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Companies Paying Americans the Least

Thomas C. Frohlich and Alexander E.M. Hess
A cashier counts out money at Macy's Herald Square on Thanksgiving Day in New York November 28, 2013. REUTERS/Eric Thayer/Files

In the wake of mounting protests from labor groups, numerous U.S. localities have approved minimum wage increases, including two of the nation’s largest cities, Seattle and San Francisco. Yet, especially among many of America’s largest employers, the remarkably low wages of most workers are in stark contrast with the compensation of shareholders and executives. And while the average hourly earnings of an American worker was $24.53 as of September, these companies pay most of their workers far less.

Companies that pay employees the least tend to be part of one of three industries: retail, restaurant chains, and grocery stores. According to Arun Ivatury, campaign strategist at the National Employment Law Project, “These industries have embraced a low-wage business model. Their way of doing business is trying to squeeze as much out of their employees as they can, while paying them as little in wages and benefits as possible.” These industries fall into one of two sectors -- leisure and hospitality and wholesale and retail trade -- that together accounted for almost 70% of all jobs paying the minimum wage or below it, according to the Bureau of Labor Statistics.

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According to Ivatury, one reason wages are so low in these industries is that low pay represents an accepted practice. Ivatury was especially critical of how large-scale, low-wage employers viewed their workers. "You can come up with all kinds of labels like associate, or team partner," Ivatury said. "It doesn’t change the fact that you’re paying them as little as $7.25 an hour.” Employees at these companies “are basically treated as dispensable."

Opponents of raising the minimum wage argue that doing so would lead to job cuts. Further, some policy analysts have stated that a more effective measure for alleviating poverty might be to raise the earned income tax credit. Increasingly, however, Americans are supporting a higher minimum wage. Last year, a Gallup survey revealed that 76% of Americans polled favored raising the minimum wage. Additionally, during the recent midterm elections, Alaska, Arkansas, Nebraska, and South Dakota voters approved measures to raise the minimum wage in their states.

One possible obstacle for higher wages may be the slowing profitability at many of the nation’s largest low wage employers. Although eight of these 10 companies reported revenue growth during their last five fiscal years, only a few have also reported higher margins and and increased profitability. For example, Darden Restaurants’ earnings declined from $2.65 per share in 2009 to $2.15 in its 2014 fiscal year

At the other end of the spectrum are companies such as TJX and Macy’s, both of which have become far more profitable in recent years. For TJX, earnings per share rose from $1.00 to $2.94 between 2009 and 2014. However, despite their growing profitability and the accompanying rise in stock prices, Ivatury said the companies still feel more of a responsibility to improve their investors’ fortunes than those of their employees. “They feel it’s their obligation to have their share price continue to rise, and continue to grow, year over year, as much as possible.”

Several of these companies do not directly operate their stores. McDonald’s, Yum! Brands, and Starbucks, for example, franchise or license their businesses. Ivatury maintained that the franchise system is an extension of an overly financialized American economy, which has created a perverse set of incentives for CEOs to do virtually anything to increase the value of their stock. When companies franchise their business, they are able to focus more energy on the corporate brand, Ivatury said. “You’re essentially managing your brand in a shell and foisting both risk and responsibility for workers on some other entity.”

Based on the methodology used by the National Employment Law Project in its 2012 report “Big Business, Corporate Profits, and the Minimum Wage,” 24/7 Wall St. identified the 10 companies that pay employees the least. These companies are in industries that typically pay low wages. We identified these industries based on the BLS’ Occupational Employment Statistics database as well as its report, “Characteristics of Minimum Wage Workers, 2013.” We then identified the largest employers in these industries using S&P Capital IQ, company annual reports, and information on corporate websites. We finally reviewed salary information submitted by employees to Glassdoor.com in order to screen out any companies where wages for the most common occupations were not either close to or less than $10 an hour.

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Included in our analysis were total U.S. employee figures, which we estimated when the figures were not provided by the company. In keeping with the NELP methodology, all employee figures represent systemwide employment, including employees of franchisees. Employee totals also include both full- and part-time workers. Starbucks is an exception. As many other low-wage employers are Starbucks licensees, we only considered company-owned stores to avoid double-counting low-wage workers.

The recent performance of the corporations in terms of revenue, profitability, store count, and CEO pay at these companies, is based on figures published by the Securities and Exchange Commission and Morningstar. These data are all for the most recent fiscal year, except where noted.

