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The job market is forcing pay hikes at Walmart
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Walmart workers are getting a pay raise.

Not because Congress dictates it or, to a lesser degree, the California Legislature.

They are getting one because Walmart wants to avoid losing employees.

The announcement on Feb. 18 that the world's largest retailer, that some argue besides bragging about supposedly "always low prices - always" should also brag they pay "always low wages - always," was criticized by many as not being enough.

Walmart's lowest paid part-time employees will receive at least $10 an hour by 2016. The retailer's average full-time worker will make $13 an hour.

Due to other employers in an improving economy competing for the same skill set of workers by paying better, Walmart found itself with a higher than acceptable turnover rate. Not only does it cost money to hire and train workers but it also impacts customer service.

It really doesn't make any difference in California where the mandated minimum wage goes up to $10 anyway in 2016. Walmart was also already paying higher than the federal minimum wage of $7.25 that establishes a de facto floor in all states.

Union activists want Walmart and everyone else to do a lot more. They want a $15 an hour minimum wage declaring that is what it takes for someone to support themselves. That comes to $31,200 a year assuming they work full-time.

While not begrudging anyone a pay raise, every action has an equal and opposite reaction.

Mandate a $15 an hour minimum wage and you will see an acceleration of automation to eliminate low-paying service jobs. It is why McDonald's is starting to experiment with kiosks where customers place their own orders. In labor intensive concerns a jump in labor costs means they have to find ways to cut their costs or become more efficient in order to remain competitive. Yes, one option is to raise prices but there are only so many times you can do that before it starts undermining your customer base.

What forced Walmart's hand is essentially labor pursuing upward mobility options elsewhere in an improving economy even if it is only at 50 cents an hour or a few more hours a week of work. The opportunity will arise as the economy continues to improve for many to secure "real" upward mobility by getting away from entry level jobs that is Walmart's forte.

Line work at McDonald's was never intended to be a career choice. It's not a position that on its own is going to pay a livable wage.

That said McDonald's is getting what it pays for these days.

It pays $1 to $3 an hour less for similar positions such as those at In-n-Out Burgers. Comparing the two chains is like pitting Red Delicious Apples against Ambrosia Apples. One is driven by massive volume with a product that isn't exactly at the top of the taste charts. The other needs less volume but delivers a produce one may well argue is tastier and therefore commands a somewhat higher price.

Go into an In-n-Out and the overall customer experience tends to be much nicer. You won't come across an inattentive or surly worker or a dirty dining room. That can't be said many times for McDonald's.

In-n-Out also has a lower turnover of employees because it pays more to further keep costs down.

It can pay for an employer to pay more. At the same time mandating all employers to pay more can be the equivalent of the government issuing a death sentence that is actually carried out.

But if that is the case why aren't the higher minimum-wage laws in places like San Jose ($10.50 an hour and San Francisco ($11 an hour to go up to $15 by 2018) triggering massive small business closures?

The answer is fairly clear. Cities such as San Jose and San Francisco have hot economies. And while higher prices put the squeeze on merchants and forces them to increase prices, the majority of consumers in those cities are doing well thanks to money being spread around by the tech economy. If you doubt that impose an $11 an hour minimum wage in Ceres or Modesto and see what happens.

A strong economy is the best way to improve pay.

However, you don't want it to be too strong.

In Williston, N.D., economists argue the basic minimum wage is $14 because you can't hire anyone for less.The city's unemployment rate is 0.90 percent (that's not a misprint) thanks to it being located in the heart of the shale oil boom.

Walmart in Williston advertises the low-end cashier's job for $17.40 an hour and they still struggle to fill them.

Sounds good for the low-skill worker, right? Wrong. It costs nearly 2.5 times more to rent an apartment in Williston than in Ceres assuming you can get one. There are people sleeping in cars and trailers in parking lots who are making more than $25 an hour. The price of everything has gone through the roof due to the super-heated economy.

There's only one way to survive in Williston and that is to secure a better paying job that requires more skills sooner than later.

The bottom line is true upward mobility requires people to try and better themselves. Simply dictating higher wages isn't going to do the trick as it just raises everyone's floor and ultimately gets you back to where you started.

This column is the opinion of Dennis Wyatt and does not necessarily represent the opinion of Morris Newspaper Corp. of CA.


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