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Title: Economics 102: WalMart Cuts Worker Hours After Hiking Minimum Wages
Source: ZeroHedge
URL Source: http://www.zerohedge.com/news/2015- ... urs-after-hiking-minimum-wages
Published: Aug 31, 2015
Author: Tyler Durden
Post Date: 2015-08-31 12:51:26 by nolu chan
Keywords: None
Views: 2335
Comments: 26

Economics 102: WalMart Cuts Worker Hours After Hiking Minimum Wages

Submitted by Tyler Durden
ZeroHedge
08/31/2015 11:20 -0400

This year, some American executives who heeded loud calls for across-the-board wage hikes for America’s lowest-paid workers received a complimentary refresher course in undergrad economics courtesy of the free market. 

Take Dan Price for instance, the 31-year old CEO of Seattle-based Gravity Payments Systems who found out the hard way that setting the pay floor at $70K comes with all manner of unintended consequences. 

And then there’s Wal-Mart.

Earlier this year, the retail behemoth became one of several corporate heavyweights to raise wages for its meagerly compensated workers, around 500,000 of which are now set to receive at least $9/hour and $10/hour by Q1 2016. The move will cost somewhere around $1 billion this year. 

Now one thing that should have been abundantly clear from the start is that if ever there were an employer that could ill-afford a $1 billion across-the-board pay raise without immediately making up the difference by either firing some employees, cutting hours, or squeezing the supply chain it’s Wal-Mart. After all, they’re the “low price leader”, and you don’t hold on to that title by passing labor costs on to customers.

Predictably, the company moved to extract more “value” from its suppliers and when that didn’t prove sufficient, the folks in Bentonville brought in the “plumbers.” 

But the story didn’t stop there. Late last month we highlighted an internal memo circulated at Arkansas recruiting firm Cameron Smith & Associates which looked to be an attempt to prepare the firm’s employees for layoffs at Wal-Mart’s home office. Then, not a week later, Bloomberg ran a story detailing the grievances of some senior Wal-Mart employees who suddenly realized that although they may still be making more than their subordinates, the wage hierarchy had been distorted and that distortion had nothing to do with merit. As we put it, “higher paid employees don’t 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 which means that, for Wal-Mart, raising the minimum for the lowest paid workers to just $9/hour will end up costing the company around $1.5 billion if you include the additional raises the company will have to give to higher paid employees in order to retain their 'talents'and avoid a mid-level management mutiny.”

Well, don’t look now, but undergrad economics is rearing its ugly again at Wal-Mart as the retailer cuts workers’ hours in a desperate attempt to offset wage hikes. Here’s Bloomberg with more:

Wal-Mart Stores Inc., in the midst of spending $1 billion to raise employees’ wages and give them extra training, has been cutting the number of hours some of them work in a bid to keep costs in check.

 

Regional executives told store managers at the retailer’s annual holiday planning meeting this month to rein in expenses by cutting worker hours they’ve added beyond those allocated to them based on sales projections.

 

The request has resulted in some stores trimming hours from their schedules, asking employees to leave shifts early or telling them to take longer lunches, according to more than three dozen employees from around the U.S. The reductions started in the past several weeks, even as many stores enter the busy back-to-school shopping period.

 

A Wal-Mart employee at a location near Houston, who asked not to be identified because she didn’t have permission to talk to the media, said her store had to cut more than 200 hours a week. To make the adjustment, the employee’s store manager started asking people to go home early two weeks ago, she said. On Aug. 19, at least eight people had been sent home by late afternoon, including sales-floor associates and department managers.

 

The employee said she’s covering an area once staffed by multiple people at one of the busiest times of the year -- the back-to-school season. On a recent weekday, she had a customer who had to wait 30 minutes for an employee to unlock a product the shopper wanted to purchase, she said.

 

The staff at a location in Fort Worth, Texas, were told that the store needed to cut 1,500 hours, according to a worker who asked not to be named for fear of being reprimanded. 

So there you have it. Further proof that across-the-board wage hikes - like socialized medicine and free college - is a concept that sounds good when considered in a vacuum, but when implemented is subject to economic realities that conspire to make the end result look far less desirable than proponents might have imagined.