These are the companies paying Americans the least.

10. Macy's, Inc. (NYSE: M)
> U.S. workforce: 172,500
> CEO compensation: $12.0 million
> Revenue: $27.9 billion
> Net income: $1.5 billion
> No. of U.S. stores: 840

At the end of its last fiscal year, Macy’s employed 172,500 full- and part-time employees. During the holidays, that number rises even further. This year alone, Macy’s plans to hire 86,000 seasonal employees for its stores, distribution centers, and online fulfillment centers. According to Glassdoor.com, an hourly sales associate at Macy’s earns roughly $9.19 an hour, on average. However, many Macy’s employees have the opportunity to earn commission, with the average reported commission-based pay for an hourly sales associate exceeding $2,000 a year on Glassdoor.com. Further, the average hourly wage reported at Bloomingdale’s, also owned by Macy’s, for a similar job was much higher, at more than $13 per hour for a sales associate.

9. The TJX Companies, Inc. (TJX)
> U.S. workforce: 147,459 (est.)
> CEO compensation: $22.5 million
> Revenue: $27.4 billion
> Net income: $2.1 billion
> No. of U.S. stores: 2,475

TJX operates stores under a number of names in the U.S., Canada, and Europe. In the U.S., TJX’s largest brands are clothing stores T.J. Maxx and Marshalls, as well as home furnishing store HomeGoods. The retailer also operates the mostly-online outdoor retailer Sierra Trading Post. TJX’s business model is slightly different from that of other retailers in that it takes advantage of cancelled orders and production overruns to buy at low prices. It can then resell the products to customers at considerable discounts to many department stores' prices. However, because these stores operate in a retail environment, they still pay employees at levels common for the industry. For example, the average sales associate at TJX earned just $8.07 an hour, according to Glassdoor.com.

8. Starbucks Corporation (SBUX)
> U.S. workforce: 137,000 (company-owned only)
> CEO compensation: $17.2 million
> Revenue: $16.4 billion
> Net income: $2.1 billion
> No. of U.S. stores: 7,303 (company-owned only)

Starbucks is one of America’s most ubiquitous restaurant chains, and the company continues to post dramatic growth rates. According to the company, Starbucks opened nearly 1,600 net new stores worldwide in the most recent fiscal year, bringing the total number of company-owned and licensed stores to 21,366 in 65 countries. Comparable store sales also rose 5% globally in the most recent quarter. While Starbucks is among the companies paying Americans the least, COO Troy Alstead announced in October pay raises for starting employees and a somewhat more relaxed dress. The changes will take effect in January 2015.

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7. Darden Restaurants, Inc. (DRI)
> U.S. workforce: 202,920 (est.)
> CEO compensation: $4.3 million
> Revenue: $6.3 billion
> Net income: $286 million
> No. of U.S. stores: 2,174

Darden restaurants, parent company of multiple full-service restaurant chains such as Olive Garden, LongHorn Steakhouse, and -- until recently -- Red Lobster, reported revenues of $6.3 billion last year. The sale of Red Lobster was completed in July, for $2.1 billion in cash. For many investors, the sale was an outrage, triggering a shareholder lawsuit and contributing heavily to investors’ decision to replace the entire board of the company. While non-employee members of the since-ousted board took home hundreds of thousands of dollars last year, regular employees were hardly paid as well. The average host at Olive Garden earns just $9.45 an hour, according to Glassdoor.com. The sale of Red Lobster may preclude Darden from being on this list in the future. The company reported having more than 206,000 employees in its latest annual report, but on its website it now pegs that number at roughly 150,000 employees.

6. Sears Holdings Corporation (SHLD)
> U.S. workforce: 226,000
> CEO compensation: $4.3 million
> Revenue: $36.2 billion
> Net income: -$1.4 billion
> No. of U.S. stores: 1,980

Sears Holdings, the parent of both Kmart and Sears as well as the majority owner of Sears Canada, had nearly 275,000 employees at the end of fiscal 2013, the vast majority of which were in the U.S. Like many other customer-facing service industry positions, Sears employees are paid low hourly wages. According to Glassdoor.com, the average sales associate earns $8.45 an hour and the average cashier is paid $8.22 per hour. The company’s four most highly compensated executive officers, on the other hand, were each paid more than $1 million in fiscal 2013. Still, it is unlikely Sears and Kmart employees will see substantial wage increases as the company has struggled to remain profitable. Sears Holdings posted negative operating profits in its last three fiscal years.

