Tyler Durden:
We have tried a number of times (here, here, and here) to explain the simple math behind the populist call for a higher minimum wage (that appears to be founding the President’s new class warfare) but in the following clip, we hope, Peter Schiff visits a local Wal-Mart in the hopes of explaining that magic money trees are not real.
Posing as representatives of “15 for 15,” a make-believe organization advocating that Walmart raise prices by 15% and use the extra cash to pay its low-skilled workers $15 per hour (Schiff suggests that the surcharge be added to customer’s bills at checkout, just like a gratuity at a restaurant).
Not surprisingly few shoppers supported his cause. Even those who felt Walmart workers should be paid more did not want to pay higher prices themselves to make it possible.
Perhaps, as Schiff notes, those demanding higher wages for Walmart’s workers should consider the importance of low prices to Walmart’s customers.
Those who advocate across the board wage increases assume that the company can meet the additional payroll by simply dipping into profits.But with just $6,600 profit per employee any significant raise in pay will largely cut into profits, greatly alter return on equity, and force dramatic changes in the company’s operations. In truth the kind of pay raises envisioned by the activists, must lead to price increases.
