As the busiest shopping season of the year approaches, Wal-Mart's overall revenue and profits are down yet again. This week's earnings report follows the worst stock decline Wal-Mart has experienced in more than 15 years – when management warned investors to expect a 6 to 12 percent decline in earnings per share over the next year. This has prompted some critics to attack the company's plan to invest $1.5 billion next year raising starting wages to at least $10 an hour. But paying workers enough to live on without food stamps is hardly a radical idea, and it's one that will likely boost Wal-Mart's sales even further. The actual problem is that it doesn't go far enough.

I'm a hardcore capitalist; I've founded or funded 35 companies across a range of industries, and I can say without a doubt that fair compensation is not only good for Wal-Mart's employees, it's actually good for business, good for investors and good for the American economy as a whole. The fundamental law of capitalism is that when workers have more money, businesses have more customers – and when businesses have more customers, they hire more workers. It is this positive feedback loop between customers and businesses that is the fundamental driver of economic growth.

The real threat to Wal-Mart's profits isn't higher wages; it's stagnant consumer demand. And as the nation's largest employer, Wal-Mart's own predatory employment practices have played a major role in hollowing out the middle-class customer base on which Wal-Mart relies. At the same time the Walton heirs and I are thriving beyond the dreams of any plutocrat in history, the rest of the country – the 99.99 percent – is lagging far behind. Wal-Mart workers and their families are living paycheck to paycheck, relying on government assistance to pay their rent, purchase their health insurance and put food on the table.



Profits are down at the retailer not because wages are finally ticking up, but because workers at Wal-Mart and other low-wage companies can no longer afford to shop enough to sustain Wal-Mart's growth. Quite simply, when the American middle class has less money, America's largest retailer has fewer customers. And that is very bad for business.

But better-paid workers don't just make for better customers – they also make for better workers, a desperately needed improvement for a chain that has developed a reputation for messy stores and poor service. In a recent blog post, Wal-Mart CEO Doug McMillon defended his decision to invest more in workers by citing a dramatic increase in associate engagement and customer satisfactions scores – along with a corresponding increase in same-store sales – since raising the company's minimum wage to $9 an hour in April. "We will continue investing in our people," McMillon wisely declared, "Bottom line – it's working."

But that alone is not enough. If Wal-Mart wants to continue growing and thriving, it must also engage proactively, decisively and publicly in the national effort to substantially raise the minimum wage for all American workers. Because when every worker is paid a livable wage, every business benefits from increased consumer demand and every taxpayer is relieved of the burden of picking up the tab for the working poor.



Over the past decade Wal-Mart has spent an average of $6.5 billion a year on stock buybacks, an amount roughly equivalent to the estimated $6.2 billion the company's 1.4 million employees cost U.S. taxpayers every year in food stamps, Medicaid, subsidized housing and other public assistance. As a Wal-Mart worker wrote recently, "Despite working hard to make Wal-Mart a successful company, I come home to an empty kitchen most nights. Though investors may feel like they lost a lot, I can barely afford groceries."

An economy where giant profitable companies pay their workers poverty wages and taxpayers make up the difference isn't capitalism. It's socialism – for the rich.

It doesn't have to be this way. Last year, Wal-Mart earned more than $25 billion in pretax profit. If it had paid each of its 1 million lowest-paid workers an extra $10,000 a year, it would have been enough to raise them all out of poverty, enabling them to, of all things, afford to shop at Wal-Mart. And the company still could have earned more than $15 billion pretax, without raising prices a penny.

But if Wal-Mart wants to truly act in the best interest of itself, its workers and its shareholders, the company should do more than just raise wages and benefits for its own employees – it should publicly back an increase in the national minimum wage to at least $12 an hour. A federal minimum wage that guarantees all Americans a livable income will benefit the economy as a whole. But in the long term, no business would benefit more than our nation's largest retailer, Wal-Mart.