at what cost

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AT WHAT COST

MINNESOTANS FOR A FAIR ECONOMY

NOVEMBER 2013

How Minnesota Taxpayers Subsidize Big Box

Stores Poverty Wages


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3/13AT WHAT COST:HowMinnesota Taxpayers Subsidize Big Box Stores Poverty Wages

Black Friday, the day after Thanksgiving, is the single most lucrative day ofthe year for retail department stores. Last year, retail stores took in over

$11 billion just on Black Friday,1and about $22 billion over the four day

weekend beginning on Thanksgiving.2

Thanksgiving and Black Friday kick off the holiday sales season which ac-

counts for 20 percent of the retail industrys total annual sales.3Some stores

can make up to 40 percent of their annual sales during this period.4 The

Black Friday weekend is the cornerstone of the holiday season, accounting

for almost 9 percent of all sales during the season.5

The two largest retailers in Minnesota and in the U.S., Wal-Mart and Tar-

get, both posted record prots last year of $17 billion6and $3 billion7re-

spectively, and the CEOs of both companies each received over $20 million

in compensation.8

However, not all Team Members or Associates shared inthe companies prosperity.

The average hourly wage of a Wal-Mart sales associate is just $8.81.9 The

average pay for cashiers at Target is $8.10/hour, while the pay for sales oor

team members is only slightly higher -- $8.34/hour.10 The situation is not

much different at other retail stores. According to the Bureau of Labor Sta-

tistics, the typical retail sales person earns just $21,000 per year. Cashiers

earn even less annual pay of just $18,500. These are the men and women

who make Black Friday possible by going without sleep to work the long,

overnight shifts, and handle irate customers who are frustrated after waitingin line for hours for deals that sell out before they even get in the store.

A full-time worker at these wages earns less than $18,500 well below

the poverty line and not nearly enough to provide food, housing, health care,

transportation and other basic needs for their families.11However, over half

of the workers in these positions at Target and Wal-Mart dont even earn

this much because they are involuntarily part-time.12

Benets are also scarce for retail department store workers who say that

the health plans are too expensive or inaccessible. Only about half of Wal-

Mart associates are covered by the companys health plan,13

while only abouta third of Target store team members participate in the companys health

plan.14

The combination of poverty wages and no benets, often coupled with

part-time hours, means that many of the families of retail store workers

must rely on taxpayer-funded safety net programs to make ends meet.

INTRODUCTION

A full-time

worker at thesewages earns less

than $18,500

well below the

poverty line

and not nearly

enough to

provide food,

housing, health

care, transpor-

tation and other

basic needs fortheir families.

3



Nationally, working families make up nearly three-quarters of enrollmentsin major public benets programs.15For many workers, their jobs pay so little

that their paychecks dont cover even their basic necessities.

Low wages not only harm workers and their families they cost taxpayers.

When Big Box retail employees are unable to afford the basic necessities of

life taxpayers pick up the tab for the public benet programs that workers

need in order to get by.

Based on the utilization rates by working families of Medicaid, Food Stamps,

the Earned Income Tax Credit and Temporary Assistance for Needy Families,

we estimate that over 20,000 Big Box department store employees in Min-

nesota are enrolled in one of these four public assistance program for them-

selves or family members, at a cost of over $150 million a year to taxpayers.16

Included in this total is $44.7 million a year that taxpayers pay to help al-

most 6,000 Target employees in Minnesota who must rely on public assistance

and $40.6 million a year to help 5,300 Wal-Mart employees in Minnesota.

MINNESOTA

4

STORES

IN MNEMPLOYER

MN WORKERS

RECEIVING PUBLIC

ASSISTANCE

COST TO

TAXPAYERS

# # $

TARGET 75 5,85017 $44,752,500

WAL-MART 6318 5,31119 $40,628,385

MENARDS 37 1,55420 $11,888,100

HOME DEPOT 33 1,48521 $11,360,250

JC PENNEY 34 1,02022 $7,803,000

MACYS 12 93023 $7,114,500

BEST BUY 23 89724 $6,862,050

KOHLS 24 86425 $6,609,600

MARSHALLS/TJ MAXX 26 79626 $6,089,400

KMART 21 78827 $6,028,200

LOWES 11 57828 $4,421,700

SEARS 12 45029 $3,442,500

Big Box Employees on Public Assistance in Minnesota



Even for full-time workers, the low wages paid by Big Box retail stores arentenough to cover the basic necessities for many workers. The low wages, com-

bined with involuntary part-time hours and no benets, mean that the families

of many Big Box retail workers must rely on taxpayer-funded safety net pro-

grams to make ends meet.

