higher returns on shareholders' equity.

The average ROE of retailers in the S&P 500 (SPX) is 16.95%. Their shares trade at price-to-book ratio of 2.9. Wal-Mart's price-to-book ratio of 3.45 is 19% higher than the group, which means that investors, based on Wal-Mart's current $78 share price, are expecting it to produce a higher-than-average ROE. How much higher? It is not exactly a linear relationship. So, let us say that based on the stock price, investors are signaling that they are looking for a return of 19%.

Remember, that's not just dividends. Most of that money is reinvested in its business. But just like Amazon, dividends are not the end-all be-all.

In regards to dividends, Wal-Mart has a higher dividend yield than the average retailer in the S&P 500: 2.4% vs. 1.3%. Adjusting for valuation, that means that 4.6% of the return shareholders are looking for comes from that larger-than-average dividend. Thus, the ROE it has to satisfy investors after dividends is 14.4%. Wal-Mart's actual current ROE is 21%. Investors are giving them room to pay their employees!

Wal-Mart has a book value of $73.3 billion. Take 14.4% of that, and that means investors are looking to get paid ~$10.5 billion a year. That leaves ~$102.3 billion to pay employees.

Assuming a small number of executives taking let us say 300 million of that money (likely a lot less), that leaves 102 billion to pay 2.2 million employees, of which 1.4 million are American. Let us assume that the American employees only get the 64% of Walmart's workforce that they compromise; this should be higher since we can assume that in general, American workers need to/will get paid more; this will skew the numbers in their favor. That leaves $65.2 billion for the U.S. workers, or $46,571. According to DOL statistics, 30% of compensation goes towards benefits (and I doubt Walmart is paying that much).

That means the average Wal-Mart employee's take home pay could be $32,600. When you factor in that the average employee probably doesn't work 52/40 (after all, sick/vacation time would be part of the %30 benefit), that should easily cover the average of $15/hour. Of course, if Walmart ROE falls, wages would have to go down.

Plan for eliminating the national debt in 10-20 years:

Overview: http://rolexian.wordpress.com/2010/09/12/my-plan-for-reducin...

Specific cuts; defense spending: http://rolexian.wordpress.com/2011/01/03/more-detailed-look-a

I am not sure

why your response has been down voted. Perhaps some people who down voted can elaborate. Are people down voting because they feel the numbers being used by Dr. NO are inaccurate or there is a flaw in his argument or conclusions?

You might be interested in this blog post

By Megan McArdle, who is a very good blogger if you haven't heard of her already:

Why Wal Mart Will Never Pay Like Costco
http://www.bloomberg.com/news/2013-08-27/why-walmart-will-ne...

Some choice quotes:

"In other words, Trader Joe’s and Costco are the specialty grocer and warehouse club for an affluent, educated college demographic. They woo this crowd with a stripped-down array of high quality stock-keeping units, and high-quality customer service. The high wages produce the high levels of customer service, and the small number of products are what allow them to pay the high wages. Fewer products to handle (and restock) lowers the labor intensity of your operation. In the case of Trader Joe’s, it also dramatically decreases the amount of space you need for your supermarket ... which in turn is why their revenue per square foot is so high. (Costco solves this problem by leaving the stuff on pallets, so that you can be your own stockboy)."

"Wal-Mart’s customers expect a very broad array of goods, because they’re a department store, not a specialty retailer; lots of people rely on Wal-Mart for their regular weekly shopping. The retailer has tried to cut the number of SKUs it carries, but ended up having to put them back, because it cost them in complaints, and sales. That means more labor, and lower profits per square foot. It also means that when you ask a clerk where something is, he’s likely to have no idea, because no person could master 108,000 SKUs."

"For one thing, it’s no accident that the high-wage favorites cited by activists tend to serve the affluent; lower income households can’t afford to pay extra for top-notch service. If it really matters to you whether you pay 50 cents a loaf less for generic bread, you’re not going to go to the specialty store where the organic produce is super-cheap and the clerk gave a cookie to your kid. Every time I write about Wal-Mart (or McDonald's, or [insert store here]), several people will e-mail, or tweet, or come into the comments to say they’d be happy to pay 25 percent more for their Big Mac or their Wal-Mart goods if it means that the workers are well paid. I have taken to asking them how often they go to Wal-Mart or McDonald's. So far, no one has reported going as often as once a week; the modal answer is a sudden disappearance from the conversation. If I had to guess, I’d estimate that most of the people making such statements go to Wal-Mart or McDonald's only on road trips."

Costco does it. Costs makes

You have a good point in that 8 to fifteen is a huge jump.

However, others do do it. Costco does it. Costs makes about half of what Walmart makes as a %, but pays its workers far more.

When Clinton raised the taxes in the 90s, companies compensated mostly by just handing out less to investors. Lowered dividends, lowered earnings, across the board. It is always hard to pinpoint how wages and prices would have changed without the tax increase, but it appeared to have little affect. When Bush lowered taxes, it went straight to capital: increased dividends, increased EPS, increased profits.

Plan for eliminating the national debt in 10-20 years:

Overview: http://rolexian.wordpress.com/2010/09/12/my-plan-for-reducin...

Specific cuts; defense spending: http://rolexian.wordpress.com/2011/01/03/more-detailed-look-a

let's be honest with

let's be honest with ourselves, here. the average costco worker is likely more productive and worth the extra money that is paid to them compared to the average walmart slave.

One would have to compare costco prices to walmart prices.

If Peter is right, Costco will have higher prices.

Free includes debt-free!

that assumes costco and

that assumes costco and walmart workers have the same productivity.

That's true. Productivity is an issue.

If they are productive enough, people, will pay higher prices.

Productive includes customer service.

But if your shopping doesn't require that extra service, shop for lowest price.

It all comes back to the customer.

Free competition in the market for labor and customers exposes malinvestments and profit opportunities.

Free includes debt-free!

Higher wages is a logical fallacy

You want to crash a few cities, increase the maximum minimum wages again. If you want to stimulate the cities instead, do what must be done and allow every town to set their own wages.