Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Target announced they would raise entry wage to $15 an hour by 2020, and with the advent of the new tax reform Walmart states they too will raise their entry wage to $15 an hour by 2020.
My question is what will happen to other business that are both entry level such as McDonald's and those in a professional sector that requires a degree and is considered high risk?
Lets make a scenario (something I am horrible at).
A student who worked very hard to complete college for a better wage and lifestyle in a professional career is now in debt a good chunk of money to learn a useful trade. The market for an entry level position in the completed degree field starts between $19-29 an hour depending on location, size of business, and severity of potential health risk along with long hours.
Now big corporate retail world decided they want to raise their entry wage which will trickle down to the consumer and even other business over time. What will happen to other business industry like fast food, home delivery, and truck driving (an industry that is hurting already)? Also what would happen with the higher paid individual who has a degree? They now effectively make less due to prices increases.
Will these other industries be forced to increase their wages to keep everything in-line?
PS. Not really sure my concern and curiosity is coming across clearly.
...what will happen (with) other business that are both entry level such as McDonald's
and those in a professional sector that requires a degree and is considered high risk?!
I think it depends mostly on whether they're truly an hourly employee
or have acquiesced to some salary plan including most true special snowflakes.
As for the employee's it's mostly about how transparently their rogering is allowed/forced to be shown.
40hrs worked @ $9.50/ = $380 ÷ $11 = 35hrs worked.
Hourly? Salary? Not much difference in cost to companies either way.
Until the excess labor pool is exhausted, higher wages will make the economy grow and businesses will have more revenue and profit.
In California the minimum wage was sharply raised from $8 to $11 in just a few years. The pay hikes resulted in the unemployment rate dropping from 8% to just under 5%, despite the many armchair economists on here saying that raising the minimum wage always results in job losses.
Here's why unemployment fell while wages went up: Our economy is constrained by a shortage of money at the bottom and an excess of money at the top. Raising wages at the bottom gives the working poor more money to spend. They spend it at local businesses, who see rising demand and sales, and who then hire up to meet that rising demand.
Sadly higher wages drive the push towards increased efficiency and automation. That drives a decrease in jobs. In economics things have a trade off. Those pushing for higher salaries across the board better be ready for the potential fallout which tends to be job loses and inflation. Growing the real economy is harder than just demanding wage increases. People need to read economics books before proposing overly simplistic solutions. Today we have too many people who think they understand economy, but in reality they don't have a clue .
Something not often brought up but that is relevant in business: paying better wages can reduce employee turnover. Turnover is expensive. Retaining employees who know their job rather than perpetually retraining and getting new workers who in turn will jump ship any time they get a better offer up to speed over and over is more expensive than the slightly higher wage. It's not always wise to pay as little as possible. Target could be using this tactic to improve employee retention, loyalty and provide a better experience for customers who benefit from the increased experience of the average employee. This can help with customer loyalty in a crowded retail sector.
The hypothetical college educated person upset that retail workers aren't making less in relation to his or her job is not Target's problem.
They will just cut some hours to make up the difference. They will try to avoid passing on the expense to customers. More automation in the future but for now you won't see any drastic changes. You might have to stand in line longer or will have more trouble finding a sales person to help you due to cut hours but that's the extent of it in the near term.
An all robot future would be a cutting off the nose to spite the face situation. Yes companies can save money but if this becomes widespread the economy will tank like we have never seen before unemployment would be so widespread. The economy depends on consumers spending money. If it becomes too difficult to earn money all hell will break loose...sales will suffer and crime will go through the roof...all our remaining civility will dissolve.
Something not often brought up but that is relevant in business: paying better wages can reduce employee turnover. Turnover is expensive. Retaining employees who know their job rather than perpetually retraining and getting new workers who in turn will jump ship any time they get a better offer up to speed over and over is more expensive than the slightly higher wage. It's not always wise to pay as little as possible. Target could be using this tactic to improve employee retention, loyalty and provide a better experience for customers who benefit from the increased experience of the average employee. This can help with customer loyalty in a crowded retail sector.
The hypothetical college educated person upset that retail workers aren't making less in relation to his or her job is not Target's problem.
This isn't brought up because it's not relevant when the entire market moves up, just when individual companies do in isolation.
If Target is paying $15 and their competitors are paying $8, they will have lower turnover. Minimum wage goes to $15, and Target's turnover goes right back to what it was. This effect is zero sum; for one business to gain from it another must lose.
For a small employer, this is a simple math problem if you can get your hands on the data needed to set it up - at what level does the marginal cost of increasing wages for unskilled labor equal the marginal gain from lower turnover. For larger employers like Target or Walmart, there is an added game-theory element about whether they will move the market - going to equilibrium will backfire if it shifts upward more broadly in response to them. Which, given Walmart's follow-up, it looks like Target's move has done.
Quote:
Originally Posted by MillerThyme
Will these other industries be forced to increase their wages to keep everything in-line?
Depends by what you mean by in line. If you mean will it inflate wages for non-retail jobs paying under or very close to the new Walmart minimum? Yes. If you mean will it push up wages for people making over $25/hr or so? Not so much, that's effectively a different labor market.
edit: This is neither here nor there, but I bought a bunch of Target stock with near perfect timing at around $50 a share before the melt up but will be dumping once it's been long enough to qualify for long term capital gains. I fully expect this to compress profits if it doesn't flow into prices and/or sales if it does and the undervaluation has corrected.
Last edited by ALackOfCreativity; 01-13-2018 at 04:45 PM..
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
.
