The seesaw of wage-hike economics strikes again.
When Wal-Mart Stores Inc. announced in April that it would raise the minimum wage of its retail workers to $9 an hour, with plans to move those workers to $10 an hour by February 2016, proponents of minimum-wage legislation praised the move as a step in the right direction.
But as Wal-Mart's most recent earnings report showed slumping profitability, the company has now decided to offset the wage increase by more closely monitoring and, in some cases, cutting employees' hours. According to The Wall Street Journal, the move is part of an effort to reduce costs amid its recent profitability woes and make stores more efficient. The company said it will also increase staffing at core shopping hours to ensure shoppers are moved through more quickly.
All of this acts as a reminder that the nationwide minimum wage debate, which is sure to become a top talking point in the 2016 presidential election, is centered on an economic seesaw. Put weight on one end, and the other will tilt upward.
Anyone who maintains a personal monthly budget knows that increasing spending in one area likely means the need to decrease spending in another — unless, of course, you increase the money you have to spend. Profitability is down in Wal-Mart's case, so the company is forced to tighten the purse strings after increasing the money it spends on workers' wages by cutting the hours of some of those workers.
It's the classic retailer's trap, writes industry analyst Paula Rosenblum in Forbes.