Walmart illustrates economic reality as it cuts worker hours in light of wage increase

By Rob Janicki
Walmart recently and arbitrarily increased entry level employee wages
to $9 per hour, due, at least in part, to union activist pressures.
Now we are seeing what some would call unintended consequences of
Walmart's move.

Walmart is now cutting employee hours to contain costs.  Anyone with a
pulse, any business sense and a basic familiarity with economics knew
Walmart would have to make an adjustment after it raised its entry
level wage rate.  Walmart is a public corporation and is thus
responsible to its shareholders to maintain profits and profit growth.
Walmart's adjustment has been to reduce employee work hours.  Rest
assured, Walmart will operate in such a manner as to get the same
productivity out of those employees working fewer hours.  That's the
challenge to management that wants to keep working for Walmart.

What is interesting is that the reduction in employee work hours is
not limited to those entry level jobs earning the new $9 hourly entry
level wage rate, as it includes those in front line supervision and
department management.  This has caused dissatisfaction among career
employees and does not bode well for keeping these people in the
Walmart family, which adds to turnover costs including training
involved in promoting employees to positions of greater
responsibility.

My contention is that this result was a known and very likely
consequence of what would happen when arbitrarily raising wages,
whether it's done by government fiat, such as arbitrarily raising the
minimum, or by an employer raising their minimum entry level wage for
no other reason than caving into public pressure from activist groups
seeking to unionize the business.

Walmart actually made the business decision to raise wages for
multiple reasons.  Management simply did not want to alienate more
shoppers in light of the recent decline of Walmart revenues and wanted
to fend off rival business operations that are not in a position to
match Walmart's wage increase.  Walmart realized that their wage rate
increase would put pressure on its competitors and their operating
costs.

Walmart seems to have concluded it was a win-win result for them.
However, Walmart may not have realized the unintended consequences to
their existing work force.  There will be a price to be paid by
Walmart.  With the reduction of employee work hours, we may be seeing
the beginning of what could lead to further reduction in employee work
hours and the introduction of new technologies to completely replace
some human labor.

In physics there is an equal and opposite reaction to any applied
action.  It's much the same in economics and Walmart may be the latest
example of that axiom.