In state after state, Wal-Mart, Target, and other Big Box retailers are among the

employers with the most employees receiving public assistance. This shifting

of labor costs on to the taxpayers amounts to a public subsidy for Big Box

corporate giants and provides an unfair nancial advantage over others.

In 2010, over 4,300 Wal-Mart employees in Massachusetts, a quarter of thecompanys total workforce in the state, used subsidized health care for them-

selves or family members, costing taxpayers $14.6 million. Over 2,600 Target

employees, more than a third of the companys Massachusetts workforce,30

used subsidized care, costing the state $8.3 million.31Big Box retail chains

made up ten of the thirty companies with the most employees on Medicaid in

Massachusetts.

SUBSIDIZED HEALTH CARE

MASSACHUSETTS

The low wages,

combined with

involuntary part-

time hours and

no benefts, mean

that the families

of many Big Box

retail workers

must rely ontaxpayer-funded

safety net pro-

grams to make

ends meet.

EMPLOYEES

USING

SUBSIDIZED

CARE

RANK

BY

TOTAL

COSTEMPLOYER

COST FOR

EMPLOYEES &

COVERED

DEPENDENTS

# $

1 WAL-MART 4,327 $14,602,933

4 TARGET 2,610 $8,325,571

8 HOME DEPOT 1,929 $5,678.420

14 MACYS 1,723 $4,059,919

16 TJ MAXX 1,027 $3,280,228

19 KOHLS 969 $2,743,79420 MARSHALLS 900 $2,648,489

24 LOWES 826 $2,211,397

25 SEARS/ KMART 1,052 $2,124,144

27 BEST BUY 772 $1,909,951

Retail Employers in Massachusetts with Largest Costs of Subsidized Care

5



In New Jersey, Wal-Mart and Target are the top two employers with the most employees enrolled in

the states Medicaid program, followed by many of the same Big Box retail stores as on the above Mas-

sachusetts list.32

In Wisconsin, over 3,200 Wal-Mart employees are enrolled in Badger Care, the states Medicaid program,

accounting for a total of 9,200 enrollees including the children and adult dependents of these employees.Six other Big Box retail stores were also among the employers with the most employees receiving subsi-

dized care. 33

NEW JERSEY

WISCONSIN

EMPLOYEES

ENROLLED

RANK

BY

TOTAL

COSTEMPLOYER

SPOUSE/

DEPENDENTS

ENROLLED

TOTAL

ENROLLED

# #

1 WAL-MART 2,306 4,993 7,299

2 TARGET 1,199 2,379 3,578

3 LORD&TAYLOR 1,008 1,945 2,953

5 TOYS R US 771 1,513 2,284

6 KMART 746 1,646 2,392

12 KOHLS 565 1,120 1,685

14 HOME DEPOT 487 1,188 1,67518 SEARS 456 854 1,326

23 JC PENNEY 373 733 1,106

28 MARSHALLS 328 580 908

Retail Employers in New Jersey with Most Employees Receiving Subsidized Care

EMPLOYEES

ENROLLEDRANK EMPLOYER

TOTAL ENROLLED

INCLUDING ADULT

DEPENDENTS &

CHILDREN

# #

1 WAL-MART 3,216 9,207

4 MENARDS 784 2,245

11 TARGET 562 1,592

15 KOHLS 508 1,340

27 KMART 278 772

34 HOME DEPOT 242 663

46 SEARS 217 580

Retail Employers in Wisconsin with Most Employees Receiving Subsidized Care

6



Most state reporting has only included data on Medicaid and not other publicassistance programs. In addition, the data has only reected the actual enroll-

ment in the Medicaid programs. The number of Big Box employees and depen-

dents who are eligible to participate is likely much higher.

