The general public thinks the average company makes a 36% profit margin, which is about 5X too high, Part II
AEIdeas
This is an update of a CD post from a few years ago, with some new data and supplemented by a video below created by Richard Rider.
When a random sample of American adults were asked the question “Just a rough guess, what percent profit on each dollar of sales do you think the average company makes after taxes?” for the Reason-Rupe poll in May 2013, the average response was 36%! That response was very close to historical results from the polling organization ORC International polls for a slightly different, but related question: What percent profit on each dollar of sales do you think the average manufacturer makes after taxes? Responses to that question in 9 different polls between 1971 and 1987 ranged from 28% to 37% and averaged 31.6%.
How do the public’s estimates of corporate profit margins compare to reality? Not surprisingly they are off by a huge margin. According to this NYU Stern database for more than 7,000 US companies (updated in January 2018) in many different industries, the average profit margin is 7.9% for all companies and 6.9% for more than 6,000 companies excluding financials (see chart above). Interestingly, for nearly 100 industries analyzed by NYU Stern, there’s only one industry that had a profit margin as high as 36% – and that was tobacco at 43.3%. The next highest profit margin was 26.4% for financial services, but more than 72% of industry profit margins were single-digits and the median industry profit margin is 6%.
“Big Oil” companies make a lot of profits, right? Well, that industry (Integrated Oil/Gas) had a below-average profit margin of 5.6% in the most recent period analyzed, and separately, the Production and Exploration Oil/Gas industry is losing money, reflected in a -6.6% profit margin. For the general retail sector, the average profit margin is only 2.3% and for the grocery and food retail industry, it’s even lower at only 1.6%. And evil Walmart only made a 2.1% profit margin in 2017 (first three quarters) which is less than the industry average for general retail, possibly because grocery sales now make up more than half of Walmart’s revenue and profit margins are lower on food than general retail. Interestingly, Walmart’s profit margin of 2.1% is actually less than one-third of the 6.5% the average state/local government takes of each dollar of Walmart’s retail sales for sales taxes. Think about it – for every $100 in sales for Walmart, the state/local governments get an average of $6.50 in sales taxes (and as much as $10.12 in Louisiana and $9.45 in Tennessee, see data here), while Walmart gets only $2.10 in after-tax profits!
Bottom Line: The public’s complete overestimation of how much companies earn in profits as a share of sales explains a lot. If $36 of every $100 in sales at a company like Walmart, McDonald’s, Home Depot, Ford Motor Company or a local dry cleaner or restaurant really did turn into profits, then of course those companies could afford to pay unrealistic minimum/living wages of $15 per hour, accept unreasonable demands from labor unions, provide all sorts of generous fringe benefits including weeks of paid holidays, long paid maternity leaves, and gold-plated pension programs, etc. The general public that believes in the fantasy-world of unrealistically, sky-high 36% profit margins would naturally think companies are just being greedy and stingy when they don’t pay higher “living wages” and have to be forced to do so through minimum wage legislation.
If the average person could realize that a 36% profit margin isn’t even close to reality and that the typical, median firm has a profit margin of only less than 8% or almost 30 percentage points below what the public thinks is a normal profit margin, then hopefully the average person would become a little more realistic about how the business world operates. Companies aren’t being stingy when they pay competitive wages, they’re just trying to survive on what are sometimes razor-thin profit margins, in a competitive environment where there’s not a large margin of error. If they’re not operating efficiently and watching costs very carefully, it’s pretty easy for a business to go from a 7-8% profit margin (and only 1-2% for retailers) to a 0% break-even situation, and then from there to losses and bankruptcy — just look at the more than half a million businesses that fail every year.
Bonus: Below is the video mentioned above from Richard Rider — “Corporate Profits Explained (Bernie Sanders CEO of Walmart??)” — who provide some commentary here.
Not only does the average person overestimate the profit made by the average business.
They also often fail to realize that the business owner risks a result far worse than simply failing to make any profit.
Business owners often find themselves working hard while losing large amounts of money due to fixed costs that can’t be reduced short of going bankrupt.
“The general public thinks the average company makes a 36% profit margin”
I regularly hear people mistake total revenues for profits. The average person, I am sorry to report, has no idea that money received by a business is anything but a gain.
