The Walmart Subsidy You Pay For

Introduction

Walmart pays starting wages as low as $14 an hour in some markets, low enough that workers qualify for Medicaid and food stamps. Walmart then collects roughly 26 cents of every SNAP dollar Americans spend on groceries. The Walton family is worth $432 billion off the back of that loop.

The Closed Loop Nobody Names

Most coverage of Walmart wages stops at the first half of that sentence. Workers earn too little, so they enroll in public assistance. That part is well-documented. The GAO confirmed in February 2021 that Walmart was a top-4 employer of SNAP and Medicaid recipients in every state it surveyed. In Nevada in 2024, 29.3% of Walmart employees were enrolled in Medicaid, the highest share of any employer in the state.

The half that rarely gets named is what happens to that government aid once it's deposited. Grocery Dive, citing Numerator panel data, reported Walmart captures approximately 25-26% of every dollar of SNAP grocery spending in the country. That's the loop: pay wages low enough to push workers onto SNAP, then capture about a quarter of the SNAP spending that flows back through the same registers. Taxpayers cover the wage gap while Walmart collects the revenue, and the Walton family, per Bloomberg's Billionaires Index (December 2024), holds more wealth than the bottom 40% of American households combined.

There's a 2014 Americans for Tax Fairness estimate that pegged Walmart's annual public-assistance cost at $6.2 billion. That figure is twelve years old, based on a 2012 Wisconsin Medicaid extrapolation, and PolitiFact rated it "Mostly False" in 2018 because Walmart had since raised wages. The current GAO data and the 2024 Nevada Medicaid share keep the directional claim intact even if the headline dollar figure is dated. Walmart's wage floor still tracks the eligibility floor for federal assistance, and that's the relationship that matters.

The 958-to-1 Number

For the fiscal year ending January 31, 2026, Doug McMillon's last as Walmart CEO, Arkansas Business reported Walmart's proxy showed McMillon earned $29.2 million in total compensation. The median Walmart employee earned $30,520 the same year. That works out to a 958-to-1 ratio. McMillon retired effective January 31, 2026, and John Furner took over February 1; Walmart's reported average frontline associate wage sat at $18.25 an hour in 2024, with starting wages as low as $14 in some markets.

For comparison, Costco CEO Ron Vachris earned $12.2 million in FY2024 against a $47,092 median worker, a 262-to-1 ratio. The median Costco worker earns $16,572 more per year than the median Walmart worker.

The wage gap upstream tracks the wealth gap downstream. The Roosevelt Institute calculated that between 2008 and 2017, Walmart returned about $121.6 billion to shareholders through buybacks and dividends, roughly 82.5% of profits. In 2024 alone, Walmart spent another $2.779 billion on buybacks. That money could have funded substantial raises across Walmart's 2.1 million-person U.S. workforce. Instead it went to existing shareholders, and the Walton family owns about half the stock.

Where Costco's Wage Bill Comes From

Here's the part that took me a while to internalize. Costco isn't paying $20 an hour minimum and $31 average because Jim Sinegal had a more enlightened theory of management than Sam Walton. It's because Costco's revenue architecture is structurally different.

In FY2024, Costco's membership fees totaled about $4.8 billion, and that line item alone represented roughly 73% of Costco's gross profit. The rest comes from product sales at margins capped at 14% (15% on Kirkland items). Walmart's gross margin runs around 24%. So Costco doesn't actually need to squeeze the product margin to hit its quarterly numbers. The membership renewal rate, running at about 93%, is doing most of the profit work.

That's why Costco can absorb higher wages without the stock cratering. A $20 minimum doesn't blow up the model when the model isn't built on product markups in the first place. Costco's employee turnover sits at about 6-8% versus a retail industry average of around 60%, retention after one year is 94%, and 87% of Costco's salaried managers (per CEO Vachris) started as hourly employees. The high-wage strategy pays for itself in lower recruiting and training costs, but it only pencils out because the membership fee pool exists to underwrite it.

Walmart doesn't have that pool. Its margins come from product sales, and product sales are sensitive to wage costs. Raising wages to Costco levels would mean either raising prices, accepting much thinner margins, or both. Shareholders won't wear that, so the cost gets pushed onto the federal budget instead.

