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Don't Look Now, but Wal-Mart Is Facing a New Lawsuit, Even as Black Friday Strike Threats Loom

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Black Friday is getting darker and darker for the mega-retailer.

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MINYANVILLE ORIGINAL Last week we updated readers about the status of historical strikes by hourly workers at some Wal-Mart (WMT) (NYSE:WMT) stores in the US, and the response of one UC Berkeley labor specialist who believes the company may act and change the way it pays employees in the face of the concerted action by hourly employees.

Employees who have joined the latest actions claim store managers retaliate against workers who threaten to organize and fight for better wages and benefits. Following the first day of strikes on October 4, walkouts spread to 28 stores in 12 states. Employees are now threatening to strike on Black Friday, the day after Thanksgiving and one of the most lucrative shopping days of the year. (See:
Why Wal-Mart May Respond to Black Friday Strike Threats, Adjust Wage Structure: Labor Economist.)

Today Wal-Mart was hit with a new lawsuit that says it has violated minimum wage laws. According to Reuters, the suit filed today in a Chicago federal court claims that Wal-Mart and two staffing agencies "required that temporary workers show up early for work, stay late and work through lunch." Wal-Mart has not yet responded to the allegations.

What if Wal-Mart Raised Its Wages?

Last week, Ken Jacobs, Chair of the UC Berkeley Center for Labor Research and Education, told Minyanville that he thinks it's possible that employees and investors will see a response from Wal-Mart -- and a change in the company's wage structure -- given the growing popularity of the strikes. "What the strikes are doing is continuing to bring attention to the low wages and subpar benefits that Wal-Mart workers receive compared to their counterparts in the unionized grocery industry and retail workers overall," he noted. According to the Center's research, Wal-Mart workers earn significantly less than other retail workers -- about 12.4% less than retail workers as a whole and 13% less than large retail workers in general.

As we reported, the UC Berkeley labor research center recently updated its study Living Wage Policies and Big Box Retail. Its findings concluded that if Wal-Mart moved wages to a minimum of $12 per hour, and pushed 100% of the expenses on to consumers, it would cost shoppers an average of $0.46 per shopping visit, or $12.49 for the year. In all, it would be an increase of 1.1% facing consumers, well below the discount Wal-Mart aims to offer shoppers. Earning a minimum of $12 per hour would greatly improve the lives of Wal-Mart employees currently living close to the poverty line -- 41% would go to workers in families with total incomes below 200% of the federal poverty level, according to the study -- but would not greatly impact Wal-Mart's customers, including low-income families.

Said Jacobs: "Is there a way to improve wages and benefits while maintaining profitability? I think there's no question that there is."

If Wal-Mart did improve its wages, he added, it might see a warmer reception from US urban centers, the final frontier for Wal-Mart's US stores. In its attempts to penetrate major cities, the company has faced resistance from community groups who fear the retailer would drive down wages for competitors.

In 2010, labor economist Sylvia Allegretto, also at the UC Berkeley Center for Labor Research and Education, found that the wealth of the six Walton family members who are heirs to the Wal-Mart fortune have a net worth equal to the income of the bottom 41.5% of all American families. Wal-Mart, a major Dow (^DJI) (INDEXDJX:DJI) component, has annual sales of about $444 billion and profits of nearly $16 billion per year. The stock price has been up nearly 24% this year.
No positions in stocks mentioned.
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