In the Idaho Statesman’s online edition Nov. 26, Mr. Wayne Hoffman wrote about Idaho’s “dumb relic Unfair Sales Act.” I would argue for a robust enforcement of the act. In fact, I would argue for even more changes in the retail sector.
According to Mr. Hoffman, the law says, “The practice of selling certain items of merchandise below cost in order to attract patronage is a deceptive form of advertising and an unfair method of competition. Such practice misleads the consumer, works back against the farmer, obstructs commerce and diverts business from dealers who maintain a fair price policy, with the result of unemployment, underpayment of employees, excessive working hours, nonpayment of taxes and an inevitable train of undesirable consequences including economic depression. This act is designed to make illegal such practice and to promote the general welfare of the state of Idaho.”
Those lawmakers from decades ago had a better understanding of how the retail economy works than does Mr. Hoffman. A 2012 study of the country’s largest retailers (“big box” stores) by Catherine Ruetschlin, a policy analyst at Demos, shows that those lawmakers had reason to fear unfair sales practices.
The typical retail sales clerk earns about $18,500. The study shows what could be accomplished by creating a new wage floor of $25,000 per year for a full-time, year-round worker at the nation’s largest retail companies employing at least 1,000 workers.
Here are the highlights:
1. More than 700,000 Americans would be lifted out of poverty.
2. The economy would grow and 100,000 or more new jobs would be created. How? Families living near the poverty line will spend every dollar they receive on goods or services that were out of reach before. This money stimulates the economy and would increase GDP between $11.8 and $15.2 billion over the next year. The study also shows that, as a result of this economic growth, employers would create 100,000 to 132,000 additional jobs.
3. The increased purchasing power of low-wage workers would generate $4 billion to $5 billion in additional annual sales for the retail sector.
4. The additional payroll costs would represent a very small fraction of total sales. The study shows that this wage increase amounts to about $20.8 billion, or just 1 percent of the $2.17 trillion in total annual sales by large retailers. An interesting side note in the study shows that using profits to pay for the wage increase would be a more productive use than the current trend of stock repurchases. Large retailers buy back stock in order to boost earnings per share, then give the profit out in dividends and pay hikes for executives. In 2011, the top 10 largest retailers alone spent $24.8 billion on stock repurchases.
5. Effects on prices to consumers would be minimal. If retail firms passed on the entire cost to consumers, prices increase by only 1 percent. The impact of rising prices on household budgets will be negligible. The study shows that if retailers pass half of the costs of a wage raise onto their customers, the average household would pay just 15 cents more per shopping trip!
There are more than 15 million workers in the retail sector in the United States, and retail has enormous power when it comes to setting the standard of living for millions of Americans. Legislators in Idaho are fond of saying that the government shouldn’t be involved in stimulating the economy and creating jobs. Well then, who should? It sounds as though our big-box retailers could have a huge impact on our economy by simply paying their workers a living wage.
Read the entire study at http://www.demos.org
Donna Yul is executive director of the Idaho Public Employees Association.
