Want to Know What $15 An Hour Minimum Wage Means? Ask Wal-Mart

 

IBDEditorials.com

Wal-Mart employees and union supporters rally for better pay and benefits outside a store in Boynton Beach, Fla., on Nov 23, 2012. AP

Labor: Wal-Mart's politically driven decision to raise its workers' pay is a major reason for its financial woes. Maybe now Americans will think about what the same thing would mean if it were imposed on the entire U.S. economy.

As IBD's Jed Graham reported Monday, Wal-Mart's recent earnings warning is due largely to the company's decision to unilaterally raise its wages.

For the record, we have no problem with wage hikes. But when it's done for political rather than economic reasons, it's always a mistake.

It's hard to blame Wal-Mart. In recent years, the retailing behemoth has been subjected to nonstop hard-left criticism for its low wages. The criticism stung.

So earlier this year, the company announced it would raise its own base wage to $9 an hour in April and to $10 an hour as of February 2016. Very generous.

But last week, the Benton, Ark., discounter issued its second warning about profits in two months, saying that it expects a 6%-13% drop in earnings next year as a result of its higher costs.

Wal-Mart's shares didn't take it lightly, plunging 10% in just a day — a $21 billion loss for shareholders.

Contrary to the propaganda of unions and their media toadies, Wal-Mart's profit margins are razor-thin — about 3.6% in 2013. Now, due to higher wage costs and ObamaCare, its margins will shrink below 3%.

It's strange that Wal-Mart's poor results surprised investors. After all, earlier this year, after its wage hikes were announced, Wal-Mart quietly revealed plans to lay off 1,000 workers at its headquarters.

Then, in April, it announced it would close five stores for "plumbing" problems, idling 2,500 more workers. No doubt, as the company's margins are squeezed further, more layoffs will come.

Unfortunately for its critics, Wal-Mart already pays its workers more than the comparable average for retail workers, as a 2014 National Bureau of Economics Research study showed. That never stops the criticism.

Meanwhile, anti-Wal-Mart activists also ignore the discount chain's massive economic benefits to the U.S. economy. A 2005 study by Global Insight found WalMart saved American families — even those who don't shop there — $2,500 a year, or some $287 billion total.

Even so, Wal-Mart is a test case for what unions and their "progressive" allies are now trying to foist on all of us: A job-killing hike in the U.S. minimum wage to $15 an hour from $7.25. Don't expect a different outcome. It will kill millions of jobs and raise minority youth unemployment dramatically.

We've already seen what such big wage hikes have done to cities such as Seattle, San Francisco and Oakland. Massive mandated hikes in the minimum wage have caused businesses to close, killed jobs and lost many others their long-cherished benefits as employers scramble to offset sharply higher wages.

A doubling of the U.S. minimum to $15 an hour will mean the Wal-Mart-ization of America — job losses, benefit cuts, closed stores and a lower standard of living for all. But at least the far left will feel good.