Economics 102: WalMart Cuts Worker Hours After Hiking Minimum Wages

Tyler Durden's picture

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 undergad 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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Backtable
Backtable

Wait for it…next will be a demand for “mandatory minimum working hours” or some such nonsense. It’s absolutely astounding that people can be so dense as to not understand simple economics.

Hope@ZeroKelvin
Hope@ZeroKelvin

HAHAHAHA eyeballs rollin’ outta my head.

I just love the sight of progressive “fixes” to predatory business models burning to the ground in the morning!

I made the horrible decision of going to Walmart yesterday afternoon to get an school item for my son. It was packed with the back-to-schoolers buying “school supplies”. I decided, against my better judgement, since I was already there, to try to find a particular type of light bulb Mr. HZK insisted we put in the bathroom.

There were NO employees out on the floor, I had to go through the entire light bulb section myself and of the 40+ cash registers they had, only FIVE had a cashier. Truly a miserable experience.

Next time, I’m ordering off Amazon (through the TBP site of course).

(That very concept of having to buy “school supplies” is bizarre given the property taxes etc that we pay, but illegals have overrun all the Houston metroplex school systems and the districts are so far beyond broke you can’t find it with the Hubble.)

Fuck WalMart. Their corporate model was based on slave wages for their employees, who had to depend on Medicaid and food stamps. Their belated attempt at atonement has backfired in their faces.

Hah.

bluestem
bluestem

Gotta make payroll one way or another. Isn’t this the site that promotes the idea that “There is not free lunch?” (sarc) John

bb

I like Wal-Mart . Got cheap blood pressure medicine (4 dollars for 30 day supply ) and good deals on ammo. The Wal-Mart near home sells bulk ammo 308 ,5.56 ,9mm .

Homer
Homer

This is why business owners should make decisions about how to run their businesses. They have ‘skin in the game’ having invested their time and money. The businesses are glad to have employees and the employees are glad to have a job. It is a synergetic relationship. Each derives an advantage from the other.

Central planners don’t have any ‘skin in the game’. Their only interest is to remain in power and that is only possible by kowtowing to the voters. But, it is all unrealistic lies which come to naught. They sound altruistic, but the end is named, misery and wretchedness.

The problem with Democracy is it doesn’t last, it always ends in failure. You can vote yourself a higher wage, but it isn’t done in a vacuum. There are always unintended consequences. It is like pushing on a balloon. Somewhere else on the balloon changes and the balloon expands in unpredictable places.

Bernie Sanders Socialism works great as long as there is money to steal from those who earned it. Eventually that runs out. People stop working when they realize that they get more on the government dole. Production declines and the economic pie gets smaller to the detriment of society.

Society demands more and government promises and gives more, a never ending circle-jerk. When it fails and it always does, reality asserts it’s self and we are awakened from our delusion realizing that a fiat currency economy was nothing more than a ‘wet dream’.

Rise Up
Rise Up

@Hope: “(That very concept of having to buy “school supplies” is bizarre given the property taxes etc that we pay, but illegals have overrun all the Houston metroplex school systems and the districts are so far beyond broke you can’t find it with the Hubble.)”
——————–
Long ago (1960’s) when I was in grade school we had a supply room with one of those half-doors where you would go to and the clerk would hand you a ruler, some #2 pencils, lined paper, and some composition notebooks. Nobody went to the store to buy supplies unless you wanted one of those zipper 3-ring notebooks or maybe some book covers. Nobody wore backpacks either. A few kids had “book bags”. Why has everything gotten so complicated?

Anonymous
Anonymous

So just raise prices significantly, their competitors would never take advantage of that.

WalMart really isn’t doing as well as most people seem to think it is.

So goes WalMart, so goes the nation. (used to say that about GM but times change)

Hope@ZeroKelvin
Hope@ZeroKelvin

@Rise Up:

Gosh, you are dating yourself. I remember when you actually had to be clean and presentable at school, have eaten your breakfast AT HOME, Mom packed your LUNCH, and you got a major asswhuppin if you dissed the teacher.

Chalk it up to: the destruction of traditional American values + hordes of illegal alien children whose parents are net negative to paying for public services + states re-allocating school $$ for other projects.

As to my WalMart story, the “family” in front of me tried to use their EBT card for school supplies. Their card did not work, either because they had used it for food (they were all obese) or in Texas, an EBT card cannot be used for school supplies. Arrgh.

We. Are. Doomed.

Card802
Card802

This is too funny, who could have predicted this?
Certainly not a government economist or professional politician, we really are headed for a epic shitstorm.

The people will continue to look to the politician, the politician will continue to make laws that will make the situation even worse.
The people will lose hope and look to blame somebody.
Black vs white vs Hispanic vs Asian vs Muslim vs each other.

Not many will look at the real problem, but continue to vote for the fuckers that promise to fix what they created.

I wonder what the history books will say.

Maddie's Mom
Maddie's Mom

Haven’t been inside a Walmart for over two years.

Fewer employees? Go armed.

Thieves are attempting to steal CARTS FULL of merchandise in our area. At Lowes too.

yahsure
yahsure

They actually had 22LR ammo the other day.But it was so expensive that i didn’t get any. I laughed when reading that they were going to stop selling AR15’s because there was no demand?
Yep,stuff isn’t going that well out there,no matter what the media says.
I find that the employees run and hide when they see me looking for help, My daughter says i look scary.
Its all sliding downhill. Makes you wonder how anyone would vote democrat. Maybe people are into abuse.

TPC
TPC

@Rise Up “Long ago (1960’s) when I was in grade school we had a supply room with one of those half-doors where you would go to and the clerk would hand you a ruler, some #2 pencils, lined paper, and some composition notebooks. Nobody went to the store to buy supplies unless you wanted one of those zipper 3-ring notebooks or maybe some book covers. Nobody wore backpacks either. A few kids had “book bags”. Why has everything gotten so complicated?”

Its inundated college as well. When I first entered college we had one required text per class, and the recommendation that we purchase a calculator as well.

10 years later I’m reviewing the syllabus for that same class, and they need a text book, a class notes book (ppt slides printed out), a lab manual, a lab notebook, a “clicker”, an online account, access to three different websites hosted by the school, and one by the textbook manufacturer, and whole bunch of other jazz.

Shit guys, what the fuck. This crap is not making students smarter, its dumbing things down to the point a monkey could click the buttons and get the correct results.

And they wonder why millenial unemployment is so damned high.

Stucky

I can’t believe I found this. My mom actually shopped at Woolworth’s. I don’t think she ever spent more than ten bucks …. and that included a grilled cheese and coke at their luncheon counter.

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