Sunday, January 31, 2016

Stark example of forced minimum wage hikes

The closure of many Wal-mart stores (with the re-establishment of new ones simultaneously) seems to provide very practical evidence of what happens when minimum wages are legislated too high.

Where the minimum wage was raised to $12.55 in Oakland, California the store closed. In the nearby city of San Leandro the minimum wage is $10 and the stores stayed open.

The difference between these three locations is the Oakland Wal-Mart has over a 25 percent difference in labor costs for entry-level employees than the San Leandro locations, says Mark Perry, an American Enterprise Institute scholar and professor of economics and finance at the University of Michigan’s Flint campus.
“Given the reality that Wal-Mart operates on razor-thin profit margins (only 2.8 percent last quarter), a 25 percent difference in labor costs for entry-level workers can be the difference between a store that turns a profit and a store that barely breaks even, or loses money,” Perry wrote.
A research fellow from the Heritage Foundation observes:

 “The true minimum wage is $0.00 an hour, Companies do not have to hire workers, and they will not pay them more than the value they create.”
That's the reality of the private sector.

Hence the movement for higher minimum or  living wages has now focused on the public sector where  economic facts take a back seat to forced wealth redistribution ideology.


aWanderer said...

yes, there is a social decency in providing a minimum wage BUT....

It can also make labour uncompetitive if the business is fighting over an export market where other players don't have the same restrictions. Extending this thinking somewhat I suspect trade groupings will start to consider minimum wage provisions for participants and further down the track similar clauses for company tax.

The other possibility is that tech overtakes this completely and prices human labour out of the picture at the low end. The conversation will change to wage subsidies or govt guaranteed minimum income.

Anonymous said...

The true minimum wage is $0.00 an hour

Actually, it's lower than that: internships, apprenticeships etc. being more cynical, studentships, "research assistants: etc.
In the real real world people will pay to work.

We need to eliminate minimum wage laws, and all benefits

Don't get me started on Labour's latest, economically illiterate, blatant, shameless bribe.
Little's right - without real degrees our kids won't be able to get jobs in Australia or the UK.

Jigsaw said...

I see that Labour estimate that their changes will result in about a 15% increase in student numbers. I wonder just what sort of courses that extra 15% of students would take? Perhaps they would want to do 'media studies' or 'marine biology' or one of the countless other courses where we already have too many graduates chasing too few positions.
Personally I have never be able to figure why the state has anything at all to do with
the minimum wage let alone setting it.