President Obama isn't waiting for congress when it comes to raising the minimum wage on federal contract workers.
As promised during his State of the Union address in January, Obama signed an executive order on Wednesday raising the minimum wage on all new federal contractors from $7.25 per hour to $10.10 per hour. In case you missed that, it applies only to new contractors. Everyone else currently getting paid below $10.10 will continue at that rate.
The president has made it no secret that he wants to raise the minimum wage nationwide to $10.10, though the Republican-led congress isn't exactly jumping on the idea. According to Bureau of Labor Statistics, about 3.6 million Americans – roughly 4.7% of the workforce – earn at or below (for example, jobs paying tips) the national minimum wage of $7.25 per hour. About 25% of American workers make $10.50 an hour or less.
The single largest employer of people earning at or near minimum wage is Wal-Mart. The company employs a total of 1.3 million Americans (2.2 million worldwide). The company's average full-time wage is $12.81 per hour. But, there are two things about that number: First, that's only full-time employees. Second, it's the average, so that number includes more senior employees.
For the past several years, a number of studies have tried to put a figure on what higher wages would do to Wal-Mart's costs. Back in 2007, the UC Berkeley Center for Labor Research and Education estimated a $10 minimum wage would add $2.4 billion in annual costs for the company. Two years ago, they estimated that a $12 minimum wage would increase Wal-Mart's payroll by $3.2 billion per year.
To put that in perspective, Wal-Mart's revenues were $475 billion over the last twelve reported months but its net income during that time was $17.2 billion. In other words, a hike in minimum wage to $10.10 could eat at least 14% of the company's profits.
"Obviously, it's going to increase their costs," says CNBC contributor Gina Sanchez, founder of Chantico Global, on any law increasing minimum wage. "But, in the case of Wal-Mart, I don't think that the costs will increase such that all by itself is going to be a critical factor."
Sanchez points out that Wal-Mart has an advantage over other retailers in its ability to cut costs. An increase in wages would potentially hurt Wal-Mart's competitors even more.
Instead, Wal-Mart is more worried about the finances of its consumers, according to Sanchez. The company said the government's cuts in food stamps starting last November hurt the company's profit margins. But, an improving economy would change that.
"Going forward, we're looking at a continued improvement in the economy and that should actually be beneficial to consumers," says Sanchez. "In the improving economy I think Wal-Mart should actually start to improve."
But what do Wal-Mart's charts say about where the company's stock is going next? In the video above, Talking Numbers contributor Richard Ross, Global Technical Strategist at Auerbach Grayson, says the stock hit a critical long-term technical point.
To see Ross' charts and to hear the rest of Sanchez's fundamental take on what's next for Wal-Mart, watch the video above.
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