I won't bother to reproduce the argument here since it is so idiotic (as I will demonstrate below) and you can read it for yourself. I only want to quote Mr Gandel's conclusions:
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Wal-Mart paid its top executives and board members $66.7 million last year. The rest of the money has to be split among Wal-Mart's remaining roughly 2.2 million employees. Of those, about 1.4 million work in the U.S. Assume that Wal-Mart spends about 2/3 of that on the salaries of its U.S. employees, because salaries are generally higher here. That leaves $66.6 billion for the U.S. workers, or $47,593 [sic]. The Bureau of Labor Statistics estimates that 30% of the average U.S. workers' total compensation is spent on benefits.
That means the average Wal-Mart employee's take home pay should be $33,315. Wal-Mart doesn't say what its actual average salary is. But Payscale estimated it to be just over $22,000 at the end of last year.
The conventional wisdom, of course, is that if Wal-Mart were to hand out raises, its stock would tank. That may not be true. When Google (GOOG) announced a 10% raise for its employees three years ago, the stock dropped a bit but mostly recovered within a year. And Google's stock is 60% higher now than it was before the raise.
So, Mr Gandel concludes that "the average Wal-Mart employee's take home pay should be $33,315," whereas it now stands at a mere $22,000. According to this argument, then, Wal-Mart should increase the pay of each American Wal-Mart employee by $11,315 per year. Now, as Mr Gandel himself notes, Wal-Mart has 1.4 million American employees. To give an $11,315 a year raise to 1.4 million employees would cost Wal-Mart an additional $15.841 billion per year. According to Yahoo!, Wal-Mart has 3.26 billion shares outstanding. So, the additional wage expense would amount to about $4.86 per share. Wal-Mart's current earnings per share -- again, according to Yahoo! -- are $5.20. So, we are being asked to believe that Wal-Mart could essentially wipe out its entire earnings per share and this would have no impact whatsoever on its share price. This is what passes for economic argument in our society today.
But wait, there's more! Mr Gandel notes that Google's share price even went up after they gave a 10% raise to their employees. First of all, let it be noted that there is an enormous difference between a 10% raise and the 50% raise (from $22,000 to 33,315) that Mr Gandel is recommending for Wal-Mart employees. More to the point, Google's decision to give its employees a raise was presumably dictated by the highly competitive market for knowledge-workers (in particular, software engineers) in Silicon Valley. Google made the determination that it could more easily hire and retain workers (and keep them from going to competitors) if it paid them more. To compare highly skilled and highly sought after software engineers in Silicon Valley to unskilled shelf stockers at Wal-Mart is ludicrous.
Moreover, if there is any lesson to be learned from Google's actions, it is that a competitive, meritocratic marketplace ensures that salaries are adjusted to the correct level: if a company's pay is too low, employees will go elsewhere; if a company can find abundant labor, it does not need to pay exorbitant salaries. If we apply this calculus to workers at Wal-Mart, we can conclude that management might actually be paying its employees too much since management is not having any problem hiring and retaining employees at the current wage being paid. Comparing Google and Wal-Mart employees reveals only that the minimum wage is a completely artificial construct that has nothing to do with market forces, but has been instituted by politicians seeking to curry favor with low income voters. The minimum wage is not really a wage for work done at all, but rather merely another form of enervating, humiliating social welfare.
And, yes, if all this sounds like Social Darwinism, I proudly plead guilty.
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