Clothing retailer GAP which is also the parent corporation who owns Banana Republic, Old Navy, Piperlime, Athleta, and Intermix has announced that it will raise the minimum wage it pays employees to $9 in 2014 and $10 in 2015. That’s great! However, the notoriously Progressive website Think Progress misses critical details of this fiscal move.
“To us, this is not a political issue,” GAP Chairman and CEO Glenn Murphy said. “Our decision to invest in frontline employees will directly support our business, and is one that we expect to deliver a return many times over.” In a release, the company argues that increasing the minimum wage will help retain “attract and retain great talent” and improve customers’ experience.
First of all, despite what GAP CEO Glenn Murphy says, this move is entirely political. There is now a big political push from big name Democrat pols to hike the minimum wage to $10.10 per hour. Coincidence? No. They want to be in the headlines, and memories, as being the first to do it out of the kindness of their hearts.
Additionally, GAP is a retailer who strives to attract young and hip customers. America’s youth is pretty impressionable. They were already persuaded to vote for a president who made many promises and under-delivered on the ones he happened to keep…twice. GAP can’t afford to have their customers thinking they’re greedy evil capitalists who only pay minimum wage.
While many retailers claim that they cannot afford to pay the minimum wage without firing employees or raising prices, research shows that companies paying low wages stand to benefit from the huge stimulus a wage hike would bring to poor workers who spend most of their income on basic needs like food and clothing. Even Walmart, one of the most notoriously low-paying companies, announced Wednesday it would consider supporting a minimum wage hike, acknowledging that it would generate extra pocket money for Walmart’s typically low-income customers. Additionally, employees tend to work harder and stay at their company longer after their wages increase.
Here’s where TP begins to derail. The above is all true. However, employees work harder, and they have more money when their wages are higher…in relation to the minimum wage. Much of what it costs to live, i.e., the costs of products and services have some base in what the minimum wage is. When the minimum wage increases the cost of doing business increases. Eventually the employee making $10 an hour as the minimum will have the same buying power as when they earned $7.25 an hour. Then they’re right back where they started.
Employees often relate their personal value to their company with what they’re paid. I think this is a mistake because it speaks to the value of the task, not the one who performs it. But that’s neither here nor there. Workers work harder when they’re paid more, yes. But that’s because it’s more in relation to others. If they’re making the minimum at $7.25, they’re still making the minimum at $10.10.
GAP’s announcement comes just one day after the Congressional Budget Office released an analysis arguing that raising the minimum wage could reduce total employment by about 500,000 workers.
When a company voluntarily raises its wages, it’s because they’ve assessed their finances and determined they can adjust, absorb, or afford to do it with little or no financial detriment to their bottom line. When the government steps in and imposes an increase in the cost of labor, it doesn’t take anything into account except how many more potential voters they’ll yield. It doesn’t consider whether a business can afford the hike. The government, like Think Progress, holds up billion dollar corporations who they feel have too much money in order to make their point — never the thousands of small businesses who just make payroll as it is.
There’s a much larger issue if the minimum wage is increased by such a large ratio: you dramatically increase the number of people who “only” make minimum wage. Only 1.5 million employees make minimum wage. Yes, only 1.5 million, and note how Progressives tell us this is a dire tragic state of affairs. The vast majority of hourly paid workers earn more than the minimum. When the minimum increases, that number explodes. One source claims that more than a quarter of private sector workers earn less than $10 an hour and according to the Department of Labor, there are 115.7 million private sector workers. Think about this, when the minimum wage increases to $10 an hour, you’ll immediately have 29 million workers only making minimum wage.
Do you really think these newly minted minimum wage workers won’t be exploited for political gain? Forget the costs. This statistic alone will be used as propaganda for decades. Not only will such a large increase ruin an already dilapidated economy, it will ensure that an already dishonest political atmosphere becomes downright fraudulent.