Sales = they made this much.
Jax Burgers sold $5 million in burgers last year. “Yep, Jax made $5 million bucks. Sweet.”
Fairly unsurprising, as I bet most of those surveyed wouldn’t know the term “profit margin,” let alone be able to find it on a correctly-labeled balance sheet. The failure of democracy, or “mob rule” as the founders denigratingly called it, is that it gives votes to people to have their say on a host of topics they know nothing about. That’s why the founders instituted a republic, where you didn’t vote for a president, but for a local elector who you knew and trusted, who would get together with all the other local electors to choose a president for you. However, that initial wise design has now been debased to simply choosing an elector who promises to vote for a certain candidate, and many states forcing their electors to all vote for one person.
With all the ways this can be done better online nowadays, it’s only a matter of time before democracy is obsoleted, just like the newspapers and TV stations are going away now. However, govt will be the last to fall, after education, medicine, and a bunch of other quasi-socialized markets are disrupted, because govt’s become such a gigantic parasite that it’s the hardest to get rid of.
It would be hard for a PhD in accounting to find profit margin on the “balance sheet,” friend.
Income statement-related item.
Profits are on the P&L (profit & loss statement) – not the balance sheet.
You both may be right, but I wouldn’t know as I’ve never actually looked at a paper balance sheet or income statement either. I merely look up such numbers on online finance websites, where I now see that you’re right that they label it as an income statement, but it is irrelevant what vestigial labels they use at the top, as it’s all online now anyway.
thank gawd Trump is restricting aliens from the Sh!thole countries !!
An act you called treasonous the other day, I hasten to remind you.
I’ve been a guest speaker in over a hundred high school and college economics classes. I have posed this question in most of my presentations.
When the students are cautious (knowing my free market bias), they lowball their “profit on a dollar of sales” answer down to “only” 15% to 20%. But it’s apparent that this fundamental fact is never presented by the teachers or the curriculum. Even the educators often seem surprised at the answer.
That’s EXACTLY the point! People don’t know what “inventory turn” is — confusing ROI with profit margins.
You say it’s a BS question, but in reality it shows that the media and academia are presenting BS information, (intentionally?) miseducating the public.
From a consumer standpoint, I’m less concerned with the ROI of a company as what part of my purchase is profit. Well, I’M not really concerned, but Bernie Sanders acolytes are.
Solid post.
On the other hand, corporate profits are higher than ever, both relatively and and absolutely.
https://fred.stlouisfed.org/graph/?g=fPLQ
Corporate profits were much higher under Obama than the Reagan Salad Days.
And they will be even higher under Trump than Obama.
I think this fine, and I hope corporations devote their cash to R&D and better products and services and making more money.
These are the good ol’ days for corporations.
Should corporations hand out pay raises due to Trump tax cuts?
As a shareholder in Wal-Mart, I expect management to honor their fiduciary responsibility to me and pay employees as little as possible.
“I expect management to honor their fiduciary responsibility to me and pay employees as little as possible.”
Even if paying employees as little as possible leads to increased turnover and loss of potential profit from higher employee cost in other areas?
Maybe that paying employees as little as possible is a good idea is just as wrong in practice as the perception of how much companies make in profit?
Even if paying employees as little as possible leads to increased turnover and loss of potential profit from higher employee cost in other areas?
The phrase “as possible” in the context Joe uses it is ambiguous here. I’d contend that if employers are paying a wage that leads to lost potential profit, then they are paying a wage that is too low (in other words, they are paying a wage lower than what is possible).
We need more clarification: what does “as possible” mean? “As possible” compared to what? For profit maximization? For some “social” or political goal?
Jon, I worked with some small companies in an incubator for a local college for a few years. We found paying competitive wages led to lower overall employee cost than “as little as possible.”
Few things are a better judge of effective best business practices than success stories in your field.
I agree with your comment, Walt. I’d argue that you did pay as low as possible. As low as possible to minimize your costs.
That’s my point. Joe’s comment is ambiguous without telling us the end goal.
Walt, I think “as little as possible” means at the lowest possible cost, not the lowest possible wage.
