This article addresses the critical question of How Much Does Dollar Tree Pay its employees and the broader implications of its compensation practices. It serves as a rebuttal to the Dollar Tree Board, urging shareholders to vote “FOR” Item 5 of the DOLLAR TREE proxy. This proposal calls for a report analyzing whether Dollar Tree’s employee remuneration and benefits policies harm the financial performance of long-term diversified investors by prioritizing company profits over the economic and social costs of inequality and racial/gender disparities.
For diversified investors, a financially insecure workforce and associated inequality could negate any profits Dollar Tree gains from low wages. The proposal aims to shed light on these conflicting interests, allowing shareholders to assess the risks linked to Dollar Tree’s compensation strategies.
Inequality in Dollar Tree’s Compensation
Dollar Tree’s CEO compensation in 2022 was $13,975,672, while the median employee earned $14,702. This places Dollar Tree’s median employee salary in the bottom 10 percent for “retail salespersons” or “cashiers,” according to the U.S. Department of Labor’s Bureau of Labor Statistics. The CEO-to-median worker pay ratio is a staggering 951:1.
While Dollar Tree argues that comparing CEO pay to full-time employees is more appropriate, even then, the median salary is only $34,221, resulting in a CEO-to-worker ratio of 408:1.
Furthermore, the Executive Chairman received stock options valued at $135,583,212 in 2022, creating a Chairman-to-median employee pay ratio of 9,222:1. Considering the substantial compensation of the seven named executive officers (NEOs), excluding the CEO, the average annual pay between 2020 and 2022 was $11,494,117, which is still 336 times the median full-time salary of a Dollar Tree worker.
Racial and Gender Disparity
Dollar Tree’s leadership (Officer and Director Level) is overwhelmingly white (81.6%) and male (75.2%). In contrast, the overall workforce is only 44.8% white and 32.2% male. This suggests a disparity where top-level pay disproportionately benefits white males, while women of color are more likely to be in the lowest-paid positions.
Failure to Pay a Living Wage
Dollar Tree lacks a minimum wage commitment, let alone a living wage commitment. Many competitors, such as Walmart ($14/hour) and Target, Best Buy, Amazon, and Costco (at least $15/hour), have made such commitments.
Information regarding Dollar Tree’s average and starting wages is often gleaned from third-party job boards. Indeed reports an average of $11.87 per hour for Dollar Tree cashiers, while Payscale indicates entry-level positions ranging from $7.98 to $15.35 per hour. These pay differences are influenced by varying state minimum wage laws.
Dollar Tree’s low starting wages fall significantly below a living wage, defined as the minimum income required to meet a family’s basic needs while maintaining self-sufficiency. The MIT Living Wage Calculator highlights that a living wage is essentially a “minimum subsistence wage.”
Dollar Tree stores are often located in areas with lower costs of living. However, even in these locations, Dollar Tree’s advertised salaries for Customer Service Representatives fall short of the living wage for a single adult with no children:
| Store Location | Living wage: 1 adult, 0 children Annual Salary | Dollar Tree Advertised Salary for Customer Service Representative |
|---|---|---|
| Jackson, MS | $36,745 | $21,600 – $27,300 |
| Clayton, NJ | $36,027 | $23,400 – $29,600 |
| Orofino, ID | $32,466 | $21,500 – $27,200 |
| Austin, TX | $37,754 | $21,900 – $27,700 |
| Manchester, NH | $36,549 | $21,900 – $27,800 |
This gap widens significantly when considering employees with children or other family members to support.
Economic Inequality as a Risk for Investors
- Diversification is essential: Investors diversify their portfolios to mitigate risk and enhance returns.
- Market performance matters: Diversified portfolios rely heavily on overall market return (“beta”) rather than the performance of individual companies (“alpha”).
- Social and environmental costs impact beta: Costs imposed on social and environmental systems by companies affect the overall economy and, consequently, beta.
Income inequality and racial/gender disparities negatively impact the economy. Research indicates that income inequality slows U.S. economic growth by reducing demand, and racial/gender gaps resulted in $2.9 trillion in losses to U.S. GDP in 2019. Addressing racial disparity could add $5 trillion to the U.S. economy over the next five years.
Economic productivity losses due to inequality reduce returns on diversified portfolios and create social costs, such as social instability and increased healthcare costs.
A U.S. Government Accountability Office report revealed that taxpayers subsidize underpaid workers through federal assistance programs like Medicaid and SNAP. The wholesale and retail trade industries have a high concentration of working adults enrolled in these programs.
Companies that contribute to inequality may see their profits overshadowed by the added costs to the economy.
Profitable strategies that harm stakeholders, society, and the environment are common. Publicly listed companies worldwide imposed social and environmental costs of $2.2 trillion annually, exceeding 50% of their reported profits.
Mitigating Costs with a Living Wage
Paying a living wage would provide Dollar Tree workers with the minimum income necessary to meet basic needs. This commitment would disproportionately benefit women and people of color, who constitute the majority of Dollar Tree’s employee base. In 2021, 65.7% of new hires were female and 60.2% were people of color.
Competitive Wages vs. A Living Wage
Dollar Tree claims to pay “competitive” wages. However, this argument overlooks the systemic risk perspective. “Competitive” pay is insufficient if employees still require public assistance to survive. The fact that the entire industry underpays its workers negates the value of simply being “competitive.”
Conclusion
Voting “FOR” Item 5 urges Dollar Tree to acknowledge its impact on the labor force and the broader economy. A comprehensive report can help the Board and management address income inequality while serving the interests of shareholders.
United Church Funds encourages shareholders to vote “FOR” Item 5, requesting a report on the external costs of Dollar Tree’s compensation and workforce practices at the Dollar Tree Co. Annual Meeting on June 13, 2023.