5. Yum! Brands, Inc. (YUM)
> U.S. workforce: 632,658 (est.)
> CEO compensation: $14.2 million
> Revenue: $13.1 billion
> Net income: $1.1 billion
> No. of U.S. stores: 16,110

In all, including employees at franchises, Yum! Brands employed 1.5 million associates across its chains worldwide. Pay across the company’s various restaurants is typically quite low -- the average crew member at Taco Bell reported being paid $8.33 per hour, according to Glassdoor.com. Similarly, Pizza Hut delivery drivers reported an average hourly pay of just $7.62 per hour, not including tips. As of last year, Yum! and its franchisees had far more stores abroad than in the U.S. One of the company’s biggest markets, China, has been especially troubled lately. Sales in the most recent quarter plunged after a TV report uncovered serious food safety violations at a Yum! supplier.

4. Target Corp.  (TGT)
> U.S. workforce: 333,722 (August)
> CEO compensation: $13.0 million
> Revenue: $72.6 billion
> Net income: $2.0 billion
> No. of U.S. stores: 1,793

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The number of Target employees fluctuates seasonally. During the peak holiday season, at the end of the year, employment surges. Until last year, when the company expanded into Canada, Target operated exclusively in the U.S. The average sales floor team member at Target earns just $8.85 per hour, according to Glassdoor.com. Target defenders might point to the fact that a sales floor team leader earns almost $15 per hour, on average and that eligible employees receive important benefits such as health insurance and a 401(k) plan. In response to shareholder concerns, Target tweaked its CEO compensation package for 2013. Despite the adjustments, CEO Gregg Steinhafel earned almost $13 million last year before his resignation in the wake of a data breach that roiled the company.

3. The Kroger Co. (KR)
> U.S. workforce: 375,000
> CEO compensation: $12.8 million
> Revenue: $23.2 billion
> Net income: $422 million
> No. of U.S. stores: 3,746

Kroger’s roughly 375,000 employees are described by the company as its “most enduring strength.” Shareholders and executives, however, clearly receive far greater compensation than ordinary Kroger associates. As of 2013, Kroger had paid shareholders nearly $2 billion in total dividends since 2006. And CEO David Dillon’s salary was $1,370,000 in 2013, excluding bonuses and other benefits, which amounted to a total compensation of nearly $13 million. According to Glassdoor.com, an average cashier working at Kroger receives an hourly wage of $8.41, while the average courtesy clerk earns $7.75 an hour. However, unlike most retail workers, the majority of the company’s employees are part of collective bargaining agreements facilitated by local unions.

2. McDonald's Corp. (MCD)
> U.S. workforce: 725,406 (est.)
> CEO compensation: $9.5 million
> Revenue: $28.1 billion
> Net income: $5.6 billion
> No. of U.S. stores: 14,278

Like several other companies paying Americans the least, most of McDonald’s restaurants are franchises, which means McDonald’s Corporation is not directly responsible for many workers’ pay. Including in its franchises, McDonald’s employed roughly 1.8 million employees worldwide. While the average crew member at McDonald’s reported earning $8.09 an hour on Glassdoor.com, CEO Donald Thompson's compensation last year totalled $9.5 million. McDonald’s employees and other fast food workers across the country have repeatedly held one-day strikes in recent years in an ongoing effort to raise wages to $15 per hour. Protests have been unsuccessful so far. With McDonald’s reporting a 3.3% year-over-year decline in U.S. comparable sales in its most recent quarter, executives are perhaps less likely than ever to raise employee wages.

1. Wal-Mart Stores Inc. (WMT)
> U.S. workforce: 1.4 million
> CEO compensation: $5.6 million
> Revenue: $476.3 billion
> Net income: $16.0 billion
> No. of U.S. stores: 4,990

Walmart is run by America’s wealthiest family, and it employs more people than any other public company in the world. The majority of the company’s 2.2 million employees, as of last year, worked in the United States. Walmart’s U.S. workforce of roughly 1.4 million dwarfs that of every other American business. Walmart reported revenues of $476.3 billion last year, the largest of any retailer worldwide, as well as roughly $16 billion in net income. Walmart’s financial success has frequently been attributed, at least in part, to its workers’ low wages. While Walmart may benefit from the low wages it pays its employees, taxpayers may not. According to several studies, Walmart employees are among the most likely to rely on government subsidies and assistance programs.

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Click here to see America's Worst Companies to Work For.

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