Ron, you would have to ask Joe what he meant. He said “pay employees as little as possible.”
I spent much of my career trying to show ways paying a premium wage/benefits actually cut down on overall employee cost.
I watched a $40,000 robot wrist get destroyed because management assigned a job to someone who made $5 less an hour to pay as little as possible. After a few of those, they decided paying more was paying less 🙂
Walt
“Ron, you would have to ask Joe what he meant. He said “pay employees as little as possible.” ”
When Jon said much the same thing you felt a need to respond to his comment. What happened to “I don’t generally respond when I agree”?
Do you just have a need to respond to things, even when you don’t have anything to say?
Ron, if I respond to comments, I think I have something to say, but whether you think I do or not is entirely up to you. Same thing goes with relevancy.
I don’t know why my responding to Jon would concern you though. You seem to have appointed yourself moderator along with copy editor here.
Ron, thanks for supplying my actual remark. Notice the “generally” in it? I try not to corner myself like you tried to do from a lot of years of covering my ass 🙂
Which means you give the impression of being evasive.
Ron, evasive to you seems to be not being a black-and-white thinker. In my experience, very few things don’t have exceptions.
I’ll comment when I wish, and probably more likely if I don’t agree. That’s what I do on informal media such as blogs, but feel free to use your own judgment about your comments and replies.
Is it really a libertarian concept to concern yourself so much with what other people choose to write and how they choose to do so?
And they will be even higher under Trump than Obama.
So far, according to your link, that has not panned out. And it’s even less likely if Trump goes through with his protectionist plans.
I expect the Trump tax cuts will lead to higher corporate profits.
I fear the Fed will suffocate the economy, so maybe not.
“As little as possible” of course consistent with sustainable maximization of shareholder profit.
I expect the Trump tax cuts will lead to higher corporate profits.
They probably will. But the protectionist plans of Trump, should they come to fruition, would swamp any good the tax cuts do.
A NOTE OF EXPLANATION: This video is our first foray into this video area of education. The visual if good enough, but we had a sound problem with the narrative. It’s good as version 1.0, but we’ll endeavor to do better with future efforts.
I’m sure you are all familiar with the fine work of PragerU. We’ll probably never reach that level of professional excellence, but it’s a benchmark to shoot for.
PragerU is great source for such short, educational online learning experiences. As a “bang for the buck” avenue for reaching the public, it offers great promise.
It’s funny — I was thinking this should be a Prager U video. I asked some numbnut standing outside a grocery store collecting signatures to put higher minimum wages on the ballot (his cohorts were currently protesting at McDonalds), and I asked him how much he thought the average McDonalds franchise (85% of all store) makes in profits. He guessed 70%. I told him it was less than 3%. I don’t think he believed me…but it sure does illustrate your point. Our children are being brainwashed, not educated. As Jordan Peterson says, this is going to lead to the end of western civilization.
Profits are not as highly publicized as revenue. We are a sound-bite society.
I don’t think many people are going to dig very deep into the numbers, so that’s why the sources of our information need to be as accurate and bias-free as possible.
Way too many people are just looking for the easy and quick confirmation of what they already believe instead of challenging what they think they know. The Internet is both our friend and foe for our daily fix of “Damn, I’m right!”
Whether or not leftists like Sanders are so ignorant that they don’t understand this, they all have a vested interest in maintaining the illusion of a zero-sum world where corporate profits reduce your wealth rather than add to it.
Whether or not leftists like Sanders are so ignorant that they don’t understand this, they all have a vested interest in maintaining the illusion of a zero-sum world where corporate profits make you worse off rather than better off.
I just visited Sweden. With 45% tax, businesses thriving. They have more Fortune 500 companies on per capita basis than us. Good infra. Hardly poor or run down neighborhoods.
With 45% tax, businesses thriving.
Which tax? Not corporate; their’s is 22%, according to the OECD. In fact, I can’t find that number anywhere doing a quick Google search. Some additional information would be helpful.
Yes, it seems business tax is 22% in Sweden.
Individual taxes are very high, but zero inheritience tax for Swedish heirs.
https://www.skatteverket.se/privat/skatter/beloppprocent/2013.4.2b543913a42158acf800010110.html#h-Statliginkomstskattfysiskapersoner
Seems more like a drive-by.
