Minimum Wage and WalMart. Catch 22?

[Gregg]

WalMart only as an example, not a scapegoat this time. Sorry to disappoint. Their stock has dropped from a high around $90/share early this year to a little under $60 now. There are analysts who are blaming WalMart's decision to raise US worker's starting wages to $10 I believe its incremental with that as the ending point, but however it works out it should be a lot less of a hot button than the popular $15/hour movement. Even though WM is one of the largest employers in the country it makes no numeric sense that a company with a ~$200B market cap and almost $500B in annual revenue would lose 1/3 of that market cap because they decided to pay the lowest paid workers in the organization a few extra bucks a week.

I've heard the opposing argument that the valuation is dropping because of a projected drop in future sales as their customer base continues to be squeezed between higher prices (cost of living) and stagnant or falling wages. That, IMO, seems to be the more logical explanation. If true then it seems WalMart would actually be making a calculated investment by paying more now so the customer base can spend more later. A little smaller slice, but of a bigger pie. As much as I'd love to get away from a consumer based economic model, that seems like a pretty reasonable near term approach.

[sweetana3]

I wonder if it has something to do with the constantly declining quality of its merchandise and merchandising, its inability to keep its stores clean and stocked, the proliferation of other sources for people to shop (both local and online), and the decline in wages due to other priorities such as phone plans. I think the wage issue is far down the scale in my opinion.

[Williamsmith]

I spar with my conservative friends all the time over this one. Okay, so to be a good conservative apparently you have to back the free market capitalism Milton Friedman party line crap about how raisin the minimum wage will crush the economy. And how if we raise it to $10 then why not $20 or $100 dollars an hour. Well, because there is a difference between surviving and being a filthy rotten capitalist pig. Surviving is $10 an hour. The filthy rotten part is making billions of dollars managing a hedge fund and raising pharmaceutical pills out of reach of anyone but the 1 %.

All that's being proposed is that if you can't pay workers a wage that allows them to survive on a paycheck to paycheck basis, then maybe your business model got stepped on by the bully next door. You just basically suck as a capitalist because your business sucks and if it is that bad off, why are your CEO flying to the Bahamas all the time on learjets? Maybe you better trade them in for some Piper Cubs.

So I ask, if the minimum wage right now is just okay, why not make it $5 an hour and our economy will take off like freaking mad. Or maybe, hey how about $1 an hour and we can take over the world. Wait, we already did that by shipping our manufacturing to Mexico where kids can work for free and China where they work like slaves.

Oh oh and don't forget the argument about how pathetically incompetent and uneducated and just basically worthless the minimum wage workers are. You know what, there are a lot of people with Masters Degrees making minimum wage. And there a lot of high school drop outs. Don't make sense do it?

WalMart stock is going down. Nobody likes to shop there. D'oh! Man the GOP has got some splainin to do Lucy.

[Alan]

WalMart stock is going down. Nobody likes to shop there. D'oh! Man the GOP has got some splainin to do Lucy.Other than being a popular punching bag, what does the GOP have to do with it?

[sweetana3]

I also have to add that the Walmarts here in Indy have gotten to be fairly dangerous places or the perception is that they are dangerous. The Beech Grove Walmart was deemed a nuisance by the city due to the number of police runs and people have been shot at and robbed in and around the various stores. Several have obvious security guards instead of greeters.

[Zoe Girl]

I wonder if it has something to do with the constantly declining quality of its merchandise and merchandising, its inability to keep its stores clean and stocked, the proliferation of other sources for people to shop (both local and online), and the decline in wages due to other priorities such as phone plans. I think the wage issue is far down the scale in my opinion.


That is what I wonder, we are seeing improvement in my area in wages and so I have the choice to not buy junky merchandise or shop in stores that are dirty. I appreciate that I have some more choices about what to support as well,

I wonder if it is related to fast food chains that are not doing as well also. I don't have the data on that but I know that major fast food chains are overall losing business. Enough people making different choices.

[Williamsmith]

Other than being a popular punching bag, what does the GOP have to do with it?

