Tuesday, July 11, 2006
Phew! I'm Back
A recent Op-Ed piece in the Chicago Sun-Times sheds some light on the true effect of a raise in wages.
The "retail living-wage ordinance" currently being considered by the [Chicago] City Council would make large retailers (with stores of at least 90,000 square feet) pay a starting wage of $10 an hour, plus $3 of health benefits. Though the proposal would apply to numerous large retailers in the city, including Target and Costco, it quickly got the attention of Wal-Mart. To put it mildly, the world's largest employer, with plans to open numerous stores in the city, wasn't happy and immediately threatened to suspend the store openings.
The $13 an hour total compensation cost mandated by the Chicago ordinance is roughly a 20 percent raise over what Wal-Mart claims to pay its employees. A raise of this size could be financed through a combination of Wal-Mart allowing its profit margin (after-tax profits divided by sales) to fall from its current 3.6 percent to 2.9 percent and by raising its prices 0.7 percent -- less than a penny on a $1 pair of socks.
0.7 percent? That's the massive price hikes the Republicans are warning us about? To put things in perspective, the price of $100.00 of groceries bought at one of Wal-Mart's "Supecenters" would cost a whopping $100.70 after the 0.7 percent price increase. That's right - 70¢.
To be honest, the proposed raise in the federal minimum wage would have been an incremental raise of 40% over the next two years - double what the above quoted scenario investigated. However, the numbers clearly show how small of an impact a raise in the minimum wage would actually have on consumer prices.