Last week, Wal-Mart made headlines when it announced during its fourth-quarter earnings report that it would be raising the pay of 500,000 retail outlet workers across the United States.
In April, hourly associates will be earning $9 per hour and by early next year all current associates will be given a wage of at least $10 per hour. When it comes to department managers, they will be paid a minimum wage of $13 per hour this summer and then that will be boosted to $15 by early next year.
At the present time, the average Wal-Mart associate earns $12.94 per hour.
“After all, we’re all associates. We have different roles at different times in our career and every one of them is important,” wrote Doug McMilon, Wal-Mart CEO, in a blog post. “Today’s cashiers will be tomorrow’s store or club managers. Today’s managers are tomorrow’s vice presidents. Tomorrow’s CEO will almost definitely come from inside our company.”
Although this is being celebrated by many, Peter Schiff, CEO of Euro Pacific Capital, says a higher minimum wage at the retail juggernaut will mean fewer employment opportunities for its current slate of employees or potential applicants.
Schiff, who made a video outside a Wal-Mart store last year mockingly calling for $15 minimum wage, told Yahoo! News that this will prompt Wal-Mart to start cutting back on any hiring plans it has in the near- or long-term.
“Ultimately, it’s going to cause Wal-Mart to cut back on hiring. I mean, if it has to pay higher wages, it may decide just to have fewer job opportunities,” said Schiff. “When Wal-Mart has a job opening, they get inundated with applicants. I mean, this is going to make it even harder to get a job at Wal-Mart. Because if people were lining up for Wal-Mart jobs before, they’re obviously a lot more attractive now at these higher wages.”
The pay hike could also pose harm to low-income customers who patron Wal-Mart because of its low prices. Any spike in pay, says Schiff, would be passed onto the consumer.
“They may end up passing on some of that extra cost to their customers,” he added. “It’s not all going to be about lower profits at Wal-Mart. It also could be about higher prices for Wal-Mart customers. And of course, many of those customers are low-income workers themselves.”
Finally, the higher pay may backfire and prompt Wal-Mart to lose customers as they would seek out alternatives where the business pays its staff lower wages but in turn charges lower prices. This would then result in Wal-Mart tapering its workforce.
“They might pay higher wages, but they may pay them to fewer people,” Schiff averred. “And it will be harder to get a job. So pretty soon, you might have to have a connection to get a job at Wal-Mart.”
At the time of this writing, Wal-Mart stock (NYSE: WMT) is trading at just under $85 per share.
Schiff is an idiot. Walmart isn’t doing this because of some government mandate. This is the free market choosing to pay employees a little more so that they get better production. If this was going to negatively impact Walmart’s prices or hiring practices they wouldn’t have done it.
This wasn’t forced by the government. Walmart obviously knows the impact this is going to have and they choose to do it anyway. Walmart operates on low margins they know they can’t pass a small but modest pay increase onto their customers. Obviously they calculated that the improvement to their public image and the lower turnover and higher production rate would off-set the money given to their workers.