It is clear that Wal-Mart, Target, and other Big Box retail store employees

must also rely on additional public benets. For instance, in Florida, over 9,000

Wal-Mart employees receive food stamps.34In California, a study found that the

average Wal-Mart worker required $730 in taxpayer-subsidized healthcare and

$1,222 in other types of public assistance, such as food stamps and subsidized

housing per year to get by.35

In July 2013 the Dayton Daily Newsobtained data from the state Department of

Jobs and Family Services showing that Wal-Mart had more employees or house

hold members on food stamps (14,684) or Medicaid (14,056) than any other

company in the state. Target was 11thfor most employees or family members o

Medicaid (2,479) and food stamps (2,383).36

The number of Wal-Mart employees or household members in Ohio on pub

lic assistance almost doubled from the previous ve years, and it was not relate

to an overall increase in employees. There was a 74 percent increase in the

number of Wal-Mart employees receiving food stamps and a 95 percent increa

in the number enrolled in Medicaid, while Wal-Marts total employment in the

state declined by 10 percent during this period. 37

OTHER PUBLIC ASSISTANCE

OHIO

In Ohio,

almost 15,000

Wal-Mart

employees

receive food

stamps.

EMPLOYEES &

FAMILY

MEMBERS

ENROLLED

RANK EMPLOYER

#

1 WAL-MART 17,679

14 TARGET 2,602

16 LOWES 2,470

21 SEARS 2,155

33 JC PENNEY 1,631

29 K-MART 1,686

27 KOHLS 1,876

28 HOME DEPOT 1,874

40 MACYS 1,481

Ohio Medicaid Enrollment - January 2012

7

EMPLOYEES &

FAMILY

MEMBERS

ENROLLED

RANK EMPLOYER

#

1 WAL-MART 14,684

13 TARGET 2,201

17 SEARS 1,860

20 LOWES 1,787

26 KMART 1,546

27 HOME DEPOT 1,546

29 KOHLS 1,494

39 JC PENNEY 1,256

40 MACYS 1,217

Ohio Food Stamps Enrollment - January 201


8/13AT WHAT COST:HowMinnesota Taxpayers Subsidize Big Box Stores Poverty Wages 8

In a report earlier this year, the U.S. House Committee on Education and the

Workforce estimated that a single 300 employee Wal-Mart Supercenter store

in Wisconsin costs taxpayers between $900,000 and $1.7 million per year or

$3,000 to $5,800 per employee.38

The lower estimate assumes that only those workers enrolled in Badger Care

also enroll in other taxpayer-funded programs. The upper estimate assumes

that an additional quarter of a stores employees enroll in other taxpayer-fund-

ed programs.

WISCONSIN

OTHER PUBLIC ASSISTANCE

Free & reduced price lunches(under the National School Lunch Program)

Free & reduced-price breakfasts(under the School Breakfast Program)

Subsidized housing assistance(Section 8)

Earned Income Tax CreditMedicaid Enrollment under Badger Care

Low Income Home Energy AssistanceProgram (LIHEAP)

Supplemental Nutrition Assistance Program(formerly Food Stamp program)

Wisconsin Shares Child Care Subsidy

PUBLIC ASSISTANCE PROGRAMLOW-END

ESTIMATE

UPPER-END

ESTIMATE

$25,461

$12,938

$155,406

$72,160$251,706

$11,414

$96,007

$279,450

$58,228

$29,588

$355,350

$165,000$251,706

$26,100

$219,528

$639,090

TOTAL $904,542 $1,744,590



Widespread practices of involuntary part-time work and unstable schedulingby Big Box department stores push the incomes of retail workers even low-

er. Nationally the number of involuntary part-time retail workers (those who

would rather have full-time hours) has increased 144 percent from 644,000 in2006 to 1.5 million in 2010. 39

The retail industry has embraced just-in-time computerized scheduling sys-

tems, which are designed to cut costs by matching staff size to customer trafc

hour by hour. This gives managers increased exibility, but for workers it means

unpredictable schedules that vary from week to week and even day to day

Retail workers are expected to keep their schedules open in case they may be

needed and to call in on the days theyre scheduled to see if they should come

to work that day.40These scheduling systems allow Big Box stores to manage

a large part-time labor force working short shifts that can easily be changed.41According to data that Wal-Mart reported to the Partnership for a Healthy

