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Economics 101: Wal-Mart Hikes Minimum Wages, Prepares To Fire 1000
"Please remember, these people are our neighbors and friends. You have a skill that will be very much in need when this goes down. You are experts in the job market and you know what it takes to get hired. This is a time for us to step up and do what we can to help."
The quote above is from an internal memo sent to employees of Northwest Arkansas recruiting firm Cameron Smith & Associates and references an expected wave of layoffs at WalMart’s home office in Bentonville.
The memo was obtained by the Arkansas Democrat-Gazette, who spoke with Cameron Smith himself via e-mail.
"The last time Walmart had a large layoff (800 plus), we were unprepared and overwhelmed with phone calls, emails, resumes and walk-ins," Smith told the paper, referring to a series of cuts at WalMart in 2009. The next round of layoffs are just around the corner and could affect as many as 1,000 employees Smith contends, citing conversations with company insiders.
As those who follow the retailer closely are no doubt aware, context is key here.
Back in April, we asked why WalMart was mysteriously shuttering geographically distinct stores nationwide for "plumbing problems." The company, citing the need to repair persistent "clogs and leaks", closed five stores across the country almost simultaneously. The 2,500 affected employees were in some instances given almost no notice whatsoever.
After a few enterprising reporters determined that no plumbing permits had been filed in any of the locales where the shuttered stores were located, conspiracy theories sprung up, the most outlandish of which posited a link between the store closings and the Jade Helm 15 military drills which began earlier this month in Texas and six other states.
For our part, we argued that the store closures were more likely the result of two things: i) the need to cut costs, and ii) the desire to close a "problem" store in California that had for years served as a hotbed for union activism. For now, we won’t dive into the union issue, but for those interested, see here, here, and her.
As for cost cutting, consider the following, excerpted from "Why Is WalMart Mysteriously Shuttering Stores Nationwide For Plumbing Issues?":
Earlier this year, WalMart became one of several corporate heavyweights to lift wages for its meagerly compensated workers, around 500,000 of which are now set to receive at least $9/hour and $10/hour by Q1 2016 (that of course assumes they make it on $9 an hour for another 12 months and don’t seek out other employment by sheer necessity).
Meanwhile, the move by the country’s largest retailer to pay a few extra pennies to its (basically) minimum wage employees comes at a cost to the company’s suppliers because when you operate on the thinnest of margins in order to be the "low price leader," someone has to pay for those wage hikes and you can’t pass along the costs to customers because many of your low-income patrons are operating from the same tax bracket as your low-paid employees. As such, the supply chain is forced to lower their prices and of course they’re going to comply because well, you’re WalMart meaning you’re your vendors’ biggest account pretty much by default. The outcome is that "while WMT (or MCD or GAP or Target) boosts the living standards of its employees by the smallest of fractions, it cripples the cost and wage structure of the entire ecosystem of vendors that feed into it, and what takes place is a veritable avalanche effect where a few cent increase for the lowest paid megacorp employees results in a tidal wave of layoffs for said megacorp's vendors."
If that doesn’t turn out to be enough in the face of an economy which isn’t really recovering and in which low-income shoppers are constrained by lackluster (and by that we mean nonexistent) wage growth, some sacrifices may have to be made.
The first such sacrifice (apparently) were the 2,500 or so employees at the five locations with intractable plumbing problems, but clearly that was not enough which is why now, the company is moving to cut 1,000 higher paying jobs in Bentonville.
Of course WalMart can’t come out and say that a lackluster economy and nonexistent wage growth for 83% of the nation’s workforce has ironically served to make the company’s own minimum wage hikes untenable and therefore some heads in middle management have to roll, so instead the cuts will be blamed on bureaucratic inefficiencies. Here’s the Democrat-Gazette again:
Cutting through red tape and trimming bureaucracy has been among the goals of McMillon, who took over as CEO in February 2014. Wal-Mart employs more than 2 million worldwide and has more than 1.4 million employees in the U.S.
McMillon mentioned the size of the company's headquarters as a possible detriment to quicker action at the store level and told retail analysts during a June question-and-answer session that employees should remember "there are no cash registers in the office." During a store visit last year, McMillon said he encountered an electronics department manager who spent five hours on the phone with the home office to get assistance with a problem.