I had to read that question a second time. okay, I'll take a stab at it. Might be a trick answer. Let's see, every time somebody says raising the minimum wage is a bad thing they seem to have an R in front of their Senate or a house designation. And every time somebody says they are in favor of it, they don't. Except ......Carson seems to be lucid in his thoughts and proposes a minimum wage tied to inflation.

The GOP is in shambles. When was the last candidate who had a chance? If it weren't for a few hanging chads, you'd have to go back before George to get an answer. Usually, if you have been underperforming for more than a decade....you pretty much get fired Face it, they ain't connecting. When an outsider like Trump can upstage the establishment......you got some splainin to do. Trump has basically slapped them in the face and said, "What are you going to do about it?"

The biggest problem the GOP has is that half of the electorate thinks Ronald Reagan was a founding father. I mean, they got real problems. And the minimum wage is just one of them.

[creaker]

I put Walmart in the same box as McDonalds - people are just getting tired of it. Pretty much the same reason I think all the oid chains went under or are doing so.

But I do think the drop in sales creates a vicious cycle of dropping store and inventory quality to cut costs which leads to lower sales. Walmart is supposedly putting some serious money into upgrading and refurbishing stores, let's see if it helps.

As far as the minimum wage question goes, I would think it would not make that big a difference in their bottom line. Given Walmart employees are likely Walmart shoppers, although it might affect their bottom line, you would think it would make sales go up, unless it's being offset by lower government entitlements due to higher wages.

[ctg492]

Once on top no where to go but down. Kresge's, Woolworths,Kmart, Sears and Roebuck. WM time for the next big thing to match the market.

[Miss Cellane]

You'd need to compare Walmart's stock to that of other retailers. Aren't all major retailers doing less well than they expected this year? Target and Macy's also raised their minimum wage to $9/hr--how are they doing? I guess I'm not sure if this is a Walmart specific problem or one that is affecting many retailers this year.

Walmart may have some lower prices, but just a short while ago, I was behind a couple at the supermarket, a local family-owned chain, and over and over again, I kept hearing, "But this is lower than Walmart!" Smart shoppers don't just trust Walmart to have lower prices, they check prices elsewhere.

I think Walmart and other brick-and-mortar retailers will need to step up their on-line shopping--making it easier, faster and cheaper to ship goods to people's homes--if they want to stay in business.

What's happened around here is that stores are stocked with the most popular items, things that sell well. To get specialty things--hobby gear, the "unpopular" color of a shirt--you have to order on-line or find a real store that carries what you want. Add in shipping costs and delivery times of up to two weeks, and the "option" of shopping on-line just isn't as popular as going to a store that has what you want, lets you examine it before buying, and you don't have to pay shipping to get it or return it if you don't like it/it doesn't work. Granted, the further you are from a major city, the harder the specialty stores are to find, but they are out there.

The hardware store in the downtown area of my little city has been there 50 years. They don't carry everything the big box store at the other end of town does, but they carry a lot of smaller items that the big box store does not or that they carry but you have to order on-line. And you can always find someone to help you out at the smaller store. The big box store has lots of employees who greet you cheerfully, but don't always have any answer to your questions.

During the holiday season, companies offer free shipping or overnight shipping or at least faster shipping. The rest of the year, some major companies can take days to process an order, and longer to ship it. And then they wonder why they aren't getting much business. If major amounts of your merchandise are only available on-line, you have to make it quick and easy and not too expensive for people to get that merchandise, or people will look elsewhere.

The major retailers are simply out of step with what people want and how they shop today.

[catherine]

WalMart stock is going down. Nobody likes to shop there. D'oh!

+1
Yup. You might be able to pay me to go to WalMart and that's the only way I'll go, but I love going to Target. BJ's, no, nothing appeals to me there, but I love the Costco that's right across the street from BJs. Listen to the customer and give them what they want. Bonus: if I know the employees are well taken care of, I'm even MORE likely to shop there (which is one reason I'm a loyal Costco customer).

