Study: Higher retail wages would lift Americans out of poverty, boost economy

A new study released by the progressive think tank Demos on Monday estimated that if retail workers were given a living wage, hundreds of thousands of Americans would be lifted out of poverty and the wage boost would significantly bolster the economy.

The study began by assuming a new "price floor" for retail workers at America's largest retailers -- amounting to a 27 percent pay raise for those workers. If companies that employed at least 1,000 workers paid them a living wage of just $25,000 for full-time, year-round work, more than 700,000 Americans would make their way out of poverty and an additional 700,000 would move up near poverty. In all, the wage boost would affect more than 5 million retail workers.

Demos further estimated that if these low-wage workers got a pay boost, the economy would grow and create 100,000 more new jobs, boosting the economy by somewhere between $11.8 and $15.2 billion over the next year.

"Families living in or near poverty spend close to 100 percent of their income just to meet their basic needs, so when they receive an extra dollar in pay, they spend it on goods or services that were out of reach before. This ongoing unmet need makes low-income households more likely to spend new earnings immediately – channeling any addition to their income right back into the economy, creating growth and jobs," the report said.

The report pointed out that such a pay increase would amount to $20.8 billion -- or just 1 percent of the $2.17 trillion in total sales large retailers see every year. "Using profits to pay for the wage increase would be a more productive use than the current trend towards stock repurchases." Demos also said that the pay increase would be passed on to consumers in just pennies more per dollar.

"It has become conventional wisdom that retail workers must be paid low wages. Yet our study, adding to a growing body of research, demonstrates that retailers could provide the nation a needed economic boost by paying higher wages, while remaining profitable and continuing to offer low prices," the report said.

The United Food & Commercial Workers International Union, which is leading a fight against retail giant Walmart, praised the report, saying, "America’s largest retailer, Walmart, should be the leader in this movement. If Walmart were to make the standard hourly rate $12.25 an hour (a number that they claim to be average for their associates, yet tends to be closer to $9) thousands of workers would enjoy poverty-free lives, and many other people would benefit indirectly."

Instead, the union said in an advisory, "Walmart has used this power to lower wages, cut hours, and deny benefits to its workforce, reducing the quality of retail jobs as a whole."

(h/t Lauren Feeney writing for Bill Moyers)