This past week, WalMart reported an earnings decline of seven percent during the first quarter of 2015, as compared to the same quarter last year. Now, don’t get out the crying towels just yet, since Walmart still had profit of $3.54 billion during the quarter. The world’s largest retailer suggested several reasons for the shortfall: the strong dollar; a shift toward more on-line buying; shoppers pocketing tax-refunds (rather than spending them); consumers paying-down debt; unseasonably bad weather; the company’s recently reported increase in its minimum wage to $9.00; and expenses attributed to new marketing strategies.
Of all the potential reasons for the shortfall, and perhaps there are others, the media has been focusing on Walmart’s recent minimum wage, which will be further increased to $10.00 next year. The Republican Party has constantly been predicting that higher minimum wages will result in job losses. But, even at $10.00 per hour, and working a standard 50 weeks, at 40 hours per week, that would only provide an annual income of $20,000–hardly enough to live on. Most employees who work for the minimum wage, by the way, do not earn any benefits or paid vacation–not even sick days.
Predictions of job losses due to a higher minimum wage, however, are not based on any reliable studies. Unlike the wealthy, lower wage workers tend to spend their extra income. Thus, increased consumer spending expands the economy and, due to the multiplier effect, can result in even more jobs–rather than less. Higher earnings also add to the tax rolls.
Now, Walmart’s earnings report was just announced on Wednesday. I do not believe, however, that we have heard the last of blaming the increase in the minimum wage for the earnings decline. In fact, the same politicians who have been predicting the resultant job losses are many of the same people who, when President Obama pushed a watered-down Stimulus Package through Congress soon after his first Inauguration, also predicted: higher unemployment; a spike in inflation; skyrocketing debt; a bond rating downgrade and that no one would buy our Treasury bonds. None of that has happened! Rather, I believe that we will find predictions of job losses due to minimum wage increases to also be just another smokescreen from the “Right”!