[kib]

I'd agree with most of the negatives. The Walmart online shopping experience is a joke compared with Amazon, bad search engine, non-competitive pricing and comparatively expensive shipping. I think that's probably the biggest drain. But the store itself never seems to have what I want, and the employee help ranges from pleasant but not particularly helpful, to a vacant "it's probably over there in department X half a mile away." And then when I get there, it's not. The prices are not necessarily lower than anywhere else. We have an old Ace Hardware in town, 50 years old. They're always expanding, they have a personal woodworker on staff, they have a chicken expert on staff. I can get nearly anything household or hardware I want there. The Sprouts grocery is excellent and also has a nice selection of organic personal items and vitamins. The Walgreens pharmacy is in walking distance of my house. I buy all my clothes used, and I buy my specialty items online, I don't really decorate, and I want a personalized experience when buying expensive electronics. Why would I set foot in Walmart?

[pinkytoe]

The major retailers are simply out of step with what people want and how they shop today.
I think this is the main reason. Times change, people change. Seems like big box stores as we have known them won't be around in 3-5 years.

[Williamsmith]

My wife and I hate going to WalMart.

First of all the parking lot is set up all screwy. Second, if I want to see a who's who of people I've arrested in the past, all I have to do is go to WalMart. Third, while the cashiers are pleasant enough, the floor personel won't make eye contact, avoid questions and when asked have no answers. Fourth, I can't find anything there that is not made in China. I hate that. Fifth, my wife claims WalMart has the lowest price on most things and that's the only reason we go there. So here's my proof to her that she's wrong. WalMart has a savings catcher that is suppose to credit you the difference between their prices and competitors. We have over $30 in our savings catcher, so I said to her, somebody else must be selling the stuff we are buying cheaper. Did I say I hate WalMart?

[Songbird]

I hate Walmart, but I love Target. Where I live the two stores are right next door to each other, but the shopping experience is worlds different. Target often has the lower price on what I'm buying. It's also clean, organized, and the employees are both helpful and pleasant.

[Miss Cellane]

As for raising wages, the reason my friends who work at Macys think their wages got a $1 boost is that other places, like fast food, are paying more than $8/hr, Macy's old wage. The Macy's near me couldn't hire enough seasonal help last December, because very few people applied.

[Gregg]

You'd need to compare Walmart's stock to that of other retailers. Aren't all major retailers doing less well than they expected this year? Target and Macy's also raised their minimum wage to $9/hr--how are they doing? I guess I'm not sure if this is a Walmart specific problem or one that is affecting many retailers this year.

Mixed bag. Target started the year around $60 and is now about $75. Macy's started the year a little under $60 and is now about $50. Obviously there are countless criteria that effect the bottom line of a multi-national corporation. I just thought it was an interesting idea that the value of the world's biggest retailer of cheap crap and just about everything else is dropping partly because their customer's real buying power is dropping. It makes sense that the two markers would go hand in hand. The really interesting part is that the 1/1000th of 1% that controls WM might actually be a lot better off later if they take a smaller bite now. Things to be said for the rising tide.

To some degree I think ctg492 has a point that no one can stay on top forever. Markets change faster than suppliers can, that's the nature of the beast. WalMart did a great job of building a model that worked for consumers of my generation, but the next group is looking for something different. Amazon has a pretty good lead, but I'm not convinced they will be perceived as much more than WalMart sans brick and mortar down the road. My fingers are crossed for small shops with online presence and farmer's markets. Dare to dream...

[Gingerella72]

The Walmart here (central Nebraska) price matches any other store, the customer doesn't even need to bring in the ad or any actual proof, they just have to tell the cashier that X is being offered for X price at X store and the cashier rings it up that way. I always groan when I get stuck in line behind someone who has a long list of price matches, takes forever. Is it like that for all Walmarts or just a regional thing? That pretty much puts the kabosh on any need to shop elsewhere, unless it's personal preference. It doesn't seem to be effecting business at any of the other grocery stores in town, so there must be enough people in the area that simply hate shopping at Walmart on principle.

[Tenngal]

WalMart only as an example, not a scapegoat this time. Sorry to disappoint. Their stock has dropped from a high around $90/share early this year to a little under $60 now. There are analysts who are blaming WalMart's decision to raise US worker's starting wages to $10 I believe its incremental with that as the ending point, but however it works out it should be a lot less of a hot button than the popular $15/hour movement. Even though WM is one of the largest employers in the country it makes no numeric sense that a company with a ~$200B market cap and almost $500B in annual revenue would lose 1/3 of that market cap because they decided to pay the lowest paid workers in the organization a few extra bucks a week.

