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Is the Largest Private Employer Mooching Off Taxpayers to Keep Wages Low?

Lauren Lyster
Daily Ticker
Is the Largest Private Employer Mooching Off Taxpayers to Keep Wages Low?

While unemployment has gradually been improving in the U.S. with a moderate pace of job gains, one aspect of the labor market that has not been on the up-and-up is wages.

Wages continue to stagnate. According to the New York Times, wages have fallen to a record low as a share of U.S. gross domestic product, last year falling to 43.5 percent. Until 1975, wages were typically more than 50 percent of GDP.

As Wal-Mart (WMT) shareholders meet at the company's annual meeting, a recent report contends the country’s largest private employer relies on taxpayer-funded benefit programs to subsidize its low wages. In other words, since many Wal-Mart employees aren’t paid enough to subsist they have to rely on public programs like Medicaid and food stamps for basic needs.

Related: Friday’s Wal-Mart Selloff Signals Lack of Confidence in the Consumer

The report is from the Democratic staff of the U.S. House Committee on Education and the Workforce. It estimates a single 300-person Wal-Mart Supercenter store in Wisconsin likely costs taxpayers at least $904,542 per year and could cost more than $1.7 million.

(Note, according to the Huffington Post, the study’s estimate is based on the assumption that those who qualify for the public assistance programs take advantage of the opportunities offered.)

According to CNN, the data is for Wisconsin because the state releases information about workers in its public health care program broken down by employer. Wal-Mart says the report overgeneralizes data from one state.

Nonetheless, the figures are staggering and concerning, so what’s there to do? Raise the minimum wage to say $9 nationally, as President Obama proposed in his State of the Union?

No way, says Peter Schiff, CEO of Euro Pacific Capital. “If you’re concerned about unemployment the last thing you want to do is make it more expensive to hire people,” he tells The Daily Ticker in the accompanying video. “It’s basic supply and demand… If you make hiring people more expensive then employers will demand fewer workers and you’re gonna have even more unemployment.”

Related: Raising the Minimum Wage Leads to Higher Unemployment: Amity Shlaes

Related: Top Reason to Raise the Minimum Wage: It’s 30% Below 1968 Level After Inflation

“It’s not Wal-Mart’s responsibility to take care of the healthcare of their workers,” he adds. “These retail jobs are stepping stones to better jobs. I used to work retail when I was in high school, but you shouldn’t be working retail in your thirties - you should have a better job.”

Related: Retail Sales Rise But Consumer Is Not Back: Analyst

Schiff contends that Wal-Mart helps low-skilled workers begin to climb the ladder. But where that ladder can lead in this tough job market is a question mark.

According to Fed Governer Sarah Raskin, as reported by the Los Angeles Times, a little more than half of the job gains since the recovery from the financial crisis have been in lower-wage occupations such as retail sales and restaurant work. That’s even though these jobs represented about one-fifth of the jobs lost as a result of the recession.

As for Wal-Mart, Forbes reports legislation has been proposed in California to levy a fine on employers like Wal-Mart for every full-time employee that ends up on the state’s Medi-Cal public healthcare program.

Schiff argues a move like that would backfire on the retailer's employees, while forcing higher wages would cost Wal-Mart's customers (who Schiff asserts are "poor") through higher prices.