Walmart Rolls Back Hours
This April after experiencing years of attacks from progressives, Walmart announced it would spend more than $1 billion to increase salary and training for its employees. As a result, Walmart increased its minimum wage to $9 per hour and announced it would increase it to $10 per hour in 2016.
However, it was just reported that Walmart has had an 8.2 percent decrease in income this year, which can in part be contributed to the cost of increased wages.
As a result, Walmart executives ordered the hours for employees to be cut to save money. Bloomberg reported the following:
Regional executives told store managers at the retailer’s annual holiday planning meeting this month to rein in expenses by cutting worker hours they’ve added beyond those allocated to them based on sales projections.
The request has resulted in some stores trimming hours from their schedules, asking employees to leave shifts early or telling them to take longer lunches, according to more than three dozen employees from around the U.S. The reductions started in the past several weeks, even as many stores enter the busy back-to-school shopping period.
Chief Executive Officer Doug McMillon is trying to balance a desire to improve service — partly through increased spending on his workforce — against investors’ pressure to keep profit growing.
Of course this embarrassing episode is not the first for Walmart. In 2009, the CEO of Walmart signed a letter with the head of the SEIU and the Center for American Progress in support of President Obama’s healthcare efforts.
However, in 2012 it was reported that Walmart was eliminating healthcare coverage for 30,000 part-time employees in order to save money due to Obamacare increasing healthcare costs for the company by $500 million.
The problem with these moves by Walmart is while they may be able to temporarily escape their critics, they cannot outrun simple economics. Increasing the minimum wage may seem like a tool to raise low-income workers out of poverty, but it inevitably hurts the very people it is intend to help.
When higher wages are mandated, employers face higher labor costs and are forced to respond by decreasing other costs – like cutting workers hours or eliminating jobs. As these employers cope with the increased costs of a mandated wage raise, they often respond by cutting the jobs available to less-experienced and less-educated employees. The result is that these individuals, who already have few employment options, find it more difficult to get a job.
The main conclusion of more than seven decades of research is that minimum wage increases tend to reduce employment. One review by economists David Neumark and William Wascher shows that 63 percent of studies found relatively consistent evidence of negative employment effects on minimum wages. Further, 85 percent of what they deem the most reliable studies point to negative employment effects.
For more information on the negative effects of mandated minimum wage increases, check out ALEC’s publication: Raising the Minimum Wage: The Effects on Employment, Businesses and Consumers.