11.14.2005

The power of clout...

Wal-Mart recently announced that they have a plan to place pressure on Congress, which if anyone has that kind of clout, it's Wal-Mart, to reform minimum wage (which has remained at $5.15USD for over a decade. Wal-Mart has put forth the argument that the current minimum wage is not helping the working poor and that reform is necessary to up the level across the economy. There are many interesting points to be made about this reform, with a special focus on the difference between appearance and reality.

The first point is, Wal-Mart pays the majority of its Associates that work in retail operations at a rate higher than both Federal and State minmum wage in almost all stores.
To elaborate:
If Wal-Mart were to keep its wages after the reform at an identical level (so long as it's still above the new minmum wage) as before, this move will cost Wal-Mart absolutely nothing. The only effects they would feel would be increased costs of products so long as they are manufactured, or in any way handled, by an American worker making minimum wage. Other than that one possibility, the additional costs added to Wal-Mart's expenses is zero. Following this line of rhetoric, there is an inflation index to which the Federal Reserve sets targets, meaning that the prices (which are arguably sticky in the short run for small firms, but are not so sticky for a corporation the size of Wal-Mart) will rise. But as almost all of Wal-Mart's goods being manufactured outside of the United States accompanied with the inherent strength of the domestic currency, they are in line for supernormal profits made simply with their clout.
If Wal-Mart decides to adjust, on a pro rata basis, their "minimum" wage accordingly with the rise in the new minimum wage, they will most definitely have greater expenses, meaning decreased profits.
I am going to go out on a limb and to say that Wal-Mart, the most successful company in the world, besides Microsoft (which is arguable, as Wal-Mart dominates many former nearly perfectly competitive markets), would ever take an action such as this for a non-profitable reason. Of course, there are many that will not think of such a proposition, or at least will think of it, and not be educated enough to see it. I predict a large portion of the population (particularly the left) will discredit this move as a publicity stunt, which, it is. But it is a lot more than a publicity stunt; it is a publicity stunt with major reprecussions. And still there will be another portion that will welcome this move, and buy the publicity stunt; because it is true that the increase in minimum wage will benefit all those who have minimum wage jobs, except of course those that lose their job because of the higher level of minimum wage.
What Wal-Mart really wants in doing this is to use its unprecedented clout to attempt to push smaller competitors out of the market. First of all, they can absorb the new minimum wage with zero change in costs. Secondly, they are by far the biggest of its industry and would be able to best abosrb the extra costs if their current standard was minimum wage. This move will hurt every single competitor, besides those who pay more tha minimum wage; of course, depending on their choice of action, whether it be leaving the wage unchanged, or adjusting it on a pro-rata basis.

The only thing I can say is that Wal-Mart, as a competitive company, is unprecedented. There is no button Wal-Mart won't push and no edge they will not seek. If Wal-Mart becomes successful in this bid to scale up minimum wage, they will have gained a competitive edge that has a trickle down of reprecussions for competitors as far as the eye can see. I do believe that it will come to a point where there are absolutely no more room for Wal-Marts, the question I pose is what will they do next?

4 Comments:

Blogger Mortgage Center said...

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3:53 AM  
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11:43 PM  
Blogger laurabos said...

The point of the wage reform is not entirely evident at first glace.
This is not a reform, but rather a reconstitution for this quasi capitalist autocracy where they have formed a grid.
This grid is introduced to us at birth. As infants we are dependant on our parents, survival is not an option in this modern era. As infants we cannot hunt, we cannot live organically, and most importantly we cannot educate ourselves into a reform that does not exist. We can’t fucking hunt in our overly urbanized subdivision, we cannot live organically in the man-made storm banks that provide one large fucking puddle for ducklings, and suburban squirrel and house pets can only nurture you for so long, we cannot educate ourselves to live to survive because the natural means just don’t exist abundantly in such urbanized area’s. Yes, you can climb one big fucking rock in the Canadian shield and eat wild fox, but what, risk disease the animal has ingested from some chemically produced cloned lab rat? Don’t think so. My point is we can’t live in a state of nature because of those before have chosen to abide to society.
This in turn is a segue for those business-esque sociopath type fellow’s who decided that it’d be fucking great to produce a mass production department store that will, “make our lives better and easier”. These companies buy out other companies, take over farm land, pollute our world and “create jobs for EVERYONE”. Who needs a fucking brain to sweep large department store aisles? Now with autocratic-capitalism being the modern doctrine of our era, the world is held hostage to abide to this doctrine because they have no other fucking choice. A choice that wasn’t even present at birth. We are forced to be educated, because in the end, whats the other option? Where do those who choose not to conform go? All of a sudden the fatality rate for even the fittest seems to high for comfort, now doesn’t it? Turn on the radio, buy some gangster shoes, turn on the t.v, get your diploma to one of these exciting new careers online in 1 year, open the newspaper, Shitface smith Won American Idol. Everything and everyone is consumed; and the purpose is to consume, to over indulge, buy further into the system.

WalMart knows this. They know they are one the major leading corperations that employs and serves millions of people a year. In order to keep this immensely successful grid, they must, in turn, keep up the standards. The ultimate demise for WalMart is for this grid to collapse. Dependancy is their greatest prosperity. Wage is nothing but a tease, because in turn the money returns to them.

12:08 AM  
Blogger Democratus Referendus said...

Indeed you are right - which is my point exactly. It is of no cost to them, it is of no real benefit to the labourer (as reduced competition reduces the outside option of employment), and pressures the competition.
As for your 'grid' that we are all forced to conform to and be a part of.. I agree mostly. You can always leave this country and go to say, Somalia, if you don't like the way it is.
I'm not taking away from your comments, but its not like you have NO choice. You just don't have a choice if you choose to live here.
Its an unfortunate world we live in, and I think we both agree on that.

I guess the question is: do you just accept it and move on? or do you get hung up on it and let it 'ruin' your life(potentially)?

3:00 AM  

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