Feb. 27 (Bloomberg) -- Mitt Romney says the U.S. can be “the best place in the world to be middle class again” and points to his hand in founding companies such as Staples Inc. and The Sports Authority Inc. to show he can create jobs to get people there.
While these retailers provide salaried positions, including store manager, that offer a path to the middle class, the majority are hourly jobs that don’t. Sales associates at the two chains make less than $9 an hour on average, according to survey data from Glassdoor.com. At that rate, which is common in the industry, someone working 40 hours a week would earn below the poverty line of $19,090 for a family of three.
“Some people in those companies in management do fine,” said Stephanie Luce, who studies low-wage labor issues as an associate professor at the City University of New York’s Murphy Institute. However, “the way to make a living wage is to get into a management position, and there are very few of those.”
According to the Bureau of Labor Statistics, more than 60 percent of workers in office supply and sporting goods stores are salespeople or cashiers, who are generally paid even less.
While Romney, a former private equity executive, has pegged his bid for the Republican presidential nomination on aiding the middle class, the bulk of the retail jobs he touts underscore the widening income gap that can hold workers back from reaching that status.
Retail sales positions are among the fastest-growing and lowest-paid jobs in the U.S., according to the BLS, and are often replacing better-paying manufacturing jobs. The average compensation, including benefits, across all retail jobs, from chief executive officer to clerk, is $17.15 an hour, the bureau says, compared with $32.95 an hour for manufacturing.
Because in some cases the big retailers forced smaller mom-and-pop stores out of business, it’s unclear how much they have ultimately contributed to higher employment.
Staples, based in Framingham, Massachusetts, and Sports Authority of Englewood, Colorado, pay sales associates almost $3 an hour below the retail industry average of $11.92, excluding benefits. They aren’t alone among so-called big-box retailers. Sales associates at Office Depot Inc., Dick’s Sporting Goods Inc. and Wal-Mart Stores Inc. are also paid an average of less than $9 an hour, according to Glassdoor, an employment website that has collected salary information on 150,000 companies.
That’s less than the hourly pay for filing clerks, $12.88; street vendors, $13.13; electrical manufacturing, $15.56; and the average wage for all workers of $21.35 an hour, according to the BLS.
Staples offers its workers access to medical coverage, a 401k retirement plan with a company match program, discounted stock purchases and tuition reimbursement. The chain declined to confirm if part-time employees have access to those benefits. Closely held Sports Authority declined to offer any details on its benefits.
One publication, Corporate Responsibility Magazine, ranked Staples 55th in its list of top 100 companies in the Russell 1000 Index, with high marks for employee relations. The group measures companies across seven categories based on public disclosures.
Romney’s experience at Bain creating jobs at companies like Staples gives him the skills “to focus on job creation and turn around our nation’s faltering economy,” Andrea Saul, a spokeswoman for the onetime Massachusetts governor, said in an e-mail.
Owen Davis, a spokesman for Staples, and Liz Brady, a spokeswoman for Sports Authority, declined to comment.
Attacked on Record
When rivals for the Republican nomination for president started attacking Romney for cutting employment at the companies controlled by Bain Capital LLC while he was CEO, he defended himself by saying he helped create more than 100,000 jobs. He counted the combined current employment of both companies after Bain was part of the initial investment group at the chains in the 1980s and he served on both boards.
How much Romney was involved at the companies and what level of credit he should get for current employment figures -- 90,000 at Staples and 15,000 and Sports Authority -- is a matter of debate.
Bain didn’t discover the entrepreneurs who came up with the ideas for the chains, wasn’t their first investor, and ended its stake in the companies well before they grew into the national retailers they are today. Romney did return to the Sports Authority board for about four years in the 1990s and served as a director at Staples through 2001.
Kmart bought Sports Authority in 1990, less than three years after it was founded. It had eight stores at the time of the deal and now has more than 450. Kmart spun it off into a public company in 1994 and then it merged with Gart Sports Co. in 2003.
Staples had its initial public offering in 1989, about four years after it began. It had fewer than 30 locations at its IPO and now has more than 2,000 as the largest U.S. office-supply chain.
