More on Wal-mart and the Minimum Wage

Last week, I posted on why Wal-Mart may be calling for higher minimum wages, and hypothesized that it may be because it won't hurt them (since they already pay well higher than the minimum) and may hurt competitors.  Llewellyn Rockwell of the Mises Institute, one of the few people in America with three sets of double-L's in his name, expands on this hypothesis:

The current minimum is $5.15. According to studies, Wal-Mart pays between
$8.23 and $9.68 as its national average. That means that the minimum wage could
be raised 50% and still not impose higher costs on the company....

So who would it affect if not Wal-Mart? All of its main competitors. And the
truth is that there are millions of businesses that compete with it every day.
Many local stores have attempted to copy Wal-Mart's price-competitive model, but
face lower costs and can actually thrive....

Even similar stores such as K-Mart can pay lower wages, and that can make the
margin of difference. K-Mart pays over a much wider range, as low as $6.75 an
hour. A major competitor is mainstream grocery stores, where workers do indeed
start at minimum wage. Target too pays starting employees less than Wal-Mart, if
the Target Union can be

Now, if Wal-Mart can successfully lobby the government to abolish lower-wage
firms, it has taken a huge step toward running out its competition. The effect
of requiring other firms to pay wages just as high as theirs is the same as if
the company lobbied to force other companies to purchase only in high
quantities, to open large stores only, or to stay open 24 hours. By making
others do what Wal-Mart does, the company manages to put the squeeze on anyone
who would dare vie for its customer base.

Now here is the great irony. The left has long been in a total frenzy about
how Wal-Mart saunters into small towns and outcompetes long-established local
retailers. Wal-Mart's opponents have whipped themselves into a frenzy about the
company's success, claiming that it always comes at a huge social cost.

Now, most of this rhetoric is overblown and ignorant. Wal-Mart would not have
made any profits or grown as it has without having convinced the consuming
public to purchase from the store. Consumers could put the company out of
business tomorrow, just by failing to show up to buy.

The left's claims of unfair practices would be valid if Wal-Mart did indeed
work to impose legal disabilities on its competitors "” in effect making it
illegal to outcompete the company. And yet that is precisely what raising the
minimum wage would do: impose a legal disability on those companies engaged in
lower-wage competition with Wal-Mart. So the economically ignorant left
advocates raising the minimum wage.

One Comment

  1. DeeDee:

    I'm posting this on my website, I hope you don't mind. Thanks.