Walmart employee – Increasing the wages of Walmart employees tends to make the company and their employees better.
Will Walmart’s income increase employee salaries? Minimum wages are one topic that seems to divide economists and other societies. Proponents argue that low-income households are entitled to decent wages and underestimate the gap between CEOs and lower employees. Economists see minimum wages as a price floor and, like all floor prices, it leads to suboptimal supply – in this case, less work.
Wal-Mart Stores, Inc. (WMT) made waves in 2015 by announcing graduates’ wage increases for all the lowest income employees. According to the company’s press release, the initial price for Walmart employees will be $9 per hour until February 2016, when rates will jump to $10 per hour.
Each student who took the Econ 101 course learned about the First Law of Demand, which states that people demand less because they are more expensive. This even applies to labor wages. At first glance, it looks like Walmart will have difficulty maintaining all 1.4 million members of the workforce if it should be possible for a higher starting wage, especially given that profit margins are often less than 3%.
In an economic sense, Walmart is currently demanding 1.4 million workers. If the cost of workers goes up, it makes sense that Walmart will sue fewer workers instead.
Why Walmart Increases Its Wages
Walmart does not have to increase its wages; it does it voluntarily. Wages increase due to competition.
The last straw in Walmart’s wage increase – which has been considered for a while – is news that Gap will increase its minimum wage to $9 per hour in 2014 and rise to $10 per hour in 2015. Walmart, which has a high turnover rate, sees employee exodus to Gap and other paid retail stores are higher.
There are also questions about overhead. High turnover leads to more recruitment and training costs. This causes a lack of cohesion on the floor and results in lower average productivity among employees.
Although wage increases are expected to burden Walmart more than $2 billion, some of these costs can be compensated for by lower turnover. When employees stay longer – especially top employees who are more likely to go to pursue a raise – they become more productive at their jobs.
It is conceivable that Walmart will begin to shift from a low-skilled and automated workforce, such as its own checkout counter. However, increasing productivity and reducing training costs must support higher wages. What’s more, Walmart will now put more pressure on competitors in the low skills retail market.
Minimum Government Wages
It’s a little wrong to say Walmart raised its minimum wage. The floor where Walmart can pay its employees does not really increase; companies can decide to reduce wages again in 2017.
The real minimum wage can only come from the government. When a private business chooses to pay higher wages, he knows that the business can afford it. When the federal government applies a top-down approach, there are many businesses that struggle with that change.
Increasing minimum wages leads to unwanted consequences. This leads to unemployment, especially among the least skilled workers. This disproportionately hurts teenagers and adults without a bachelor’s degree. This leads to higher prices for consumers and reduces revenue for shareholders.
Suppose a 10% increase in minimum wages forces a company to lay off 5% of its workforce. Employees who are likely to lose their jobs are the least skilled, least productive, and least experienced. As a result, the government’s minimum wage is a transfer of wealth from the lowest to the low-skilled.
Increasing Walmart’s wages is likely to make the company and its employees better. Government mandates often have the opposite effect. https://bit.ly/2UBVU5m