After years of public pressure, Wal-Mart announced a raise in their minimum wage to $9 an hour effective last April, and again in February of next year.
And the results haven’t been pretty.
Keep in mind that these consequences occurred despite the fact that Wal-Mart voluntarily raised their minimum wage. Companies who are forced to raise their minimum wages by government have a lesser ability to adapt.
As the Daily Caller reported:
CKE Restaurants President Andy Puzder, however, notes in an opinion piece for The Wall Street Journal that even when the choice was its own, Walmart still suffered as a result. The increase was do in large part to pressure from a growing national movement demanding higher wages.
“In November Wal-Mart announced a 10% decline in earnings per share, for the fiscal year’s third quarter,” Puzder writes. “In October Wal-Mart predicted a 6%-12% decline next year in earnings per share.”
“Plummeting earnings wasn’t the plan, and presumably management took other steps it assumed would prevent the decline,” Puzder notes. “[It] lost profit because the company couldn’t offset a wage increase to $9 an hour by increasing prices, automating tasks or scheduling employees more efficiently.
Some low-profit industries like restaurants and retail have few options to offset the added cost of labor. Employers have been known to reduce hours worked or reduce the number of employees they have. Those new to the workforce or with low-skills are most likely to be cut first.
“Generally, highly compensated employees contribute more to a company’s success than minimum-wage employees, who are often less experienced and entry-level workers,” Puzder states. “That makes those jobs less valuable to the company and creates an incentive to eliminate positions.”
If America’s largest employer is having this much trouble with a minimum wage hike — and one they voluntarily implemented, no less — is there really any debate that raising the minimum wage nationally won’t hurt business?
[Note: This post was authored by The Analytical Economist]