In late January, Walmart, the nation’s largest private employer, announced that it will raise its minimum wage to $14 an hour. Other companies, such as Amazon and Target have a minimum wage of $15, while Costco starts employees at $17 an hour. These businesses are raising wages in order to attract employees in a tight labor market for low-wage employees. It is in their self-interest to raise wages, and they don’t need dictates from government to do so.
Labor, like all products and services is subject to the laws of supply and demand. When the demand increases while the supply decreases or remains stagnant, prices increase. That is what is happening with low-skill workers. Demand has increased, and the supply has not kept pace. As a result, the price for low-skill labor is increasing.
A business needs quality employees, but it certainly doesn’t want to pay more for labor than it must. In a free market, what must be paid is what the market demands, not what politicians demand through minimum wage laws. In a free market, the laws of supply and demand determine what wages must be paid to attract and retain quality employees.
The actions of Walmart, Amazon, Target, and other companies stand in stark contrast the activists and politicians who call for increasing the minimum wage. California, as one example, passed a law last year to increase the minimum wage to $22 an hour for fast-food workers. Fast-food companies are challenging the law with a petition drive to put the issue before voters.
For many jobs, such as fast-food, the legally mandated minimum wage makes no economic sense. As a result, many low-wage workers lose their job because they aren’t worth what their employer is forced to pay.
When raising wages is in the self-interest of a business, it will act voluntarily. When raising wages is forced upon a business, it will find ways to reduce its costs. That often means reducing hours or eliminating jobs.