And therein lies the problem. Projecting how these "experiments" might turn out isn't difficult, which makes one wonder how policymakers and corporate management teams seem to get them wrong on a fairly consistent basis. Then again, when you live in a world governed by the principle that the cure for debt is still more debt, it's easy to see why some still believe, despite all the evidence to the contrary, that you can have your cake and eat it too.

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#1. To: nolu chan (#0)

So there you have it. Further proof that across-the-board wage hikes - like socialized medicine and free college - is a concept that sounds good when considered in a vacuum, but when implemented is subject to economic realities that conspire to make the end result look far less desirable than proponents might have imagined.

And therein lies the problem. Projecting how these "experiments" might turn out isn't difficult, which makes one wonder how policymakers and corporate management teams seem to get them wrong on a fairly consistent basis. Then again, when you live in a world governed by the principle that the cure for debt is still more debt, it's easy to see why some still believe, despite all the evidence to the contrary, that you can have your cake and eat it too.

The model is simplistic, WalMart's earnings per share are very high, and they increased their dividends this year. The company is very profitable.

They do not need to cut worker's hours. They can reduce dividends to cover the different.

Likewise, the fact that some mid-level managers look downwards are refuse to continue working if their underlings are paid more doesn't mean that the company has to hike everybody's wages. It can, rather, hold the line and replace the managers who leave with internal promotions.

Short-term, policy changes cause issues, but longer term, if a policy is held firm until capitulation takes place, the behavior of management shifts. German, French, Dutch, Swedish and other foreign companies are very profitable, and have well-paid workers. Executives are paid less, and shareholders get smaller dividends, but the companies survive and thrive. Capitulation to the necessity of a living wage occurred long ago in Germany, with the result that the behavior of investors, owners and managers shifted to accept the reality.

The American model derives excess profits by beggaring the large volume of workers at the bottom. This forces people onto the social welfare state. They cost of labor is externalized and socialized. When higher wages and other restrictions on employers are imposed, the employers always kick and fight, initially. In America they've been able to roll back changes. In those lands where they have not been able to, the result has not been economic collapse. It has been the capitulation of capital to accepting the requirement of employing people at living wages, with benefits and protections, that has allowed the Germans, et al, to adjust their expectations to more modest executive pay, more modest dividends, and to obtain market share by superior engineering and higher-quality manufacturing than is necessary on the American cheap price model.

Vicomte13  posted on  2015-08-31   14:10:26 ET  Reply   Trace   Private Reply  


#2. To: Vicomte13 (#1)

"They can reduce dividends to cover the different."

Dividends are basically profits divided up among the shareholders. You say screw the shareholders and give that money to the employees.

Well then, how about this? The employees get a raise if the company makes a profit, but their wages are cut if the company loses money. I mean, that's what happens to the shareholders.

Sound fair to you?

misterwhite  posted on  2015-08-31   15:42:54 ET  Reply   Trace   Private Reply  


#3. To: Vicomte13 (#1)

"It can, rather, hold the line and replace the managers who leave with internal promotions."

It's not just the mid-level managers. If you raise the lowest wage to $9 or $10 an hour, then what about the people who worked there for years, got annual raises, and are currently making $9 or $10 an hour?

Certainly they're going to be upset if they don't get more than someone just starting. And if you increase their pay to $11 or $12, then what about those currently making $11 or $12 an hour?

If affects everyone in the company, not just mid-level managers. Are you saying everyone should quit?

misterwhite  posted on  2015-08-31   15:51:33 ET  Reply   Trace   Private Reply  


#4. To: misterwhite (#3)

Are you saying everyone should quit?

I suggest everyone quit shopping at Wally World.

I will confess to going there once or twice a year, although I do my best to avoid it.

Fred Mertz  posted on  2015-08-31   15:57:52 ET  Reply   Trace   Private Reply  


#5. To: Vicomte13 (#1)

"The American model derives excess profits by beggaring the large volume of workers at the bottom."

The American capitalism model pays workers -- at all levels in the company -- what they're worth. No more. No less. And their wages are such that the company makes a profit.

