retail news in context, analysis with attitude

The Associated Press reports that Democrats in the US Senate and House of Representatives have introduced bill that would raise the national minimum wage to $10.10 an hour, from the current $7.25 an hour, by 2015, as well as providing for automatic annual increases tied to the cost of living.

President Obama has called for an increase to $9 per hour, but the lawmakers say that is insufficient.

According to the AP story, "The lawmakers say a hike in the minimum wage would help lift millions of workers out of poverty and boost the economy. But top Republicans have rejected the idea, saying it would hurt employers."
KC's View:
Once again, I would refer you to this passage from a New York Times story that ran earlier this week...

As a percentage of national income, corporate profits stood at 14.2 percent in the third quarter of 2012, the largest share at any time since 1950, while the portion of income that went to employees was 61.7 percent, near its lowest point since 1966 ... Corporate earnings have risen at an annualized rate of 20.1 percent since the end of 2008, he said, but disposable income inched ahead by 1.4 percent annually over the same period, after adjusting for inflation.

I'm not saying that $10.10 is the right number, and I'm not smart enough to know what the timing should be. But I do think that there is such a gap between how corporations are doing and how average front line employees are doing, that it is hard to take too seriously comments that an increased minimum age will do irrevocable and irreparable harm to employers.

The Los Angeles Times, by the way, reports that Costco is one of the companies that supports a hike in the minimum wage ... but then again, "Costco pays a starting wage of $11.50 an hour, gives most employees healthcare and other benefits, and has not switched to the model adopted by many big-box retailers of using temporary firms in warehouses to keep costs low." So raising the minimum would actually force its competitors to increase labor costs so that they are closer to Costco's.

But, here's the thing. Costco has resisted all calls from analysts to reduce wages as a way of cutting costs, believing that it has an obligation to pay its people a living wage ... and this approach certainly has not hurt its long-term growth or share price.