America regarding its newly built or expanded/remodeled stores providing fresh

groceries in food deserts, more than half of the 6,700 new employees hired to

work in these stores were hired on a part-time basis.42

Target has said at different times and in different settings that part-time em-

ployees make up between 55 percent-80percent of its retail workforce. Target

said that 55 percent of the workers at a proposed Supercenter in San Rafael

California would be part-time. However, a Target human resource manager told

the San Rafael City Council that on average 65 percent of team members werepart-time. The companys Developer Guide Edition 2.11 says that approximately

80 to 85 percent of employees per store are part-time.43

INVOLUNTARY PART-TIME WORK

Widespread

practices ofinvoluntary

part-time work

and unstable

scheduling by

Big Box depart-

ment stores push

the incomes of

retail workers

even lower.

9



Its not just workers employed directly by Big Box retail stores who are paidpoverty wages. In order to cut costs and avoid responsibility, many Big Box

stores often contract out their janitorial work. There is erce competitionamong the janitorial companies for these contracts, with each company trying

to underbid the other. Since labor is by far the largest and most costly ex-

pense in a cleaning contract, the company with the lowest labor costs tends

to win the contract. In some cases, the janitorial companies try to reduce

their labor costs with practices such as paying below minimum wage or not

paying overtime.

A number of the companies that clean Big Box stores in Minnesota have

been the subjects of lawsuits and Department of Labor investigations for not

paying their workers the overtime wages they earned.Diversied Maintenance, which is based in Florida, is the largest janitorial

service provider to Target, with contracts covering over 600 stores nation-

wide.44 Earlier this year, the company settled a lawsuit for $675,000 that had

been led by workers in Minnesota alleging that:

Employees regularly worked 56-60 hours a week without full overtime pay.

Employees were required to work seven days a week six days under theirown name and one day under a ghost name.

This is not an isolated case. In the last ten years, Diversied has settled at

least nine private lawsuits as well as six investigations by the U.S. Department

of Labor (DOL), all alleging violations of minimum wage and overtime laws.

One of the DOL investigations in Minnesota found that not only did Diversi-

ed require employees to work seven days a week without any overtime pay,

but Diversied also held new employees pay as a deposit that they would

receive when they left the company. 45

Unfortunately, these problems pervade the retail janitorial industry. Other

cleaning companies with which Twin Cities Big Box stores contract have also

been the subjects of similar lawsuits and Department of Labor investigations

for not paying their workers the overtime wages they earned.

BIG BOX RETAIL STORES USE OF

CONTRACTED CLEANING COMPANIES

10


11/13AT WHAT COST:HowMinnesota Taxpayers Subsidize Big Box Stores Poverty Wages 1

Prestige Maintenance, based in Plano, TX, also cleans Target stores in Minneso-

ta. In 2009 the company settled a lawsuit brought by sixteen of it workers who

claimed the company owed them overtime pay. The workers who brought the

lawsuit cleaned Target stores in Maryland overnight from 10:30 p.m. to 8:00

a.m. every night.46

Prior to the lawsuit, Prestige Maintenance was investigated by the Depart-

ment of Labor at least three times, resulting in more than 400 violations for

failing to pay overtime to workers in Minnesota, Florida, and New York.47

The way in which Target drove the prices down so low in its janitorial con-

tracts came to light in a lawsuit brought by cleaning workers in Texas. Target

would conduct three rounds of bidding in which its cleaning contractors had

to submit bids for Target stores. Target controlled the bidding process in way

that pitted its cleaning contractors against one another, forcing them to un-

derbid each other. Target structured this bidding process to consist of three

rounds with a rule that each cleaning contractor could submit a lower bid

but not a higher bid in each successive round. 48

BIG BOX RETAIL STORES USE OF

CONTRACTED CLEANING COMPANIES



Because the pay is so low at Wal-Mart, Target, and other Big Box retail stores,and the weekly work hours are limited, many of the families of retail workers

are unable to make ends meet without taxpayer-funded safety net programs.

Medicaid, the Earned Income Tax Credit, Food Stamps, and Temporary Aid for

Needy Programs (TANF) enable Big Box retail workers to afford basic necessi-

ties like food, shelter, and health care.