I just passed through Moscow and everything looked great, there. Maybe , centralized planning really works. We should try it.
…said, John Maynard Keynes
The top state income tax rate in California is 13%, combined with the new Federal top income tax rate of 37%, and the lack of SALT, the richest Californians now have a 50% income tax top bracket.
Re: Sweden…
Sweden will do whatever it takes, including sending in the army, to end a wave of gang violence that has seen a string of deadly shootings, Prime Minister Stefan Lofven said in Wednesday.
Swedish TV reported there were over 300 shootings, mostly in turf battles between gangs over drugs, protection rackets and prostitution.
Four people were shot dead in the first week of this year. One man died after picking up a hand grenade outside a subway station in a suburb of Stockholm.
A report by the Swedish National Council for Crime Prevention shows increasing numbers of Swedes worried about crime with confidence falling in the police and the judicial system.
“People are shot to death in pizza restaurants, people are killed by hand grenades they find on the street,” Sweden Democrat leader Jimmie Akesson said in parliament on Wednesday.
“This is the new Sweden; the new, exciting dynamic, multicultural paradise that so many here in this assembly … have fought to create for so many years,” he said sarcastically.
https://www.reuters.com/article/us-sweden-violence/swedish-pm-does-not-rule-out-use-of-army-to-end-gang-violence-idUSKBN1F629L
Still a lot less violence than the US on a per capita basis, although we are trending down while they are not. Few Americans would have any complaints about the quality of life in Sweden.
Yeah, that’s the interesting part. The Scandinavians, for the most part, have figured out that if you’re going to have a thriving economy, you have to keep corporate taxes and regulations to a minimum. In the same respects, if you’re going to provide every good and service you possibly can to your citizens, the money has to come from ordinary people. Real life has shown that it just doesn’t work when you shift the entire burden to one party.
I think we all (here) understand that the lowest wages are usually not the best option. Perhaps a better term would be the OPTIMUM wage — that compensation level (including benefits) that balances low cost with maximum productivity. High turnover generally reduces productivity.
Indeed. “as low as possible” also means “no higher than necessary”. As you wrote – “optimum”.
Of course, that was not your previous comment. Your previous comment had a blatantly racist and, by your definition, treasonous, line in it.
You can only leave comments if you supply a valid, working email address.
Mark Perry hinted at business owner’s risk but no one picked up on it. If Joe invests his retirement savings into buying a donut shop, he risks losing all that money if it fails. This “just pay employees more” misses this. Plus, if he isn’t making at least as much as a savings account or mutual fund, he should just put his money there instead–in that case no jobs for donut shop employees.
True — donut shop or mutual fund? It all depends on your personal risk-reward decisions and how you want to live your life.
But, if Joe is semi-successful, then he is a privileged greedy boss man in need of govt leveling the playing field against him and for the meek, oppressed employee.
I wonder how that average profit would change if it included all the failed businesses with negative profits.
And if you want to talk way over the public’ head, let’s look at average return on investment – especially, if it were possible – risk adjusted.
Profit margin is the net % of money earned after all expenses paid.
Employee costs are a major business expenses, including executive level positions.
The “we cant afford to raise wages” can sometimes be received as “we cant pay our bonuses, AND raise entry level wages”
Not choosing sides here. Just highlighting a variable not addressed in the write-up.
To state the obvious. A bonus is a one time payment tied to the corporation’s current success, market labor conditions and perhaps the employee’s current performance.
Wage increases constitute a more ratchet-like recurrent spending decision that is difficult and disruptive to later roll back.
And BTW, top corporate management bonuses (and indeed their total compensation) constitute a TINY part of a large corporation’s total labor costs. Paying that management a minimum wage (the progressives’ wet dream) would provide little freed up revenue to pay the employees (paying them more until the company went BK from mismanagement).
