William Thien

Big Box Retailers and Their Support for an Increase in The National Minimum Wage

Posted on: June 18, 2014

Yesterday I tuned in to that national conservative radio talk show host who broadcasts during the day. He brought up the subject of the two major big-box retailers we all know of, one whose name begins with a W and the other a C, and their support for an increase in the minimum wage. The radio host contends that the two retailers support an increase in the minimum wage because they can afford it and it will displace their competition who cannot afford to pay their own workers an increase in the minimum wage.

That was my position regarding the potential onset of a national internet sales tax. Certain retailers such as big box retailers who also have an internet presence can absorb the cost to the customer of a national internet sales tax, thereby pricing their competition out of the market. Smaller retailers would by default be increasing prices when adding the sales tax to the total receipt. Previously the smaller retailers were able to keep prices close to or competitive with the big-box retailers when adding in the cost of shipping because their overhead was naturally lower. They do not have to pay to maintain a retail location or locations. The implementation of a national internet sales tax would change all of that.

An increase in the minimum wage is another issue altogether. The motivation by the two major big box retailers to seek an increase in the minimum wage is due to the fact that their customers are no longer able to afford to shop at their stores. Retail prices, all except those that are subject to governmental price controls such as that of milk and food staples in general, have seen a large and certain jump in prices since 2008 and just prior as a result of various economic stimuli at the national level.

As a country, we are now starting to see the real and detrimental effects of the various economic stimulus plans. We are seeing the effects of the economic stimuli in the form of substantial levels of inflation and the least affluent customer, that customer to which the two big-box discount retailers primarily cater can no longer afford to shop at their stores. Sales are down at those discount retailers because prices are up substantially due to inflation, inflation which the retailers can no longer control with their economies of scale and purchasing power. Yet, their customer base has not seen a corresponding increase in wages in five years if you consider the national minimum wage while at the same time prices are being driven substantially higher. The economic stimuli we have seen since 2008 and prior have done little for the poor and lower economic classes, quite the opposite in fact.

One issue, that of the internet sales tax is a price control issue, the other issue, that of the minimum wage, is one of money supply on the demand side. When the customer has no money, that’s bad for retail business. And the customer has no money to cover the cost of inflation. The economic stimulus made sure of that.

To prove my theory I did a rather unscientific study. I went to the closest big-box retailer whose name begins with the letter W. Of the thirty or so lanes located to check out, only two lanes were open right in the middle of the afternoon (a little after 4pm), and the only line that had formed was at the self-checkout lanes and that line had only three or four people in line. The store is new and is considered a “Supercenter.” By retail standards, I’m sure it would have been considered a bit of a ghost town.

Their customer simply has no money to shop there anymore.

Copyright © William Thien 2014

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