Poverty wages, unaffordable health insurance, and low work hours come at a

public cost. We estimate that it costs taxpayers $150 million a year to provide

the above public assistance programs to Big Box retail workers in Minnesota.

Raising wages for Big Box retail workers will benet individual workers,

their families and community, and taxpayers. The more that Target and Wal-

Mart pay their workers, the less it will cost taxpayers to provide public assis-

tance.

Unlike manufacturers that must compete with offshore producers that have

lower labor and production costs, Big Box retail stores compete with each

other. The low-wage structure of the industry is not due to the competitive

global market, but rather a mixture of market conditions and policy chang-

es.49Pay in the Big Box retail industry could be increased through a variety of

means.

1.Target, Wal-Mart, and other Big Box retail stores should pay a living

wage. The Minneapolis and St. Paul City Councils have set $14.41/hour as their cur-

rent living wage levels.

50

This is almost double what some retail workers are currentlypaid.

2.The State of Minnesota should raise its minimum wage. Many retail

workers earn close to the minimum wage and would benet from an increase in the

minimum wage. The Minnesota House last year passed HF 92 to raise the minimum

wage to $9.50 per hour, indexed to ination. However, differences with the Senate

version of the legislation caused the bill to not make it out of conference committee

before the end of session.

3.Target and Wal-Mart should stop interfering with their employees

rights to speak out for better jobs Big Box retail employers could listen totheir employees calls for change, rather than retaliate against them for speaking out.

Last year, a federal judge set aside an unsuccessful unionization election at a Target

store in New York state and ordered a new vote, nding that Target managers had in-

timidated workers and violated federal labor laws.51Wal-Mart workers report regular

aggressive acts of intimidation and retaliation by the company against workers who

try to exercise their rights to stand up and speak out for fair treatment and respect

at work.

TAKE ACTION!

12


13/13

Retail Foot Trafc UP, sales Slightly Down on Black Friday, Says ShopperTrak, November 24, 2012, press release

Retail Foot Trafc Up 8.2 Percent During Black Weekend Says ShopperTrak, Nov. 27, 2012, press release

NRF Forecasts Marginal Sales Gains this Holiday Season, Oct. 3 2013

Black Friday shopping hits a new record, Emily Jane Fox, CNN Money, Nov. 28, 2012

ShopperTrak, Nov. 27, 2012

Wall Street Journal,Market Watch, Annual Financials for Wal-Mart Stores, Inc.

Target 2012 Annual Report

Target 2013 Proxy Statement and Walmart CEOs Pay Jumps 14.1 Percent to $20.7 Million, Hufngton Post,Jessica Wohl, April 22, 2013

Jeffrey Goldberg, Wal-Mart Heiresss Museum a Moral Blight, Dec. 12, 2011

Online salary database Glassdoor,

Federal poverty level for a family of four is $23,050.

The Low-Wage Drag on Our Economy: Wal-Marts low wages and their effect on taxpayers and economic growth US House Committee on Education and the Workforce, May 2013

US House Committee on Education and the Workforce, May 2013

Conditions for Workers at Target: Estimates for a Proposed California Supercenter, Jeannette Wicks-Lin, University of Massachusetts, Political Economy

Research Institute, April 2011,

Fast Food, Poverty Wages: The Public Cost of Low-Wage Jobs in the Fast Food Industry, University of Illinois at Urbana

Champaign Department of Urban and Regional Planning and University of California Berkeley Center for Labor Research and

Education, Sylvia Allegretto, Marc Doussard, Dave Graaham-Squire, Ken Jacobs, Dan Thompson and Jeremy Thompson, October 2013.

Allegretto, et al,, October 2013.

Based on a total of 19,500 total retail employees in Minnesota, using the gure of 260 employees per Target store Long Island Target Store May Be The

First to Unionize, 6/17/11, CBS News,

Does not include Sams Club stores

Based on a total of 17,703 retail employees in Minnesota, using the gure of 281 employees/store, Wal-Mart Strains to Keep Aisles Stocked Fresh, New York

Times,Stephanie Clifford, 4/3/13

Based on a total of 5,180 employees, using the gure of 140 employees/store Menards pushes bigger is better approach, Matt M. Johnson, 4/8/11, Finance

and CommerceBased on a total of 4,950 employees in Minnesota, using a gure of 150 employees/store, Big Box retailers to get even bigger, The Florida Times-Union,

12/17/11, Moshay Simpson

Based on a total of 3,400 employees in Minnesota, using an average of 100 employees per store. JC Penney has 116,000 employees and 1,104 stores.