Profits allow the company to grow (and hire more workers) and rewards shareholders for their risk. If the employees want a share of the profits, they're free to buy stock in the company.

misterwhite  posted on  2015-08-31   16:02:02 ET  Reply   Trace   Private Reply  


#6. To: misterwhite (#5)

The American capitalism model pays workers -- at all levels in the company -- what they're worth.

And you were latched at taxpayers tits.

A Pole  posted on  2015-08-31   16:06:08 ET  Reply   Trace   Private Reply  


#7. To: nolu chan (#0)

Is there any surprise this happened? Government told them to do it or it was going to be forced on them. Walmart made a business decision to obey government and keep their bottom line.

Now what they did was find a way to keep people employed.

They could have jacked up the minimum wage and then lay off people. But they didn't.

"The grass withers, the flower fades, But the word of our God stands forever.”"---Isaiah 40:8

redleghunter  posted on  2015-08-31   16:11:09 ET  Reply   Trace   Private Reply  


#8. To: Fred Mertz (#4)

"I suggest everyone quit shopping at Wally World."

I would think you would advise people not to go to Starbucks. That's the company ripping off consumers, charging 5 bucks for a f**king cup of coffee. The poor can't afford them, meaning they only serve the elites.

misterwhite  posted on  2015-08-31   16:13:14 ET  Reply   Trace   Private Reply  


#9. To: misterwhite (#2)

The argument is boring and pointless. Minds are hermetically sealed on the matter, and all is decided by applications of power that impose the opinion of the dominant side.

So rather than wasting our time jawboning at each other about something that neither is going to budge an inch on, let's leave the discussion be. We are motes of dust on a grand battlefield. I'm content to let the battle play out without engaging you personally in an endless dogfight that is doomed to be fruitless.

Vicomte13  posted on  2015-08-31   16:14:16 ET  Reply   Trace   Private Reply  


#10. To: misterwhite (#8)

I don't do Starbucks either. I agree that they're ripoff artists for wannabe yuppies/elitists consumers.

Fred Mertz  posted on  2015-08-31   16:19:20 ET  Reply   Trace   Private Reply  


#11. To: misterwhite, Vicomte13, GarySpFc, liberator, tomder55, TooConservative (#2)

Well then, how about this? The employees get a raise if the company makes a profit, but their wages are cut if the company loses money. I mean, that's what happens to the shareholders.

That is an equitable model but people cannot plan their monthly or weekly bills on it. That is why there is a salary. Salary gives expectations. Most people who work for Walmart are probably supplementing a spouse's salary to make ends meet weekly.

In the 'old days' I remember that when owners of businesses (small and large) did well for the year, they stuffed a nice Christmas bonus in the pay envelope just before or just after Thanksgiving. That I see is an end of year dividend sharing with your employees. A lot of that went away as America became less Christian and more secular. End of year (Christmas) bonuses also started going away when government, the "new god" Baal started taxing businessmen who actually provide JOBS (yes a 4 letter word Joe Biden) more. So owners/bosses figured out the new sugar daddy was government.

Maybe someone who actually runs a business would like to opine on this. As all of us who are not day to day, week to week, year to year trying to make payroll. So our comments are akin to politicians who think they know about how much an employer should be paying all the while having never had to meet a payroll themselves.

Now I know there are probably some folks who know North East country club types who would never even consider giving an end of year dividend (Christmas bonus) because of their seven figures yaht and docking fees. Now of course all of those types vote for Big government spenders so they don't have to do the right thing.

"The grass withers, the flower fades, But the word of our God stands forever.”"---Isaiah 40:8

redleghunter  posted on  2015-08-31   16:29:43 ET  Reply   Trace   Private Reply  


#12. To: misterwhite (#3)

If you raise the lowest wage to $9 or $10 an hour, then what about the people who worked there for years, got annual raises, and are currently making $9 or $10 an hour? Certainly they're going to be upset if they don't get more than someone just starting. And if you increase their pay to $11 or $12, then what about those currently making $11 or $12 an hour?

That is the unstated motive ;and why unions are so gung-ho to support the increase .

Quis custodiet ipsos custodes?

tomder55  posted on  2015-08-31   16:53:33 ET  Reply   Trace   Private Reply  


#13. To: Vicomte13 (#1)

They do not need to cut worker's hours. They can reduce dividends to cover the different.