Costco Isn't a Saint Either

The Costco-as-good-employer narrative isn't false, but it isn't pure either. In late 2024 and into 2025, Costco entered Teamsters contract negotiations covering 18,000 workers. According to the Teamsters, Costco rejected approximately 98% of the union's proposals, including language on seniority, paid family leave, bereavement, sick time, and anti-surveillance protections. Talks broke down over a card-check agreement. A threatened strike at 56 stores was averted in February 2025 with a tentative deal.

Costco pays better than Walmart and fights its unions hard for the same underlying reason. The wage gap tracks what the financial model can sustain, and the labor philosophy follows from there.

There's another wrinkle worth naming. Walmart owns Sam's Club, which runs on the same membership-fee model as Costco. Sam's Club scored an 85 on the 2025 ACSI, equal to Costco's 2024 score, well above core Walmart's 75. The assumption that Walmart corporate is uniquely bad gets complicated when the same parent company runs a high-satisfaction membership warehouse alongside the low-margin big-box stores.

Who Benefits

The Walton family, primarily. Walmart's reported FY2024 net income was about $15.5 billion, and the Walton family controls roughly half the company's stock. Every dollar in labor cost Walmart absorbs is a dollar that doesn't flow to share buybacks, dividends, or stock-price appreciation, and the Walton family's $432.4 billion fortune is largely the cumulative result of decades of those flows. The 958:1 CEO pay ratio shows who runs the operating layer; the buyback totals and the Walton wealth ranking show where the cash settles.

Walmart shareholders also benefit from the ability to suppress organizing. Between 2000 and 2005, NLRB regional directors issued 39 complaints against Walmart, per Human Rights Watch, with dozens more in recent years. Walmart has closed stores or departments rather than recognize union representation, and zero of the company's roughly 4,700 U.S. stores has unionized. That keeps wage pressure manageable, and it means nothing inside the company is pushing the wage floor away from the SNAP eligibility line.

Taxpayers are the silent counterparty. The federal government covers the gap between what Walmart pays and what its workers need to live, through SNAP, Medicaid, EITC, and Section 8 housing assistance. Then a quarter or so of that SNAP spending lands back at Walmart's registers. None of this is illegal, and most of it isn't even contested at the policy level. It's a closed loop that nobody has decided to break.

What the Costco-vs-Walmart Split Is Actually Picking Up

The Costco-vs-Walmart split in public perception isn't a culture war artifact. It's tracking something structurally real, even if the people doing the tracking would mostly describe it as "Costco treats people better." What they're actually picking up on is the difference between a model where labor is a cost center subsidized by taxpayers and one where membership fees create enough buffer to treat labor as a managed input instead of a margin enemy.

The 2024 DEI controversy and the ACSI gap accelerated the perception, but they're not the cause. Walmart dismantled its DEI programs in November 2024 under pressure from anti-DEI activist Robby Starbuck; Costco defended its DEI programs through a January 2025 board statement; a coalition of 30+ shareholders representing $266 billion wrote to McMillon calling the move "disheartening." Those headlines amplified an instinct that already existed because the underlying gaps in wages, turnover, customer satisfaction, and CEO pay had been showing up in data for years.

Whether anyone names the actual mechanism in a way that affects policy is a different question. The minimum wage debate doesn't address it. The SNAP capture share doesn't show up in any standard regulatory disclosure at the corporate level. And there's no live federal proposal to set a wage floor at the level that makes a full-time worker ineligible for federal assistance, which would be the obvious fix if the loop were the thing being targeted in the first place.

The Bottom Line

Walmart's "everyday low prices" come with a line item the receipt doesn't show. Some portion of every dollar saved at the register is funded by the federal programs that keep Walmart's underpaid workforce housed and fed, and roughly a quarter of that SNAP spending circulates straight back to Walmart's registers. The Walton family's $432 billion is what sixty years of that loop produces.

Costco shows the alternative is possible, just not under the same architecture. Membership fees buffer higher wages, and the lower turnover that follows makes those wages cheaper than they look at the gross-cost level. Scaling that to Walmart's 2.1 million-employee footprint would require a ground-up financial restructuring, and nobody is proposing that. So the question worth asking is why Walmart's wage floor sits exactly where SNAP eligibility begins, and what that says about who the system was built to underwrite.