I've heard the opposing argument that the valuation is dropping because of a projected drop in future sales as their customer base continues to be squeezed between higher prices (cost of living) and stagnant or falling wages. That, IMO, seems to be the more logical explanation. If true then it seems WalMart would actually be making a calculated investment by paying more now so the customer base can spend more later. A little smaller slice, but of a bigger pie. As much as I'd love to get away from a consumer based economic model, that seems like a pretty reasonable near term approach.

Just my opinion, I think Walmart's current state of affairs has more to do with competition.....Amazon, etc. A well run store would include many more fulltime jobs which would make for many more happy Walmart employees. A happy employees always provides better customer service and we would stick around and buy more?

[creaker]

...But the store itself never seems to have what I want...

For me this is the biggest issue with going to a store in general - why go out and possibly go to multiple stores looking for something (which can easily take hours), when I can spend 15 minutes online and have the item is delivered to my house in 2-3 days?

I also find the internet vastly superior (other than local artists events) for shopping when I don't know what I want, i.e., holiday and birthday shopping.

[Williamsmith]

Perhaps it is simply that WalMarts customers have fewer dollars to spend in their store. And their customers are largely the various layers of the middle class. And instead of a slow growing economy, WalMart is evidence of an upcoming recession. How long can we just grind out the slow growth and not get bogged down by lack of momentum. Maybe we should just get the politicians to declare the middleclass too big to fail and have the banks bail us out. :laff:

[rodeosweetheart]

Perhaps it is simply that WalMarts customers have fewer dollars to spend in their store. And their customers are largely the various layers of the middle class. And instead of a slow growing economy, WalMart is evidence of an upcoming recession. How long can we just grind out the slow growth and not get bogged down by lack of momentum. Maybe we should just get the politicians to declare the middleclass too big to fail and have the banks bail us out. :laff:

I always wondered about the flipside of that-- as an average middle class worker,
was I "too small to succeed"?

[Gregg]

Perhaps it is simply that WalMarts customers have fewer dollars to spend in their store. And their customers are largely the various layers of the middle class. And instead of a slow growing economy, WalMart is evidence of an upcoming recession. How long can we just grind out the slow growth and not get bogged down by lack of momentum.

That was my idea in the OP as well. There are several economists now starting to throw the "R" word around. China stalling, strong dollar, tentative FED policy, a "recovery" that left most consumers behind... At this point I'm not convinced a global contraction would be such a bad thing.

[bekkilyn]

We still have people trying to recover from the recovery! :)

[Williamsmith]

That was my idea in the OP as well. There are several economists now starting to throw the "R" word around. China stalling, strong dollar, tentative FED policy, a "recovery" that left most consumers behind... At this point I'm not convinced a global contraction would be such a bad thing.

If another recession is on its way, in 2016 coinciding with the Presidential Election......lookout. The Fed has nothing more to offer in the way of temporary fixes. I guess simple living is good practice for being poor.

[Rogar]

Perhaps it is simply that WalMarts customers have fewer dollars to spend in their store. And their customers are largely the various layers of the middle class. And instead of a slow growing economy, WalMart is evidence of an upcoming recession.

I could buy into that, but the numbers I've seen say that unemployment is way down and wages are steady but not growing. And gas is darned cheap. I could also buy into the theory that people who were previously unemployed or concerned about loosing their jobs can jump up a step in their shopping experience and quality. I don't think there are enough indicators in the news or employment and wage figures for the average American to be able to think recession...yet.

[Williamsmith]

I could buy into that, but the numbers I've seen say that unemployment is way down and wages are steady but not growing. And gas is darned cheap. I could also buy into the theory that people who were previously unemployed or concerned about loosing their jobs can jump up a step in their shopping experience and quality. I don't think there are enough indicators in the news or employment and wage figures for the average American to be able to think recession...yet.