The only purpose of a corporation is to make money for the shareholders.

The U.S. has a per capita income of about $54K.

Median household income is about 43.5K. Each is higher than all nations you cited. There are poor people in Europe, just as there are poor people in the U.S.

The Wal*Mart reaction was entirely predictable and predicted. It will be the same in other corporations. The guy who raised the price of a pizza to $30 discovered that was not good for business.

A checkerboard of minimum wage laws does not work.

The American model derives excess profits

Deriving profits with minimum risk is the purpose of a corporation.

This forces people onto the social welfare state.

Something sure forced Europeans onto the social welfare state. When I was in Spain, for a local employee we figured fringe at over 100% of salary.

nolu chan  posted on  2015-08-31   16:58:20 ET  Reply   Trace   Private Reply  


#14. To: redleghunter (#7)

Is there any surprise this happened?

None.

nolu chan  posted on  2015-08-31   16:59:32 ET  Reply   Trace   Private Reply  


#15. To: redleghunter (#11) (Edited)

Maybe someone who actually runs a business would like to opine on this.

I am not an owner .But I've been involved in management in a couple of startups. The company I currently work for has grown from a family owned business to a 1,000 + company that is now partly owned by an international corporation . The son of the original owner still retains the majority share so he still has the say on most operational decisions .

Let me say that watching the commitment to making these companies a success by the owners convinced me that I would rather remain an employee than take the plunge. I saw them work for weeks without any take home pay while they made sure that their staff never missed a payday . I have worked for 30 years in these companies and never was a bonus misses regardless of the company bottom line for the year . I have been fortunate enough to never being forced to bring an employee into the office to give pink slips due to lay offs. There were many times when layoffs would've been justified. We found things for employees to do until business picked up. People see the success by the ownership and think their lifestyle is an undeserved given. I on the other hand was very pleased the day my boss first drove into his parking spot with a Mercedes .He certainly earned it. On top of his very busy scheduled ,he devotes a lot of his time in charitable and philanthropic endeavors including company sponsored events that he personally organized.

We have never paid any where's near the minimum wage .In fact ,I can't think of many companies around here who would be able to retain good staff if the pay wasn't substantially above the minimum wage . But I have to tell you ,when and if these new proposals go into effect ,the gap will narrow.

Quis custodiet ipsos custodes?

tomder55  posted on  2015-08-31   17:21:36 ET  Reply   Trace   Private Reply  


#16. To: misterwhite (#8)

Just imagine. My wife and I are among the elites.

Don  posted on  2015-08-31   17:37:27 ET  Reply   Trace   Private Reply  


#17. To: Don (#16)

"My wife and I are among the elites."

Not for long, at 5 bucks a cup.

misterwhite  posted on  2015-08-31   18:08:43 ET  Reply   Trace   Private Reply  


#18. To: tomder55, liberator, misterwhite, A Pole, Vicomte13, TooConservative, GarySpFc, CZ82 (#15)

I am not an owner .But I've been involved in management in a couple of startups. The company I currently work for has grown from a family owned business to a 1,000 + company that is now partly owned by an international corporation . The son of the original owner still retains the majority share so he still has the say on most operational decisions .

Let me say that watching the commitment to making these companies a success by the owners convinced me that I would rather remain an employee than take the plunge. I saw them work for weeks without any take home pay while they made sure that their staff never missed a payday . I have worked for 30 years in these companies and never was a bonus misses regardless of the company bottom line for the year . I have been fortunate enough to never being forced to bring an employee into the office to give pink slips due to lay offs. There were many times when layoffs would've been justified. We found things for employees to do until business picked up. People see the success by the ownership and think their lifestyle is an undeserved given. I on the other hand was very pleased the day my boss first drove into his parking spot with a Mercedes .He certainly earned it. On top of his very busy scheduled ,he devotes a lot of his time in charitable and philanthropic endeavors including company sponsored events that he personally organized.

We have never paid any where's near the minimum wage .In fact ,I can't think of many companies around here who would be able to retain good staff if the pay wasn't substantially above the minimum wage . But I have to tell you ,when and if these new proposals go into effect ,the gap will narrow.

PING to the above for those who did not see.

