Wal Mart's Price Reducing Tactics Essay

989 words - 4 pages

Price reducing tactics
Wal-Mart is well-known for its extremely low prices offers to its customers, not only in America, but around the world; now, over the last couple of decades, consumers are starting to realized how and why Wal-Mart can offer such low prices on its products: at the cost of its employees. For example, a 15 ounce box of Kellogg’s frosted flakes is advertised on sale for $3.49 on Jewel-Osco’s website for Park Ridge, IL, while that same box of 15 ounces of Kellogg’s frosted flakes cereal is offered on Wal-Mart’s website for Park Ridge, IL for $2.98 (jewelosco.com, walmart.com).Wal-Mart is able to offer able to offer extremely reduced prices on its products, because “much of the labor that goes into its products is that of foreigners…who get paid about 12 cents an hour”, reducing Wal-Mart’s overhead costs on the products significantly (2013, Kinsley, p.13). Another tactics Wal-Mart uses to greatly reduce its overhead costs is by paying its employees minimum wage. The federal minimum wage in the United States is $7.25, while in the state of Illinois the minimum wage is set at $8.25 per hour (dol.gov), which amounts to an annual salary of $16,500, assuming the employee is full-time and worked 50 weeks out of the year. According to Massachusetts Institute of Technology, a single adult living in Cook County, Illinois, needs to make a minimum of $10.48 per hour, working as a full-time employee, for 50 weeks out of the year, in order to be at the living wage for Cook County, Illinois (livingwage.mit.edu.). Wal-Mart employees living in Cook County, that have an annual earnings of $16,500 (IL minimum wage), are making less than the living wage, or the standard cost of living in Cook County, IL which amounts to $20,290 annually to resident in Cook County, IL. The living wage for expenses for Cook County, IL are shown below in Figure 1.1:
Monthly Expenses 1 Adult 1 Adult, 1 Child 2 Adults 2 Adults, 1 Child 2 Adults, 2 Children
Food $242 $357 $444 $553 $713
Child Care $0 $550 $0 $0 $0
Medical $145 $419 $298 $410 $383
Housing $790 $1,015 $903 $1,015 $1,015
Transportation $306 $595 $595 $686 $736
Other $83 $183 $139 $174 $196
Required monthly income after taxes $1,566 $3,119 $2,379 $2,838 $3,043
Required annual income after taxes $18,792 $37,428 $28,548 $34,056 $36,516
Annual taxes $2,998 $5,961 $4,561 $5,429 $5,812
Required annual income before taxes $21,790 $43,389 $33,109 $39,485 $42,328
(Figure 1.1) (livingwage.mit.edu)

According to Michael Kinsley’s article in The New Republic, “the average wage of a Wal-Mart ‘associate’ is $8.81 an hour. A raise to $12.50 would be 41 percent…a wage of $12.50 an hour would be $25,000 a year—just a hair above the poverty line (2013, p.13). A wage increase to at...

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