"We want people to make decisions and move with speed and not have the organization run in a way that causes it to slow down," McMillon said.
He again referred to the "dangers of a big company" during a June 11 retail conference in Springdale.
"As we've grown and time has gone on, we've created pockets of our business, situations where people don't want to share bad news. Lots of PowerPoints get built, lots of pre-meetings are held to socialize things so people aren't surprised during a meeting," McMillon said. "That is bureaucracy. That slows us down."
Got it. Too many people are working on PowerPoints and when someone making $10 an hour calls the home office, the hold time is too long. These are clear signs of an elephantine, Washington-esque bureaucracy, which must be done away with.
Or something.
Just don’t dare suggest that the cuts are the indirect or even direct result of the wage hikes that will cost the retailer around $1 billion this year, because that would mean that critics of the push to hike the pay floor are correct to assert that forcing employers to pay more will immediately result in equal and offsetting layoffs.
Only here they aren't necessarily "equal" at all.
That's in no way a commentary on the "worth" (in a philosophical sense of the word) of an hourly worker versus a salaried employee, but if layoffs in Arkansas do materialize as Cameron Smith predicts, it seems entirely fair to suggest that the pittance given to hundreds of thousands of low paid workers will ultimately come at the cost of 1,000 or so breadwinner positions. We'll leave it to readers to determine whether that is a net win for the economy.
On the bright side for anyone affected by the coming round of job cuts, at least you know that this time around, the staff at Cameron Smith & Associates is "much more prepared" to handle the sudden influx of 1,000 distraught former WalMart employees.
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the connection between raising wages and layoffs at walmart is tenuous. such a meager wage increase is in the thousandsth of a penniy per products sold. walmart has huge pricing power for many of their products because they are the only supplier in town for many things. i know of several stores where people travel as far as 30 miles to get shit that can only be bought at walmart. they also use some devious marketing. i just bought a 7 ounce can of butane for less than the 2,5 ounce can was selling for. the layoffs are more directly related to the lack of discretionary money their customers have to spend because most of them are working poor or on the .gov dole.
the irony is they can't afford to raise wages enough so their employees can buy the shit they sell.
This is bentonville arkansas we are talking about. I went through that staet not to long ago. The poverty level there is very depressing. If people are so poor that they cant even shop there then There is not reason to keep the store open, even if they are using ebt.
If you then hike up minimum wage even more so that it eats into the very thin margin of profit then there will no longer be profit. Not saying that they couldnt shift profits from elsewhere to main tain that store to keepmit open for the poor people but at some point it wont be affordable.
Raising min wage is the solution to inflation and increase in taxation and regulation by government. If government restructured the tax code so as people making min wage didnt pay fed income tax, not like they dont already with benefits and such, businesses both big and small would be able to adjust ever changing asspects of the economy.
Raising the min wage for 6% of the work force makes no sense. It only works as a political football for those who espose class warfare.
Fuck you liberals statists.
Dude, Walmart is headquartered in Bentonville. It's the home of millionaires, maybe even billionaires.
With 2 million plus employees....doesn't Walmart have a 1000 people quit each day? each week? why would they have to fire anyone in order to downsize? Unless they are firing management.
This guy raised minimum wages at his company to $35/hr - now he's losing productive ones because, hey, if the unskilled incompetents are make about what a productive worker makes, time to hit the road. Communism sucks........for the productive at least.
http://finance.yahoo.com/news/ceo-raised-minimum-wage-70-212850113.html
>>>>>>lots of pre-meetings are held to socialize things so people aren't surprised during a meeting
Anyone that uses the word socialize in this way goes strait to my management idiot list. Fucking clueless retards that alter meanings of words to create their own bullshit jargon.
The same goes for evangelize, ping....
On, and fuck ChinaMart. I hope they go under.
idiots Liberty equals capitalism U know a free fucking market. Read article five of our destroyed constitution , it is the civil method of states regaining their power. The use of the 2nd amendment to regain lost liberties is the hard way. Liberty and capitalism and adherence to the principles of the constituition made this country.