Thanks tomder55.

"The grass withers, the flower fades, But the word of our God stands forever.”"---Isaiah 40:8

redleghunter  posted on  2015-08-31   18:13:03 ET  Reply   Trace   Private Reply  


#19. To: nolu chan, Vicomte13 (#13)

Median household income is about 43.5K. Each is higher than all nations you cited. There are poor people in Europe, just as there are poor people in the U.S.

And most of them live in houses that are hundreds of years old and/or have been in the same family for generations... Most of them have no clue what air conditioning is (or forced air heat for that matter) and still use coal in fireplaces for heat...

“Let me see which pig "DON'T" I want to vote for, the one with or without lipstick??" Hmmmmm...

CZ82  posted on  2015-08-31   18:39:08 ET  Reply   Trace   Private Reply  


#20. To: tomder55 (#12)

That is the unstated motive; and why unions are so gung-ho to support the increase.

Bingo!!!

And also the reason unions are going after franchises...

“Let me see which pig "DON'T" I want to vote for, the one with or without lipstick??" Hmmmmm...

CZ82  posted on  2015-08-31   18:41:33 ET  Reply   Trace   Private Reply  


#21. To: Vicomte13 (#1) (Edited)

Rushbot sheeple believe that Economics 101 or 102 is sufficient. They are clueless.

Found on Internet, what Orwell wrote is universal and applies also to Limbaugh systems:

=====

Napoleon may not be great with a crowd, but he's "especially successful with the sheep". He teaches them simple cheers, has them chant at strategic times during public meetings, and even hands out pompoms.

Okay. No pompoms. But we kind of wish there were pompoms.

Napoleon's strategy is successful: "It was noticed that they [the sheep] were especially liable to break into 'Four legs good, two legs bad' at crucial moments in Snowball's speeches". Later, Napoleon uses the sheep to chant and drown out the four pigs who protest when he announces that he'll eliminate public meetings.

Because the sheep are so, well, sheep-like, they're super easy to manipulate. At the end of the novel, the pigs start walking on two legs—so, Squealer teaches the sheep a new chant: "Four legs good, two legs better".

Obviously, the sheep are part of the problem. They're dumb followers who go along with the crowd. But there's another problem: chanting makes everything too easy for the leaders. It's simple; it's repeatable; it can be manipulated. In other words, Orwell is saying, beware simplistic slogans. Whatever side you're on: if you can chant it at a rally, it's probably not a well-thought out political philosophy.

A Pole  posted on  2015-08-31   19:07:27 ET  Reply   Trace   Private Reply  


#22. To: Vicomte13 (#1)

They do not need to cut worker's hours

Then why are they cutting them?

U don't know me  posted on  2015-08-31   19:31:45 ET  Reply   Trace   Private Reply  


#23. To: Vicomte13 (#1)

German, French, Dutch, Swedish and other foreign companies are very profitable, and have well-paid workers. Executives are paid less, and shareholders get smaller dividends, but the companies survive and thrive. Capitulation to the necessity of a living wage occurred long ago in Germany, with the result that the behavior of investors, owners and managers shifted to accept the reality.

The American model derives excess profits by beggaring the large volume of workers at the bottom. This forces people onto the social welfare state. They cost of labor is externalized and socialized.

Unfortunately Limbaugh brainwashed sheeple insist on being fleeced. They loudly bleat "Free Market good, social justice baad, baaa, baaa" "Economy 101, 102 ..." and stifle any sensible discourse with noise of slogans.

A Pole  posted on  2015-08-31   19:42:30 ET  Reply   Trace   Private Reply  


#24. To: U don't know me (#22)

They cut them to maintain dividends.

Vicomte13  posted on  2015-08-31   19:52:22 ET  Reply   Trace   Private Reply  


#25. To: Vicomte13 (#24)

you should try investing in dividend paying stocks. I tell you ,when those checks come in quarterly it's a beautiful thing .

Quis custodiet ipsos custodes?

tomder55  posted on  2015-08-31   20:02:30 ET  Reply   Trace   Private Reply  


#26. To: A Pole (#21)

A K A Stone  posted on  2015-08-31   22:11:55 ET  Reply   Trace   Private Reply  


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