Why a Minimum-Wage Hike Could Be Good for Wal-Mart

The retail behemoth might not feel much pain from a hike, but some of its competitors would. 
Reuters

Wal-Mart, the bête noire of American labor unions, the king of all low-pay retail, might be kosher with the idea of a minimum wage hike. At least, management says it won't try to block one.

Company spokesman David Tovar tells The New York Times that the company has "decided not to take a position on minimum wage proposals," so long as they don't single out specific employers like the bill it opposed in Washington, D.C., that would have only raised wages at big-box stores.* 

If you assume that Wal-Mart is hell-bent on paying its associates as little as possible, its casual attitude here might seem surprising. But it's not really. The company previously backed a minimum wage increase in 2007 and has good reasons to be at ease with the idea today.

First, while most of Wal-Mart's associates don't earn much, the do generally make more than the minimum. Wal-Mart's official figures bounce around a bit, but in November Tovar told me the average hourly worker, not including supervisors, earns $11.83 an hour. In 2011, meanwhile, the Center for Labor Research and Education at the University of California, Berkeley, estimated that almost 80 percent of their hires earned more than $9.00 per hour.

That's one reason why, as Lydia Dypillis notes, "Wal-Mart is much better able to absorb a minimum wage increase than its smaller competitors," which are more likely to rely on bonafide minimum wage, opposed to merely low-wage, employees. So long as the cost of labor rises for everybody, at least within certain limits, Wal-Mart doesn't have much reason to sweat. Now, if the minimum suddenly shot up so everybody had to pay on a Costco wage scale, that might be a problem for its business model. But the Berkeley paper estimated that if the behemoth from Bentonville were to raise its pay all the way to $12 an hour, it could pass the entire cost onto consumers while raising prices just 1.1 percent for its average shopper. 

Which most of those shoppers probably aren't going to notice, especially if a minimum wage hike puts extra money in their pockets. This week's CBO report calculated that, even accounting for job losses, real incomes would rise by about $35.5 billion for families earning less than six-times the federal poverty line, or about $141,000 a year for a family of four. Much of that money would likely go straight back to Wal-Mart, whose sales have overwhelmingly come from families earning less than six figures (chart from the Berkeley paper, based on Nielsen data).

So to recap, a minimum wage hike would likely hurt Wal-Mart's competition more than Wal-Mart, and much of what it lost in higher payroll it would stand to gain back in higher sales. If anything, the surprising part is that the company isn't more excited about the idea. 


*Asked by Bloomberg whether the company would support a national increase, Tovar reportedly said: "That’s something we’re looking at. Whenever there’s debates, it’s not like we look once and make a decision. We look a few times from other angles.” I checked with Tovar, who clarified that the company had only decided not to oppose an increase, and said he was "not sure how or why Bloomberg made such a leap to say we are 'looking' at supporting a minimum wage increase." 

Presented by

Jordan Weissmann is a senior associate editor at The Atlantic.

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