Wednesday, October 14, 2015

The Minimum Wage Works!


I stand corrected. The minimum wage works.

From the Wall Street Journal:

The world’s largest retailer expects per-share profit would drop between 6% and 12% in fiscal 2017, which starts in February. The company also said Wednesday it now expects sales growth for the current fiscal year to be relatively flat. In February, the company had called for sales growth of 1% to 2%.

Shares of the retailer dropped more than 9% in midday trading—one of its biggest single-day declines—as executives revealed their targets during a meeting with financial analysts in New York. The stock has now declined nearly 30% this year and is on pace for its worst year since 1973.

The company’s chief financial officer, Charles Holley, who announced plans last week to retire at the end of December, said the company’s program to raise hourly wages accounted for 75% of the lowered earnings target. He said the company expected to spend an additional $1.2 billion on wages this fiscal year and another $1.5 billion in fiscal 2017.
I think one of the goals of the advocates of a government mandated wage is to re-allocate wealth. The 10% drop in Wal-Mart is worth about $18 billion. That is, an $18 billion loss by investors. That will pay for about 10-15 years of increased wages.

Of course, portfolios will shift, reducing their positions in Wal-mart, and other companies with similar exposure to minimum wage increases, and increasing positions to companies not so situated. And that will result in more growth capital for companies with fewer minimum wage workers and less growth capital for higher minimum wage workers. But we don't need to worry about that, none of that will make headlines. Instead we will just see fewer opportunities for low-skilled, low-experienced workers.


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