I would hope you would choose the side of reason. The corporate bonus structure is perhaps the dumbest reason I’ve ever seen brought up on the political stage for why wages should be higher. If Wal-Mart shareholders expect the company to produce a net profit margin of 2.3%, then that’s what they have to do. Net profits are what you’re left with AFTER Cogs, expenses, and corporate bonuses. No one is being paid a bonus if that subsequently means missing the target profit margins. A lower profit margin means lower retained earnings, and lower retained earnings means fewer dollars to be paid out in dividends for shareholders. So no, corporate bonuses just simply don’t carry the kind of weight you think they do.
QUESTION: Does anyone have a reputable URL for an article breaking out what percent of Walmart’s expenses are labor costs? I’ve not been able to Google that fact.
I think most companies keep their percentage of expenses of labor costs for need-to-know, high-level, internal use only. That’s normally considered proprietary information for competitive reasons (or so they say).
Many companies will speak in a general way about labor costs if it is to their advantage to do so.
That was a huge point of contention during my working days. They say “we can’t afford that,” we say “show us the books and prove it,” they say “no way.”
http://historymatters.gmu.edu/d/5138/
That makes sense. Thanks for the insight.
Mr. Rider, I went back-of-the-envelope for this calculation:
Walmart’s 2017 SG&A (Selling, General and Administrative) Expense = $101 billion.
Walmart has ~500,000 employees.
$40,000 expense per employee including benefits.
500,000 X $40,000 = $20 billon.
$20 billion is ~ 20% of SG&A.
Thus, 20% labor costs for WMT as portion of expenses.
My BOE calculation was based on full-time employees. If part-time (500,000) are included then:
500,000 X $20,000 = $10 billion.
Full- time employee + part-time =
$30 billion employee expense.
$30 billion is 30% Employee Expense of total SG&A.
Sorry to have forgotten part-timers.
A. Raising the minimum wage is a solution to the prisoner dilemma. Yes, if just one company had to raise their wage it would affect them as described in the article and video. If all wages are raised for all companies the increase in disposable income counteracts the increase in prices.
B. Analyzing profit margin ignores compensation to executive management and owners.
A. No it doesn’t. There is no overall increase in disposable income, only a redistribution of disposable income from some people to other people.
B. No it doesn’t.
I suspect the wage increases would be largely washed away by an increase in the price of consumer goods. And a lot of businesses would fail because of competition from imports.
Christ. Was no one else required to take 6 hours of accounting during their undergrad? Accountants possess a multitude of complex skill sets, but being able to read a P&L is fairly straightforward. Actually, basic math and reason will get you to the answer you’re looking for. Let’s assume that Wal-Mart has one billion dollars earmarked specifically for bonuses this year(they don’t, and this is completely unrealistic for effect). Let’s say Wal-Mart then decides that, instead of giving this bonus over to a select few on the executive team, they’ll divide it equally among all current employees. That amounts to about $700 additional dollars in everyone’s paycheck for the year. I’m sure it would be appreciated, but let’s not pretend like raising everyone’s salary by less than a thousand dollars per year is going to bring about sustainable change in their lives. Sure, a $100 million dollar bonus to one or a few individuals is a lot of money, and perhaps even exorbitant. But you’re contending that giving that money back to people in line-level positions is going to bring about a measurable improvement in their lives. You’re wrong. Furthermore, profit margins are what’s left after corporate bonuses have been paid.
I know it’s harsh, but the general public is clueless because they parrot what the liberal media dishes them without question.
Where in the liberal media did you read about average profits of 36%? No, people are clueless because they are clueless. And there are plenty of clueless Fox viewers and Limbaugh listeners on topics such as immigration and foreign affairs.
Ron, the media publishes “fake news” from time to time, but MOST of the time their bias can be found in what they OMIT from a story.
For instance, they’ll breathlessly report record profits, but never discuss the PERCENT of profit.
It’s not that the press reports 36% profits — they don’t discuss profit margins AT ALL. And they almost never put politicians’ claims of “obscene profits” through the “FACT CHECK” process.
I’ve read from plenty of media outlets, over the years, that there are corporations that pay no tax. Of course, what they mean is income tax, but they can’t be bothered to explain all of the other taxes that corporations have to pay in-between. Those taxes for which there are no “loopholes.”
