Why don’t Walmart workers walk away from low pay? Monopsony.
What determines the extent of employers’ wage-setting power? It boils down to how easily — borrowing Beyoncé’s phrase — you can “release your job” when pay isn’t good enough. But how simple is it for someone to quit Walmart if they are dissatisfied with their wage? To answer this question, my collaborators Suresh Naidu and Adam Reich and I surveyed about 10,000 Walmart workers in 2019 using a Facebook-based strategy, similar to the Shift Project . As we saw previously, Walmart, the nation’s largest private employer, has long been associated with low pay. In 2019, its voluntary company-wide minimum wage stood at $11 per hour, lagging behind competitors like Target and Costco. If paying jobs were truly easy to replace, one would expect Walmart jobs to be among the easier to quit and move on from, or market pressure would already have pushed Walmart wages to match those competitors. To make an apples-to-apples comparison, here I focus on roughly 1,300 workers earning exactly $11 in states where that wage was legal (i.e., the state minimum wage was below $11). We asked these workers how easy it would be to find a new job at least as good as their current one. The results were striking. Only 36% said it would be “very easy” or “somewhat easy” to get a comparable job — meaning nearly two-thirds felt it wouldn’t be easy at all. Even in higher-wage Northeastern states, where $11 was relatively low, 42% still said that replacing their $11/hour Walmart
Why don’t Walmart workers walk away from low pay? Monopsony.
For years, Walmart has been synonymous with low wages, a fact that has sparked debates about the company’s power to set wages and the ease with which workers can leave such low-paying jobs. To understand why Walmart workers might not walk away from their low wages, economists Suresh Naidu, Adam Reich, and their collaborators conducted a survey of approximately 10,000 Walmart employees in 2019 using a Facebook-based strategy similar to the Shift Project. The study aimed to determine the extent of employers’ wage-setting power and how easily workers could “release their job” when pay was unsatisfactory.
In 2019, Walmart’s voluntary company-wide minimum wage stood at $11 per hour, significantly lower than competitors like Target and Costco. If low-paying jobs were indeed easy to replace, one might expect Walmart jobs to be among the easiest to quit and move on from, or market pressure would have already driven Walmart wages up to match those of its competitors. To make a fair comparison, the researchers focused on roughly 1,300 workers earning exactly $11 in states where that wage was legal (i.e., the state minimum wage was below $11). They asked these workers how easy it would be to find a new job at least as good as their current one.
The results were striking. Only 36% of the respondents said it would be “very easy” or “somewhat easy” to get a comparable job — meaning nearly two-thirds felt it wouldn’t be easy at all. Even in higher-wage Northeastern states, where $11 was relatively low, 42% still said that replacing their $11/hour Walmart job wouldn’t be simple. This finding challenges the common belief that low-paying jobs are easy to leave and replace, revealing that many workers face significant barriers to switching jobs.
The quit elasticity of Walmart workers can be better understood by examining how pay affects the likelihood of leaving a job. To illustrate this, consider two fictional workers, Marta and Petra, based on real administrative data provided by the Oregon Employment Department. Marta ended up at Walmart, earning 75 cents less per hour than Petra. Despite the lower wage, Marta might not have an easy time finding another job that pays as much as her current one.
The survey results suggest that Walmart’s monopsony power — the ability of a single employer to influence wages in the labor market — plays a significant role in keeping workers in low-paying jobs. A monopsony occurs when a firm is the sole buyer of a particular labor or product, giving it substantial bargaining power over workers. In the case of Walmart, its large size and dominance in the retail industry create a situation where workers may have limited alternatives if they decide to leave.
Moreover, the survey revealed that workers’ perceptions of job availability and quality significantly impact their decision to quit. Many workers may feel that finding a comparable job is difficult, especially in areas with limited job opportunities or where the local labor market is tight. This perception of limited alternatives can make it challenging for workers to exercise their bargaining power effectively.
The study also highlights the importance of considering the broader labor market when evaluating wage-setting power. While Walmart’s wages may seem low in comparison to competitors, the ease of finding an alternative job at a similar wage can be limited. This dynamic can perpetuate the cycle of low wages, as workers are less likely to leave and push for higher pay when alternatives are scarce.
In conclusion, the survey of Walmart workers reveals that the ease of quitting a low-paying job is not as straightforward as commonly believed. The monopsony power of large employers like Walmart, combined with workers’ perceptions of job availability and quality, can create significant barriers to leaving low-paying jobs. This reality underscores the need for a more nuanced understanding of wage-setting power and the complex factors that influence workers’ decisions to stay or leave their jobs.
