Another article came out yesterday about WalMart (WMT) and the minimum wage. It was pretty big news on WalMart's announcement, as shareholders and Wall Street are expecting this announcement to have a positive impact on the corporation's bottom line. I have linked the Zero Hedge article, and Zero Hedge linked the original Wall Street Journal article.
Humanistic issues aside, and without touching on the emotions of this heated debate ... One of the economic issues I have with the minimum wage is a point that was stated best by Milton Friedman, who said minimum wage laws are discriminatory against the very people they are designed to help, in particular African Americans. The reason, he says, is that a person whose skill set is worth $5-$6 per hour is not to be employed for that wage. It's illegal for the employer and employee to voluntarily negotiate with each other until an agreement of free choice is made between both parties. Rather he must be employed at $15 per hour (both figures adjusted for inflation and the proposed $15 minimum). Employing this worker at the higher wage is just charity, and most businesses are not in a position to engage in that kind of charity. Therefore, the consequence is that the business will not employ him at the higher wage, leaving the worker unemployed. According to Friedman, federal minimum wage hikes increase unemployment, especially with those workers who they are meant to benefit most.
And here we have corporations, like WalMart in this case, engaging in the very actions that Friedman predicted and warned about. Low skilled workers who were intended to be helped with a minimum wage increase will actually not see the increase, but rather a decrease to zero because they’ll be unemployed.
We have seen time and again how the biggest corporations like WalMart, McDonald's, and Amazon push for the higher minimum, only to replace workers with automation, less hours, less benefits, and more. These companies can afford the push because of the other adjustments they make as well as billions in their war chest. Smaller companies and local businesses can't afford the wage hikes and do what they can to keep pace, such as less hours, no overtime hours, and asking employees to take on more responsibilities. Yet these smaller companies will eventually cave and go out of business, as many have already. And that leaves more market share for the big corporations. Do you sense the ulterior motive like I do?
In this case, WalMart is introducing autonomous stock keepers in over 300 stores and autonomous floor scrubbers in over 1500 stores. Over 900 stores will introduce similar robots to help customers pick up their online orders at store locations...and this is just for starters. The Zero Hedge article, quoting from the WSJ, lets us know that in over 4600 stores nation wide, they’ll be able to reduce the number of man hours per store by nearly 200 hours per week (back-of-the-envelope calculation my own, based on the figures in the article). At $15/hr and 4600 stores, that’s an annual saving of over $717M per year, plus payroll taxes of another $70M or so, as well as all the benefits offered to employees such as medical coverage. In other words, if the robots cost less than about $200,000 each, the company will save. Big time.
Not to mention that a robot can’t threaten a lawsuit like this, this list, or this.
That’s it for now. Make sure to leave your comments and questions down below. Thanks for reading Volumes 68 of The Macro Market Wrap Up With The Mad Genius. Remember there is always a bull market somewhere in the world, and on the opposite side of every crises there lies opportunity.