Where in the liberal media did you read about average profits of 36%? No, people are clueless because they are clueless. And there are plenty of clueless Fox viewers and Limbaugh listeners on topics such as immigration and foreign affairs, but it’s not necessarily because of Fox or Limbaugh.
Okay, I majored in Elementary Education, not business. I’m guilty of believing that a company like Walmart must have a YUGE profit margin because of stories that float around on the web stating that every member of the Walton family is a multi-millionaire. I stand corrected, but please explain how the Waltons made so much personal wealth from corporate gains of 2.6%. Please remember that I’m not stupid, I just spend most of my waking hours, surrounded by fourth graders.
Quick answer: Walmart makes a very small profit margin (2.1% in 2017) on a huge volume of sales.
Sand, you might want to look up “inventory turn” to better understand how money can be made on such low profit margins. It’s a concept that understood by any business selling tangible goods, but seldom understood by the public (even by many economics students, I have found).
Sand
Actually, every member of the Walton family is a multi-Billionaire. As major shareholders in the company, the value of their holdings have increased enormously over the years as the company has grown and its market value has increased. Their incomes are from dividends paid on their shares of stock.
Dear Dr. Perry,
Thank you so much for the piece I read in the weekly AEI. You were so right on the money – bulls eye! I’ve told the story any number of times about a visit I made to a DLA support function my company provided at the Marine base Cherry Point, NC. When visiting any operation I always tried to be receptive to questions and candid with staff – partially to avoid unionization, as well as, because I believe that informed employees are better than uninformed employees. Consequently, one supervisor was quite comfortable asking me, “Walt, what do you make out of this, about 40%?” – BOOM! Right on your numbers (36%). I tried to explain the many kinds of expenses the company had to pay with the money it received for the bills we sent to customers. This was not a new explanation, I had given it many times to my senior staff who were tired of seeing (my multi-colored box of operations – “Walt’s box”). The Cherry Point foreman’s eyes glazed the same glaze my VPs’ eyes glazed. Nobody, understands (maybe they don’t want to understand) that – the picture (box) is the same whether one speaks of an hour’s work, the completion of a deliverable task or item, a day, month or year of operations, a single contract, a division or the whole company – same descriptive box. There are many expenses in the box that must be paid by customers – not just the one dimension of the box we deliver to the customer. The proof of whether we could sustainably deliver our promises was in what we could bill for – I said many times, “The proof” of anybody’s fantastic idea, “is in the invoice”. I wrapped up with my Cherry Point supervisor with, “If I could bill all of my box and have the profit portion be 40%, why wouldn’t someone else do the work for 35%…. We only get to keep about three percent of the invoice BEFORE taxes.”
Thank you for retelling my story with statistical data rather than my old, “Would you believe this…”. Validation of a trip down Memory Lane – Thanks.
I will look forward to a piece on why it is absolutely essential that the difference between lowest paid individual compensation and the compensation of senior personnel continue to diverge….. Or how about one on why immigration of entry level persons is derogatory to society by dividing the non-immigrant population (citizens).
Thank you – Walt Malinowski
So the % of profit may be low for walmart but think about how much they sell in that year, sure they only get a bit over 2% profit, but they are getting 2% of hundreds of billions of dollars.
They get a small piece of a VERY HUGE pie.
I would rather make 8% of a multimillion dollar pie than 30 % of a few hundred thousand.
Thats the difference… And dont forget walmart is a giant leech on our society, a very large portion of their employees receive foodstamps because they dont get proper wages. And foodstamps are a major portion of their income. So they use the government to subsidize their costs and to generate more income. But some how they are making 14 bilion dollars in PROFIT. meaning after they pay the CEOs and the other big wigs their huge millions of dollars bonuses, after they shortchange thousands of americans of a decent wage. BILLIONS of dollars. after they pay all their costs they are left over with billions… What do they need billions of dollars in profit for?
Christopher
I can see tht you are badly misinformed, probably through no fault of your own, about the Walmart company, so let’s go over your false narrative one point at a time.
