Yesterday, The Daily Beast asked me for my take on WalMart's big "wage hike." WalMart raised its starting wage to $9 an hour across all locations, with the goal of getting all of its 1.4 million employees to $10 an hour next year. The company handled the PR very well. From the press I saw, you'd think WalMart had grown a heart, that economic conditions had improved for our lowest wage workers and that the system basically works.
I hope the second day take is more skeptical. A $9 an hour wage is actually below many state and city minimums. The New York Times reported that only 6,000 Wal-Mart workers made the federal minimum wage ($7.25 an hour). Those states and cities that mandate higher than federal minimum wages are probably the main reason that Wal-Mart pays the federal minimum in so few cases. In many states and city's Wal-Mart's big raise will have no effect on employees because they have minimum wages set higher than $9. Hopefully, some brave state will up the minimum wage to $12 or $15 so that we can all observe the non-apocalypse that will result.
One thing I noticed that nobody did was to inflation adjust WalMart's wage. I did my best, with the information available and it seems to me, based on WalMart's claims over the years that it has done nothing but make up for inflation since the Financial Crisis. Official inflation hasn't been particularly high in those years but it has been persistent. A dollar has lost about 10 percent of its purchasing power since 2009, which was the last time the federal government hiked the minimum wage.
Harder to compute, though, is the real inflation that affects the working poor. What I mean is that it's very expensive to be poor. For example, when you're poor and you have a sudden need for money, you either have to borrow on a high fee credit card (and then carry a balance) or go to a payday lender (where annual interest can top 300%). If you have more money, you have a lower fee credit card and maybe pay off the balance before you pay any interest at all. You don't even consider a payday lender. If you're poor, you can't keep minimum bank balances and so banks charge you to store your money, eroding your ability to save. If you have money, the bank pays you a little something. If you're poor and need to rent a place to live, landlords will pile on expensive demands like higher security deposits and last month's rent in advance. If you're not poor, you can generally rent more cheaply. If you ever want to really waste money (spend for no personal benefit whatsoever) the two most reliable ways to do it are to 1) make a mistake on your income taxes that results in a penalty or 2) be poor.
This is no triumph of the free market. That it took WalMart so long to do so much less than the right thing is only proof that we need a much higher minimum wage everywhere in the country.