Saturday, August 08, 2015

Economics 101: Why Wal-Mart's Wage Increase Blew Up In Its Face

"Pressure has grown in America for employers to pay higher wages to workers who cannot earn enough to make ends meet. Soaring rents and crippling student debt aren’t doing anything to help the situation. Of course there are unintended consequences that go along with raising wages.
"The standard criticism is that forcing employers to pay more will simply result in layoffs and/or a reduced propensity to hire, but as we saw with Dan Price and Gravity Payments, there are a whole lot of other things that can go wrong.
"For instance, higher paid employees may not understand why everyone under them in the corporate structure suddenly makes more money and if people who are higher up on the corporate ladder don’t receive raises that keep the hierarchy proportional they may simply quit. Don’t look now, but that’s exactly what’s happening at Wal-Mart. Here’s Bloomberg:
When Wal-Mart Stores Inc. chief Doug McMillon announced plans to boost store workers’ minimum wage earlier this year, he said the move was intended to improve morale and retain employees.
Yet for some of the hundreds of thousands of workers getting no raise, the policy is having the opposite effect.
In interviews and in hundreds of comments on Facebook, Wal-Mart employees are calling the move unfair to senior workers who got no increase and now make the same or close to what newer, less experienced colleagues earn. New workers started making a minimum of $9 an hour in April and will get at least $10 an hour in February.
Article here:


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