One State is Trying to Prevent Walmart from Double Dipping in Your Wallet

May 19th 2015

Sarah Gray

The minimum wage battle has been at the front and center of the current news cycle, and at the end of April, Sen. Patty Murray (D-Wash.) and Rep. Robert C. Scott (D-Va.) introduced a bill to raise the minimum wage to $12 an hour (and eliminate the low tipped minimum wage). New York Governor Andrew Cuomo also just took steps to raise the wage for fast food workers in his state, and cities such as Seattle, San Francisco, and Oakland have recently implemented higher minimum wages as well.

Yet, we cannot not forget the other half of the equation: large corporations like Walmart, Burger King and McDonald's, who -- despite making small efforts to raise wages -- have benefited greatly from paying low wages to their workers. Not just in low labor costs and high profits, but from what is in effect a subsidy for the government (and taxpayer) to take care of their employees who do not make enough to live without public assistance. How do we penalize these companies who often have little incentive to raise the wage?

One state is trying to make them pay in dollars -- $1 per employee, per hour worked making below a livable wage, to be specific.

Connecticut's plan

A little over a year ago lawmakers in Connecticut proposed HB 5069, An Act Concerning Low Wage Employers, which will charge employers a fee if they do not raise their minimum wage to $15 per hour, a wage many labor activists including the Fight for $15 movement are fighting to make the standard. The bill reads:

"Starting January 1, 2015, this bill assesses a quarterly fee on (1) employers with 500 or more employees and (2) franchisors whose franchisees collectively employ 500 or more employees. These employers and franchisors ('covered employers') must pay a $1- per- work-hour fee for each person who was (1) on the employer's payroll, or the payroll of one of the franchisor's franchisees, for the last 90 days of the most recently completed calendar quarter and (2) paid wages by the employer or franchisee that were less than 130% of the state's minimum wage."

In late 2014, State Rep. Peter Tercyak, a supporter of the bill, wrote an op-ed in the Connecticut Mirror, calling for the end of corporate welfare.

"Connecticut taxpayers pick up the tab for assistance programs needed by low-pay, full-time workers," Tercyak wrote. "It’s time for us to stop subsidizing these corporations. It’s time they redesign their business models to pay their employees a wage they can live on without subsidies from taxpayers."

If the bill were to be passed, and go into effect it would raise $300 million for the state, according to the Hartford Courant. The money collected from the $1 an hour for employees making less than $15 would go towards paying for social services including home care help and child care services, two services that would help working families.

It is unclear where HB 5069 stands in the process of being voted on by the Connecticut state house. However, a similar bill in the Connecticut State Senate, SB 1044 -- also known as the "Fight for $15 Bill" -- went to the finance committee earlier this year.

The issue at hand

Giant corporations pay their employees around $9 to $10 per hour, which in Connecticut is a sub-par wage according to Alliance for a Just Society, a non-profit organization that fights social inequality. A 2014 report from the Alliance for a Just Society and the Connecticut Citizen Action group found that a living wage for a single person in Connecticut would be $19 per hour, and for a single parent with a child in school it would need to be $29 per hour. Many of those workers, who make less than a living wage, end up on government assistance programs including Supplemental Nutrition Assistance Program (SNAP), Medicaid and more. These programs are paid for by taxpayer dollars, which subsidize low wages for these employees.

In a 2014 study done by the organization Americans for Tax Fairness, there were 9,289 Walmart employees in Connecticut, and $41 million in public assistance was dolled out to Walmart employees.

This phenomenon is not unique to Connecticut. Low wages cost tax payers $152.8 billion per year, according to a study from the University of California, Berkeley Labor Center.

Meanwhile Companies like Walmart earn revenue from public assistance dollars: in 2013 Walmart's executive VP of grocery told analysts that the company had 18 percent of the SNAP/EBT market. Back in 2013 that was an estimated $13.5 billion in revenue from SNAP.

Minimum wage

Though Connecticut's plan is good for the taxpayer and sends a strong message to large companies who benefit from low wages, a higher minimum wage is still needed -- whether it is implemented by the giant corporations, by individual states, or on the federal level.

The current federal minimum wage is $7.25 an hour. Currently the purchasing power of the minimum wage leaves many families on public assistance, and students cannot pay their way through college.

Raising the wage to $12 an hour -- $3 shy of the Fight for $15's goal -- would raise 38 million people out of poverty, according to the Economic Policy Institute (EPI). It is also economically feasible. As I have written before:

"A $12 minimum wage would raise the hourly rates of 21.1 million women (or 32 percent of women who make the minimum wage), and 16.6 million working men. It would also greatly impact wage-earning African Americans and Hispanics, raising the wages for 37 percent and 40 percent of workers respectively. Over a quarter of working parents (27.6 percent of workers) would see their wages rise -- and nearly a quarter of children (24 percent) have at least one parent who would receive raised wages due to this legislation."

On top of helping families, a higher minimum wage would also be a boon for Main Street, and according to the EPI would bring billions to the economy, as those with higher wages will spend more on basic needs.