Businesses raise minimum wage for own benefit, not workers

Phil Schurrer and Phil Schurrer

Last week, Wal-Mart announced it was increasing its minimum hourly pay for its employees to $9 this year and to at least $10 beginning in 2016.

Wal-Mart is not alone. Costco, Hobby Lobby and IKEA all pay their workers at a rate greater than the Federal minimum wage.

Starbucks increased their pay rates last month. The Gap will begin raising wages to $10 per hour and Aetna will begin paying workers a minimum of $16 per hour.

Wal-Mart’s move was not in reaction to any government decree or the demands of some “occupy” movement. Nor was it necessarily motivated by the needs or demands of its workers.

As Adam Smith, in his “Wealth of Nations,” wrote, “It is not from the benevolence of the butcher, the brewer or the baker that we expect our dinner, but from their regard for their own interest.”

It’s true that the hours worked by Wal-Mart employees may not change.

Due to pressures from the Affordable Care Act, Wal-Mart, as well as many other companies, has been scheduling individual work weeks at or below 30 hours, so as to save on the health care premiums that are incurred as a consequence of employing “full time” workers.

The underlying fact behind the wage increase is that the labor market is beginning to tighten and Wal-Mart, as is true of other firms, is interested in retaining and attracting the best workers. Call it “enlightened self-interest.”

It’s a good sign that the market economy is alive and well [or at least awakening from a long slumber] and for that we should be grateful.

With the blizzard of Executive Orders emanating from the White House, an onlooker might be tempted to think that the United States has traded the representative republican ideal of governance for “rule by decree,” with a corresponding negative effect on the economy.

Wal-Mart’s pay increase is not without precedent. Just over 100 years ago, Henry Ford announced a pay increase of $5 per day for any employee and a decrease in the workday from nine to eight hours [employees had to meet other requirements which would be deemed intrusive today].

Ford called his plan a form of “profit sharing.” He was trying to build a stable workforce and reduce turnover. It had the fortuitous yet unforeseen consequence of turning many of his workers into customers.

The genius of the market system is twofold: it enables participants to make [hopefully] informed choices and facilitates the exercise of the most noble of human characteristics – free will.

The market system is also the best method yet devised for allocating scarce resources.

This is not to say the market system is perfect. Far from it. At its heart, it makes use of greed, which is classified as one of the Seven Deadly Sins.

Two ways of moderating greed are competition and government regulation. How much regulation is needed has, is and will be the grist for lively discussions and debates.

So, it appears that some retail workers will be getting a raise. Some will see this as a hopeful sign that the chasm of inequality may be narrowing. Some will question what the workers did to deserve the raise.

But, as is true of many economic events, the long-term consequences remain uncertain.

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