If advocates of a $15 national minimum wage were motivated by evidence rather than ideology, then Wal-Mart’s recent stock slide would give them pause. At least, so argues Jed Graham in a perceptive piece for Investor’s Business Daily:
Wal-Mart’s second profit warning in two months should be a wake-up call for the political left. If America’s largest private employer is struggling with its own pay increases, how will other businesses cope with even larger minimum-wage hikes?Long the scourge of progressives for its relatively low wages, Wal-Mart (NYSE:WMT) announced early this year that it would unilaterally boost its own base wage, first to $9 an hour this past April and to $10 by February 2016. […]Wal-Mart’s stock price promptly suffered its sharpest one-day sell-off in a quarter century. Shares kept falling Thursday, and edged lower Friday afternoon.The stunning hit to profitability for the nation’s biggest retailer raises serious questions about the Democrats’ economic agenda to raise the minimum wage to $12 or $15 an hour, while asking low-wage employers to provide their workers with health insurance and paid sick leave.
Wal-Mart decided that it would trade profitability for employee retention, on the assumption investing further in its workforce would raise profits over the long run. But even raising base wages from $8 to $9 had a tremendous impact on its short-term profit margin. One can only imagine the way profitability would collapse if the company were forced to wage its minimum wage to $12—or $15, or whatever number Democrats are advocating three years from now. At some point, it would simply become impossible for the business to operate.As we’ve argued again and again, the minimum wage—especially the federal minimum wage—is a blunt instrument. There are of course instances where companies’ base wages could and should be raised—as Wal-Mart is doing now, voluntarily. But this decision is best left up to management, not to federal regulators who know nothing about a company’s position or market strategy. Read Graham’s whole piece to see why federal action to double the cost of labor in a fragile economy could be devastating to American business.