Wal-Mart and Minimum Wage

Chuck Asay drew a cartoon titled News Item: Wal-Mart Chief Asks Congress To Raise The Minimum Wage in which Mr. Asay writes:

• ...Wal-Mart already pays its workers an average wage of close to $10 an hour!, and
• That Wal-Mart wants to force small stores out of business by doing so.

According to Lee Sustar in Taking on Wal Mart (June 25, 2004)

... Wal-Mart’s unwillingness to pay a living wage. According to a study by Forbes magazine, Wal-Mart employees earn an average hourly wage of $7.50. That works out to roughly $15,000 a year--right at the federal poverty line of $15,060 for a family of three. ...

...

Employees aren’t the only people squeezed by the Wal-Mart machine. According to a study by the research group Good Jobs First, Wal-Mart extracted at least $624 million in government subsidies for its big distribution centers--in the form of infrastructure improvements, tax credits, financing, job training and more.

The subsidies are justified in the name of job creation. Yet Wal-Mart typically destroys jobs as well, driving out smaller competitors. "When they go in, they simply redistribute retail revenue," Phillip Mattera, one of the authors of the study, told Socialist Worker.

Emphasis Mine

Mr. Asay's contentionsre echoed in WSJ.com - Wal-Mart Urges Congress to Raise Minimum Wage says:

The proposal to lift minimum wage is particularly likely to raise eyebrows. Though Wal-Mart pays above the current $5.15 an hour minimum wage -- the average hourly wage among its 1.3 million U.S. workers is just under $10 an hour -- some of its smaller competitors don't pay as much. As a result, a boost in the minimum wage could pressure the profitability of Wal-Mart competitors.

"This makes it look like they're doing something for labor, but with little cost to themselves," says Lawrence Katz, professor of economics at Harvard University, Cambridge, Mass.

But [Wal-Mart CEO] Mr. Scott, noting that minimum wage hasn't changed in almost a decade, described Wal-Mart's core customer base as finding it increasingly difficult to afford basic necessities between paychecks.

"We simply believe it is time for Congress to take a look at the minimum wage and other legislation that can help working families," he said./p>

Emphasis Mine

Mr. Scott has realised that poor people do not spend much. Increasing the amount of money poor people have will increase the sales of companies like Wal-Mart. So, it must be good for business. But all of the criticisms levelled at Wal-Mart over this concern the cost to business. People like Mr. Asay and Prof. Katz do not think this far. They think that by simply lowering costs, sales will increase and therefore profits without realising that there is less money to spend.