Natural Economics Wages War on Wal-Mart Decision

1 September 2015 AD/17 Elul 5775

wal-mart cuts some workers hours after pay raise boosts costs

Around the country, employees demanded a “living wage”. Wal-Mart responded by raising minimum wages to $9/hour; early next year to $10. Naturally, raising wages raises costs thereby cutting profits and incentives to investors. What to do next? Cut hours. Zero sum gain for employees.

Read from Bloomberg: Wal-Mart Cuts Some Workers’ Hours After Pay Raise Boosts Costs

Wal-Mart is the low-price leader in the world. While some may scoff at its low wages, the fact of Wal-Mart’s benefit to our lowest income families is unmistakable: Wal-Mart customers save over $2,000/year over what they would pay at Kroger or other up-scale grocer.

Economist Milton Friedman warned against the good intentions of mandatory minimum wage which will have the opposite effect.

The fact is, the programs that are labeled ‘for the poor’, ‘for the needy’ almost always have effects exactly the opposite of those the well intentioned sponsors intended them to have. – Milton Friedman discussing the effects of minimum wage, dispelling the myth that it is a Good Thing.

Inevitably, Wal-Mart must raise prices to maintain investor expectations. As prices increase, market forces will drive down purchases by the company’s traditional customer which, in turn, will put pressure on the company to further reduce hours and demand more productivity from employees who will again demand higher wagers and so the inflation spiral gains momentum.

Time was when Sears, Montgomery Ward and JC Penney were on top. Today, two of these former giants gasp for breath while one has gone out of business. Time comes when Wal-Mart will follow suit.

Socialism fails every time it’s tried. Capitalism is not an economic theory, but the natural exchange of goods and services among a free people. Mandatory minimum wage artificially shapes the marketplace.

Socialism does not increase a society’s overall wealth; it shares the poverty.

John White

Rockwall, Texas

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