Retail’s Hidden Potential: How Raising Wages Would Benefit Workers, the Industry and the Overall Economy

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Re-posted from Demos.org

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With more than 15 million workers in the sector, and leverage over workplace standards across the supply chain, retail wields enormous influence on Americans’ standard of living and the nation’s economic outlook. It connects producers and consumers, workers and jobs, and local social and economic development to the larger US economy. And over the next decade, retail will be the second largest source of new jobs in the United States.1

Given the vital role retail plays in our economy, the question of whether employees in the sector are compensated at a level that promotes American prosperity is of national importance. According to the Bureau of Labor Statistics, the typical retail sales person earns just $21,000 per year. Cashiers earn even less, bringing home an annual income of just $18,500.2

The continued dominance of low wages in this sector weakens our nation’s capacity to boost living standards and economic growth. Retail’s low-wage employment means that even Americans who work full-time fail to make ends meet, and growth slows because too few families have enough remaining in each paycheck to contribute to the broader economy.

Contents

This study assumes a new wage floor for the lowest-paid retail workers equivalent to $25,000 per year for a full-time, year-round retail worker at the nation’s largest retail companies—those employing at least 1,000 workers. For the typical worker earning less than this threshold, the new floor would mean a 27 percent pay raise. Including both the direct effects of the wage raise and spillover effects, the new floor will impact more than 5 million retail workers and their families.

This study examines the impact of the new wage floor on economic growth and job creation, on consumers in terms of prices, on companies in terms of profit and sales, and for retail workers in terms of their purchasing power and poverty status. We model these effects based on the 2012 March Supplement to the Current Population Survey, using retail consumer data from the Neilson Company and macroeconomic multipliers derived by Moody’s Analytics. For a full description of the study methodology see the appendix.