J.C. Penney Company Inc., 2012 Form 10k

3,100 employees in Minnesota. Macys, Inc. Stores by State,

Based on a total of 2,990 employees in Minnesota, using an average of 130 employees per store (145,000 employees and 1,055 stores)

Based on a total of 2,880 employees in Minnesota, using an average of 120 employees per store.(140,000 associates and 1,100 stores).

Based on a total of 2,650 employees in Minnesota, using 102 employees/store, Marshalls Gets Mixed Reviews, Kamilla Plambeck, 8/5/11,

SantaBarbara Independent

Based on a total of 2,625 employees in Minnesota, using an average of 100-150 employees/store, Big Box retailers to get even bigger,Florida Times-

Union, 12/17/11, Moshay Simpson,

Based on a total of 1,925 employees in Minnesota using a gure of 175 employees/store Big Box retailers to get even bigger, Florida Times-Union, 12/17/11,

Moshay Simpson,

Based on a total of 1,500 employees using an average of 100-150 employees/store,, Big Box retailers to get even bigger, Florida Times-Union, 12/17/11, Moshay

Simpson,New Data Show How Big Chains Free Ride on Taxpayers at the Expense of Responsible Small Businesses Stacy Mitchell, June

7, 2013, Institute for Local Self-Reliance

Employers Who Had Fifty or More Employees Using MassHealth, Commonwealth Care, or the Health Safety Net in State Fiscal

Year 2010, Commonwealth of Massachusetts, Center for Health Information and Analysis, Feb 2013

2011 Annual Report on Access to Employer-based Health Insurance, New Jersey Department of Human services

BadgerCare by Enrollment by Employer, Q4 202, Wisconsin Department of Human Services

Alan Grayson says more Walmart employees on Medicaid, food stamps than other companies,Tampa Bay TimesPolitiFact, Dec. 6, 2012.

The Hidden Cost of Wal-Mart Jobs, Arindajit Dube and Ken Jacobs, August 2, 2004

July 22, 2013, Taxpayers subsidizing low-paid employees, Dayton Daily News,Cornelius Frolik, Josh Sweigart

Dayton Daily News, July 22, 2013

The Low-Wage Drag on Our Economy: Wal-Marts low wages and their effect on taxpayers and economic growth, US House

Committee on Education and the Workforce, May 2013

Discounted Jobs: How Retailers Sell Workers Short 2012, Stephanie Luce, City University of New York CUNY Murphy Institute

and Nooki Fujita, Retail Action Project

Abercrombie and Fitch, Other Retail Workers Protest Abusive Scheduling, 10/17/12, Good Morning America, Susanna KimMore People pushed into part-time work force Wall Street Journal, Kris Maher, March 8, 2008,

The Low-Wage Drag on Our Economy: Wal-Marts low wages and their effect on taxpayers and economic growth, US House

Committee on Education and the Workforce, May 2013

, Jeannette Wicks-Lin, April 2011,

Diversied Maintenance Systems Hits Several Major Milestones in 2011, July 12, 2011 press release

US Department of Labor, Case ID: 1479614, Minneapolis, MN District Ofce, Local ling number 2007-250-03336

Overtime suit in U.S. District Court for the District of Maryland in Greenbelt settles for up to $3.8 million, Caryn Timber, The Daily Record, Dec 9, 2009

U.S. Department of Labor Wage and Hour Division Case IDs 1183955, 1351131, and 1147129

Juan Isidro Itzep, et al. v. Target Corporation, et al. , Civil Action No. SA-06-CA-0568-XR, United States District Court, Western District of Texas, San Antonio

Division

Allegretto, et al,, October 2013.

City of Minneapolis Living Wage Ordinance/ Business Subsidy Act Programs Employment Requirements and Training Opportunities, and St. Paul Adminis-

trative Code, Chapter 98

Union Gets New Election at a Target, New York Times, Steven Greenhouse, May 21, 2012.

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