Romney has also frequently cited Domino’s Pizza Inc., and to a lesser extent mentioned childcare chain Bright Horizons Family Solutions LLC, as companies where he helped create jobs. Romney didn’t serve on the board of either company.
Bain bought the pizza-delivery chain in September 1998 when it had more than 6,000 locations. Romney left Bain in February 1999 to serve as CEO of the 2002 Winter Olympics in Salt Lake City. Domino’s went public in 2004 and now has more than 9,000 locations.
Bright Horizons was founded in 1986, and Bain Capital was one of the first investors. The company went public in 1997. It then merged with Corporate Family Solutions in 1998, almost doubling the size of the company to 8,600 employees.
Bain Capital bought Bright Horizons for $1.3 billion in 2008. It now has about 15,000 full-time U.S. workers with 85 percent being preschool teachers, according to spokeswoman Ilene Serpa. The average annual pay for an entry-level teacher is about $30,000. Employees have access to medical coverage, 401k matching funds and tuition reimbursement, she said. The average preschool teacher in the U.S. earns $25,530 a year, according to the BLS.
Romney’s role in the founding of Staples and Sports Authority was one of a senior adviser, according to people who helped found the companies. While he wasn’t involved on a daily basis, he did more than write a check, they said.
“Mitt was very helpful in making it all come together,” said Paul Korian, who served as Staples original head of merchandise. “He absolutely helped create jobs.”
As head of Bain Capital, Romney offered advice as a board member of the companies on pursuing growth and building consensus on decisions. He also helped recruit retail executives and investors.
“He doesn’t get emotionally involved,” said Scott Meadow, who served as lead investor on the Sports Authority deal for William Blair & Co. and is now a professor at the University of Chicago Booth School of Business. “He’s able to convey ideas in a very succinct and precise manner that is persuasive.”
Such was the case in 1987 as a group of venture capitalists and retail executives trying to create a sporting goods chain had come to an impasse over what to call it. Some liked Jack’s, after CEO Jack Smith, while others preferred All Sports.
As they debated, Meadow said, someone from the ad agency the company hired happened to visit New York and caught a glimpse of a sign for the Port Authority, inspiring the idea for The Sports Authority. Still divided, the group deferred to Romney to break the stalemate. He chose the new name and convinced everyone to support it.
‘More Than Money’
“He brought something more than money to the table,” said Roy Cohen, the original head of merchandising for Sports Authority and another participant in the meeting where the name was debated. “He’s probably one of the three or four most intellectual people I’ve dealt with across the conference table,” said Cohen, a self-described liberal Democrat. “Was Mitt responsible for the success at the Sports Authority? Certainly, but not by himself.”
By helping start Staples and Sports Authority, Romney also had a part in ushering in the era of big-box chains that transformed the retail landscape in the U.S. from one of regional chains and independent stores to one dominated by national companies. Known as category killers, the formula of low prices and high sales volume generated by the larger stores put smaller competitors out of business.
Helping Small Businesses
Big boxes did bring down prices for consumers, and in the case of Staples lowered the costs of office supplies for thousands of small businesses. The growth of big-box chains has also improved retail jobs, according to Kathryn Shaw, a professor of economics at the Stanford Graduate School of Business who has studied the subject.
Large retailers offer entry-level workers better pay, more promotion opportunities and better benefits, Shaw said. She pointed to Census Bureau data that showed a worker with only a high school education was paid an average of about 20 percent more at a large retailer than a small one.
“We see the spread of modern retail as being advantageous for some,” Shaw said. “With the dwindling of manufacturing jobs, many people are finding these jobs to be their career job, and those who do get promoted into these positions can make reasonably well-paid income.”
While creating employment by taking share from other companies is a successful business strategy, it might not be the best example for managing the U.S. economy, said Heidi Shierholz, a labor-market economist at the Washington-based Economic Policy Institute, which supports policies to help lower- and middle-income workers.
“A business person can be considered to be doing great work if no net jobs are created, and they grow at the expense of another business that falls off,” Shierholz said. “What a president needs to think about when creating jobs is very different than what a business person needs to think about.”
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