I do not think article five will be utilized because that requires effort and knowledge. When food becomes scarce, there will be a too late great awakening of some really stupid fat people. ur diabetics and dialysis people will be gone in a month. The rest of us will melt some goddamn barrels for sure. Obama and the Feds will make Lincolns accomplishment of 700,000 dead Americans seem like a trip to Disney.
I am fucking tired, bring it on
Wal-Mart has revenue problems because they cannot stock the shelves with what consumers want to buy. For example, I like Minute Maid "Drops" especially the "Tropical Mango" flavor. I haven't seen any tropical mango drops in my local Wal-Mart for at least a month. In fact, they have not had any Minute Maid "Drops" in stock for weeks. They do not even receive restocking shipments because the shelves are still empty after overnight restocking. This is repeated across many other product categories. It is becoming progressively worse, too.
Walmart. A zionist tool to destroy what was America. They need to be burned to the ground.
WalMart = A giant sea of toxic plastic, toxic clothing, toxic chemicals, toxic air and cancer causing electronics. All which will end up in the land fill (nice name for a toxic dump site) All being kept warm and cool with millions of gallons of wasted energy every hour.
Did you know that for every bag of trash you throw out it takes 5 bags of trash to make it. Imagine the trash generated to make everything in that Wal Fart. Not to mention the dangerous nuclear energy needed to keep it all warm and cool.
Is all that junk in there worth all the trash and nuclear waste out here?
Cell phones causing cancer, plastics causing diabetes.
http://www.nydailynews.com/life-style/health/cellphone-radiation-cancer-...
BOOM! Here comes THE BOOM!
Razor thin margins???? Ha, good one. I nearly had a heart attack laughing from that one.
Standard operating margin for Walmart is 65%. Many products are sold to buying groups for 85%. When the product sells they keep 15% and Walmart keeps 60%.
The best is the As Seen On TV crap. A Jewish owned and operated company leases space in Walmart and every product is sold at 90% margin. If the product sells for $10 it was produced for around $.50.
It is the same with every Big Box retailer. Standard margins used to 50%, then over the past fifteen years it kept creeping up. You can't even sell a product to a mass retailer unless you can give them 60% up front and another 5-10% on the back end on inventory deductions. If you are making a product you have to build in 70% of retail as a break even point. Any profit comes from cost reductions from that.
If it is $10 retail you have a cost threshold of $3 that will no longer return any profit. Your goal is a landed cost of $2.50: product, packaging, and shipping. You hope to have a net wholesale of $3.50 where you make $1 off each unit. ONE FUCKING DOLLAR. The retailer makes $6.50 gross to your $1.
So you are making a $10 retail product and it needs to land for $2.50 in a package ready to ship. Most likely you are not manufacturing the product yourself, so a factory in China needs to figure out how to produce a product and sell it to you for less than $2 with some profit for themselves. Shipping and packaging is going to cost around $.75 per unit. Now you are at $1.75. The Chinese factory wants to make $.25 on each unit.
Your $10 retail product has a manufacturing cost of $1.50.
Anyone here think you can manufacture any complete $10 retail product in the USA for $1.50? Maybe a rubber ball.
First job was with a small retailer. You are correct - the price of everything coming in is doubled, labelled, and put on the shelf.
Seasonal plastic junk gets even higher markups.
Look man, one person's corpulent margin is another's razor thin; it's all about overhead and the pass through. Yachts don't buy themselves you know.
Walmart only needs a skeleton crew except on the first few days of the month - when the gubmint money comes out.
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41664 votes were cast. The results were a knock-out blow for the organizers--a full and crushing victory for Vladimir Putin. Treason!
J.Hawk's Comment: I'd add that even it was "bots and trolls" voting for Putin, where is the pro-Poroshenko/Yatsenyuk/Lyashko/Timoshenko enthusiasm? Right? That, in my view, is what speaks in favor of its authenticity, the fact that none (NONE, KARL!) of Ukraine's leaders elicit respect, admiration, emulation, gratitude, love, or even mere tolerance. No, they are all hated or, worse, despised. Putin, on the other hand, commands respect, grudging or otherwise, even in the US.
walmart, where 2 out of 10 chekout lines are staffed.