The unemployment number paints a partial and rosier picture than actually exists. The actual participation numbers, those that reflect the actual prime age workers who are available and who actual work are depressing. Evidence that this is true is that although the Department of a labor produces wonderful unemployment numbers month after month......The Fed does nothing to raise interest rates.

You alluded to steady but not growing wages as if this were an indicator that all is well with the economy. Stagnant wages for workers is not in my view a good sign. Workers are relying more and more on credit and debt and dipping into savings to mitigate this stagnation. What happens when savings are gone and credit /debt becomes unavailable? Financial hardship.

What if the current gasoline prices are more a reflection of market manipulation by producing countries to punish the economies of other countries with conflicting interests? A tool of financial warfare. And what if these artificially low prices are creating more pain for the producers than they are their intended targets? The producers may have to bring prices back to near double the current prices, and the timing might coincide with other recessionary problems and actually be a catalyst for deeper recession. After all, we are as consumers adjusting our habits to accommodate the cheap gas.

i challenge you to rethink your indicators for a possible recession.

[Gregg]

And gas is darned cheap.

Even if we leave out the argument that the REAL cost of gas has been externalized/subsidized beyond recognition it was still cheaper a generation ago. In the early 70s when I was a kid gas ran between $.25 and $.30 per gallon. The minimum wage was $1.60/hour meaning you could get somewhere between 5 and 7 gallons for every hour you worked. Today's federal minimum wage is $7.25/hour and the average retail gas price is $2.20 (Bloomberg) meaning you can buy a little over 3 gallons with an hour's pay. A little calculated market manipulation by the big players and that can easily drop to closer to 2 gallons per hour.



I guess simple living is good practice for being poor.

I look at simple living as a way to avoid being poor.

[ApatheticNoMore]

I could buy into that, but the numbers I've seen say that unemployment is way down and wages are steady but not growing. And gas is darned cheap. I could also buy into the theory that people who were previously unemployed or concerned about loosing their jobs can jump up a step in their shopping experience and quality. I don't think there are enough indicators in the news or employment and wage figures for the average American to be able to think recession...yet.

I don't think we're in a recession yet and I'm as pessimistic as they come. But I talk to recruiters, they say the labor market is red hot. I think anyone who says we're in a recession, is confusing "recession" with another trend, which is that many people never recovered from the last recession ... and many never will :( Or the labor market is splitting at a rapid rate, into "winners" and "losers" (and in some cases the losers are no less worth hiring, no less smart and even have no less job skills than the winners, they were just unlucky). A new PERMANENT feature of the economy probably is being confused with cylical recession.

But ... but ... even the hot job market just indicates the peak bubbly froth before the fall? Could be. I tend not to claim I have a crystal ball. We'll get a recession sooner or later ... it may be later than some plan but it is coming ... it may be weak or strong etc.. Given current trends even if mild it will probably knock more people into poverty.


I look at simple living as a way to avoid being poor.

Well having an emergency fund, even years of one, is good, but it doesn't really protect from poverty entirely and is at best one step in any imperfect plan of trying to prevent poverty (the rest are mostly related to trying to stay in the job market I'm afraid ...).

[Ultralight]

People around me, who are by no means experts (though they know more than me), swear that in about 18 months there will be another big recession.

[ApatheticNoMore]

People around me, who are by no means experts (though they know more than me), swear that in about 18 months there will be another big recession.

if they are so smart, why aren't they rich? Nah, I don't really believe that, but in this case, if they could time markets and so on .... but 18 months is really too long a period to mean much.

[bae]

People around me, who are by no means experts (though they know more than me), swear that in about 18 months there will be another big recession.

What are they basing their prediction on?

What actions are they taking? (Other than talking...)

[Ultralight]

if they are so smart, why aren't they rich? Nah, I don't really believe that, but in this case, if they could time markets and so on ....

Well, one of them is kinda rich. He is debt free, has plenty of money to spend on all sorts of stuff for his family. His wife is a doctor.

One of the other ones is not rich or anything.

I am dubious about economic predictions made by anyone, even the big dogs of big econ.

[Ultralight]

What are they basing their prediction on?

What actions are they taking? (Other than talking...)

