Wednesday, March 27, 2013

Wal-mart: Live by the Market, Die by the Market

Walter Russell Mead thinks he has discovered why the stores are empty at Wal-Mart.  It's that pesky minimum wage.  If Wal-Mart didn't have to compete with (for) workers earning the minimum, they wouldn't have so much trouble finding help.

Well yes, and they could make more money if they could just kidnap bystanders and empty their wallets.  But we have this atavistic notion that even corporate behemoths should obey the law, at least some of the time.

Anyway, I think Walter may be looking for the problem in the wrong place.  Seems to me the real fly in the ointment is CostCo and all the other guys who find that they cannot get good help unless they pay above the minimum wage.   Peter Drucker taught us (or wanted to teach us) that it is important to treat the employees as an asset rather than a liability.  Hire capable people and train them to do a job, rather than teaching them how to apply for food stamps.  Wal-Mart might think this sounds like insanity; but for guidance, they might want to ask the former owners of Border's and Circuit City what happens when you try to staff the floor with zombies.

Meantime, I assume we can expect Walter to demand that Congress impose price controls on CostCo to keep them from promoting uppitiness among the underclass.


Ebenezer Scrooge said...

I can think of one evil soulless exploitative corporation that disagrees with ole Massa Mead: Wal-Mart. It supports a higher minimum wage. Not for the sake of its workers, of course! But it knows its customers very well, and would dearly love for them to have more scratch to spend.

bjdubbs said...

The CEO of WMT had a ton of options expiring by Feb 2013. Notice that he exercised nearly all of them in Nov 12. So hiring fewer warm bodies over the last few quarters has boosted the margins, temporarily but long enough. His salary is relatively low ($4m) and each dollar above $50 earned him about $350,000, so the extra $10 or $15 of appreciation earned him a multiple of his salary.

MaysonicWrites said...

Remember reading in Forbes back in the '80s of a comparative study of McD's franchises contrasting those who paid minimum wage and those who paid somewhat more (correcting for the socioeconomic standing of the zip codes). Upshot was: paying more is more profitable due to less turnover and (probably) less theft.