“And dont forget walmart is a giant leech on our society …”
That’s not correct. Walmart actually provides a huge benefit to “our society” by providing 2.1 million jobs worldwide, and by providing hundreds of millions of consumers with low cost goods they want and need. We know that’s the case, because those consumers all voluntarily shop at Walmart instead of somewhere else. No one is forcing them, they CHOOSE Walmart. They are effectively voting with their dollars for Walmart. We can her them saying: “Please take my money. I want those items you have for sale more than I want the dollars I am giving you.”
It is consumers like you and me that provide so much revenue (and a tiny profit) to Walmart, not some evil giant leech sucking on our wallets for money that we don’t want to give up.
Do you want Mom & Pop stores to stay in bussines? Well then simply walk over to their stores and spend your money there instead of at Walmart. That’s all it takes. It is you and me as consumers, not Walmart that causes Mom & Pop to go out of business. We are all free to vote for Mom & Pop instead.
“… a very large portion of their employees receive foodstamps because they dont get proper wages.”
You probably meant to write that a very large portion of their employees receive foodstamps because they are unable to produce enough by exchanging their time and labor, to deserve higher wages. Just as consumers freely *choose* to buy from Walmart, people as employees freely *choose* to work for Walmart because they cinsider that their highest and best opportunity. If they could find better jobs and higher pay elsewhere, we would expect them to go to work elsewhere instead of Walmart. I know that’s what I would do, wouldn’t you?
“And foodstamps are a major portion of their income.”
Foodstamps are not a major part of anyone’s income. Imagine how much larger the burden on society would be if Walmart didn’t help provide those folks with most of their income?
“So they use the government to subsidize their costs and to generate more income.”
Not sure what you mean here. Walmart pays is competitive wage to low skilled and low experienced workers in entry level jobs, whhich is high enough to lure potential employees away from other job prospects. People seeking work choose Walmart instead of some other work arrangement. The amount they are paid is satisfactory, in their view, or they wouldn’t agree to work at Walmart.
So far we have seen people exercising their freedom to choose, as consumers and as employees. Do you see a role for yourself to interfer in some way with any of those free choices?
“But some how they are making 14 bilion dollars in PROFIT.”
Yes. It is 2.1% of an enormous amount of revenue freely given to Walmart by many millions of willing consumers. Would you deny those consumers the right to shop where they freely choose to spend their money?
“… meaning after they pay the CEOs and the other big wigs their huge millions of dollars bonuses …”
Yes. Those Big Wigs are employees just like the entry level folks you are concerned about. They and Walmart have entered into a mutually satisfactory employment agreement just like every other employee has. You and I probably can’t determine the value of those CEOs and Big Wigs to the company, so we should assume that a company seeking to maximize profit is paying executives an amount that is far less than their value to the company.
“… after they shortchange thousands of americans of a decent wage.”
No, no one is shortchanged. Employees freely *choose* to work for Walmart, and they are paid the amount they agreed to accept. I don’t think you or I can decide these things for them.
“BILLIONS of dollars. after they pay all their costs they are left over with billions… ”
Yes fourteen of those billions. A testiment to the tremendous amount of value Walmart has provided to consumers who, after all, freely chose to shop there instead of somewhere else, and handed over their dollars to Walmart..
“What do they need billions of dollars in profit for?”
Strange question. What do YOU need a paycheck for? By “they” I suppose you mean the millions of shareholders of the nearly 3 billion shares of Walmart stock outstanding. I suspect they would like to earn a return on their investment, just like everybody else. Why do you think they need it?
edit:
bussines = business
cinside = consider
whhich = which
interfe = interfere
bilion = billion
testiment = testament
Small retail business owner here. How do I invest in growth next year, add new stores, expand inventory, try new ideas to make my business better. Or maybe just have enough money for cash flow in hard times. Its from my profit. 14 billion is a pitiful amount of money for a business the size of Walmart. I don’t see how they afford to continue the amazing momentum they have. Oh wait, it takes amazing management.
The question is worded wrong. It sounds like the margin on the individual item and that is not ludicrous because reality is it jumps all over the place. It should be what are the after tax net profits of the entire business?
This whole article and discussion is fascinating. Thank you for explaining everything in terms that I can understand and can use when debating with other people. I know what makes sense (to me) but don’t know how to explain it to someone else. I am a capitalist in what seems like a world of socialists — I just want to run around and shake people to wake them up.