While we further destroy the economy, federal budget, and many human beings as we march to war in Syria, domestic economic stupidity has not abated. The Huffington Post’s lead headline story under “Business” yesterday, trumpeted “FOR YOUR OWN GOOD: The Solution To Walmart’s Problem Is Right In Front Of It.”
Click on the link and on finds yet another article praising the salvation that comes through minimum wage law being raised.
“President Barack Obama wants workers to make more money. Walmart and other low-wage employers also want to make more money. They could both get what they want if the federal minimum wage goes up. While there’s little research on the effects of a minimum wage hike on company profits in the U.S., some studies suggest that raising the minimum wage during an economic downturn could boost sales at companies like Walmart that serve low-income shoppers. ‘Walmart caters to workers on a budget and they can expect that if those workers get an increase, they will spend the money in their stores,’ Catherine Ruetschlin, a policy analyst at Demos, a left-leaning public policy organization, told The Huffington Post. ‘These low-wage workers are the real job creators in the economy; they’re the people that go out and spend.’ Walmart and other big chain stores that serve lower-income shoppers are hurting. Their customers don’t have much cash right now – stagnant wages, higher taxes and rising gas prices have left many living close to the edge.”
Let us pretend for a moment that the “suggestion” of “some studies” is accurate and sales go up. How does that mean anything without a promise that profits will increase? Much more likely, stores that suddenly have to pay higher wages to all their employees will have to raise prices. Perhaps they will attempt to absorb some losses for awhile and not raise prices as much as they need to in order to keep present profit levels. And perhaps the higher-paid workers will then buy more and thus boost sales. But if the stores are selling at a loss or at a reduced profit this means the change in the minimum wage has hurt them. It hasn’t helped them. So then the entire promise of the headline is false.
The bottom line is that when people have to pay more for workers they will either hire fewer workers or raise their prices. Some might benefit, but only at the cost of other people losing their jobs. Furthermore, the people with higher wages will now have to pay higher prices.
The economy is not improved when unemployment increases and the dollar’s purchasing power declines. Poor people will spend their new dollars on the same items which now cost more.
The Huffington Post article is full of references to leftist think tanks, “anecdotal evidence,” and strange claims whose logic is never explained. It is all wishful thinking.
At bottom, these articles show how people want to believe in salvation by political power rather than admit they cannot control the world. Perhaps this campaign is more related to our adventure in Syria than most people realize.