Well, the well-off one is waiting until the recession he predicts to make a massive purchase -- a house that is like $700,000k.

[bae]

Well, the well-off one is waiting until the recession he predicts to make a massive purchase -- a house that is like $700,000k.

So, not really risking any capital now to back up his theories?

If I could predict 18 months out, I'd be a billionaire.

[Ultralight]

So, not really risking any capital now to back up his theories?

If I could predict 18 months out, I'd be a billionaire.

I am dubious of his claims. I know virtually nothing about the economy, accept that it is rigged against working families and that we have recessions and depressions now and then that decimate the savings of working people.

[bae]

I know virtually nothing about the economy, accept that it is rigged against working families ...

I thought you were an atheist....

[Ultralight]

I thought you were an atheist....

I am, but why would that stop me from leftist snarking against capitalism? ;)

[Ultralight]

Wait... I do believe in a higher power: The international corporate conglomerates.

[LDAHL]

if they are so smart, why aren't they rich? Nah, I don't really believe that, but in this case, if they could time markets and so on .... but 18 months is really too long a period to mean much.

That puts me in mind of the line about the guy who predicted nine of the last five recessions.

[Ultralight]

I am at the market's whim...

[LDAHL]

Well, the well-off one is waiting until the recession he predicts to make a massive purchase -- a house that is like $700,000k.

If he's so rich why isn't he smart? I can make myself believe in flying spaghetti monsters but not in market timing.

[Ultralight]

I just try to have a lifestyle that is not likely to be impacted profoundly by recessions.

[LDAHL]

I just try to have a lifestyle that is not likely to be impacted profoundly by recessions.

I think it was Cicero who said something about thrift being the best income. Of course, that was before Treasury Inflation Protected Securities.

[Ultralight]

I think it was Cicero who said something about thrift being the best income. Of course, that was before Treasury Inflation Protected Securities.

I think being thrifty still helps. :)

Though many people find it an impossible practice.

[Rogar]

Even if we leave out the argument that the REAL cost of gas has been externalized/subsidized beyond recognition it was still cheaper a generation ago. In the early 70s when I was a kid gas ran between $.25 and $.30 per gallon. The minimum wage was $1.60/hour meaning you could get somewhere between 5 and 7 gallons for every hour you worked. Today's federal minimum wage is $7.25/hour and the average retail gas price is $2.20 (Bloomberg) meaning you can buy a little over 3 gallons with an hour's pay. A little calculated market manipulation by the big players and that can easily drop to closer to 2 gallons per hour.




I look at simple living as a way to avoid being poor.

The perspective of old compared to new gas prices probably changes depending on a person's age. For the bulk of my years the products that Apple makes didn't exist and now they are one of the most successful companies. Life seemed to function well without their products and I still consider them a privilege, but to another generation they are as much a necessity as a roof over the head. I don't know exactly what might predict a recession or a boom, but people seem to find a way to buy more Apple products regardless.

A bad economy seems to come along every decade or so to some degree or another and since someone predicts it every year, some are always right. As long as we have liberal regulation of the financial sector there is a bigger chance that history will repeat itself.

I think it was Picasso who said, I'd like to live like a poor man with lots of money.

[sweetana3]

Rogar, I like your post.

[Gregg]

The perspective of old compared to new gas prices probably changes depending on a person's age.

For sure, but it can be valuable to plot points on a graph to reveal trends that might not be as obvious in other ways. If you're comparing the same commodity then and now its an apples to apples comparison that might shine a little light on how far we've come (or gone). Apple's apples, OTOH, are the oranges that don't have any real comparison to something a generation ago and so just represent new technology. No less valuable to consider, but not a straightline example of things then and now. Prices for American staples like gas, food, housing, insurance, cars, etc. measured against inflation adjusted incomes really can help show whether the average consumer is better off then or now. In most examples that measure seems to favor the past. That said, I wouldn't want to trade my i-phone for my old party line.

[Williamsmith]

I'll trade your iPhone for telephone stand with a rotary dial and no answering machine. Catch me if you can.

[catherine]

All's fair in love, war, and unfettered capitalism


https://www.youtube.com/watch?feature=player_embedded&v=SI_pFD5yEcc