How A Minimum Wage Increase Could Help Wal-Mart

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Wal-Mart

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An increase in the federal minimum wage could put smaller retail stores out of business and help large chains like Wal-Mart, according to Leon Nicholas, an analyst at Kantar Retail in Boston.

"It could knock out small independent grocers, pizza shops, electronics retailers, auto suppliers, lawn and garden stores," Kantar told Bloomberg. "Wal-Mart gets those customers."

The increase would also put more money in the pockets of Wal-Mart's low-income shoppers.  A new report from the Congressional Budget Office projected that a $10.10 minimum wage increase could  lift 900,000 families out of poverty.

The company has partly attributed its disappointing performance in the most recent quarter to cuts in food stamp benefits. The retailer's grocery sales, which account for more than half of its sales, fell by a "low single digit" percentage in the last quarter.  An estimated 20% of Wal-Mart's shoppers rely on food stamps, according to an analyst quoted by  Reuters

The company hasn't yet taken a position on the minimum wage debate, however. Wal-Mart  said Wednesday that it will remain neutral on the issue after Gap announced it would be phasing in an increase to $10 over the next two years. The federal minimum wage is currently set at $7.25 an hour.

The National Retail Federation, an industry trade group, is against a wage hike.  NRF  President and CEO Matthew Shay says the increased payroll costs would lead to job cuts. 

"Raising the minimum wage would place a new burden on employers at a time when national policy should be focused on removing barriers to job creation, not creating new regulations or mandates," he  said in statement to reporters last month. " It’s simple math – if the cost of hiring goes up, hiring goes down."

The CBO report estimated as many as 500,000 jobs could be cut with an increase to $10.10.



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