Wal-mart absorbs increased wages, no price increases

[steveh_131]

What do you think "absorbed" means?

I think it's a poor choice of words. It implies to the uninformed that this behemoth corporation is so massive that they can pay employees more and just not even notice. Next, these folks will start to wonder why more large companies won't just 'absorb' wage increases. Then they'll decide that the government will have to force them to 'absorb' wage increases.

That is not what is happening. Walmart believes that increased wages will increase sales. Probably for two reasons:

1. They get to perform this publicity stunt, and
2. They'll get better employees.

I hope it works out for them, I really do. But if it doesn't then I think we need to all understand what is going to happen. They will raise prices or lower product quality. Liberals want to believe that the executive will just sell a jet and it's a happy ending for everybody, but that's not how the real world works.

 

[HoughMade]

...They will raise prices or lower product quality. Liberals want to believe that the executive will just sell a jet and it's a happy ending for everybody, but that's not how the real world works.

Raised prices over time.
Lowered quality over time.

Plus

Not filling all positions left open by attrition.

Not increasing wages on the same schedule and at the same rate it used to.

 

[bwframe]

Went to the us31 south store today. Seems like most of the employees were standing in groups talking to each other. The ones in housewares were discussing best chicken places

[video=youtube;ZacZ_sUxW_w]https://www.youtube.com/watch?v=ZacZ_sUxW_w[/video]

 

[BehindBlueI's]

I think it's a poor choice of words. It implies to the uninformed that this behemoth corporation is so massive that they can pay employees more and just not even notice. Next, these folks will start to wonder why more large companies won't just 'absorb' wage increases. Then they'll decide that the government will have to force them to 'absorb' wage increases.

That is not what is happening. Walmart believes that increased wages will increase sales. Probably for two reasons:

1. They get to perform this publicity stunt, and
2. They'll get better employees.

I hope it works out for them, I really do. But if it doesn't then I think we need to all understand what is going to happen. They will raise prices or lower product quality. Liberals want to believe that the executive will just sell a jet and it's a happy ending for everybody, but that's not how the real world works.

They will build a spaceship to Mars, too. It's very easy to declare things will be. However they are much harder to prove. They can't just raise prices or they would have done so. Places like CostCo and Amazon mean they can't simply raise prices and keep the same marketshare. They don't produce the product, so while they can try to beat down their suppliers they don't have to.

At this point they are simply lowering their earnings forecast. Profit goes from $5/share to $4.70/share. That is absorbing it.

So, yes, it's very frightening to those of you who play the "higher wages will crash the economy" game. Because instead of adjusting your view to the facts you want to adjust the facts to your view. These companies CAN absorb wage increases if they choose to. It's an interesting that you're afraid of people wondering why they don't. God forbid the average worker continue to get the share of GDP they got in the 70s at the expense of a family that holds combined wealth equating to 43% of the US population.

 

[GodFearinGunTotin]

They will build a spaceship to Mars, too. It's very easy to declare things will be. However they are much harder to prove. They can't just raise prices or they would have done so. Places like CostCo and Amazon mean they can't simply raise prices and keep the same marketshare. They don't produce the product, so while they can try to beat down their suppliers they don't have to.

At this point they are simply lowering their earnings forecast. Profit goes from $5/share to $4.70/share. That is absorbing it.

So, yes, it's very frightening to those of you who play the "higher wages will crash the economy" game. Because instead of adjusting your view to the facts you want to adjust the facts to your view. These companies CAN absorb wage increases if they choose to. It's an interesting that you're afraid of people wondering why they don't. God forbid the average worker continue to get the share of GDP they got in the 70s at the expense of a family that holds combined wealth equating to 43% of the US population.

People obviously do not care. At least they didn't when they were chasing the "New Lower Price" right off the US shores. We had the jobs that gave people the chance to the proverbial middle class. But those jobs also carried costs that the consumer decided they didn't want to pay once entrepreneurs figured out how to get those products manufactured in places where those costs are not present.

Now, that they're gone and there's little hope of ever getting them back the way it used to be, we're trying to make middle class type jobs out of pushing grocery carts or replenishing cans of soup on store shelves or screwing up my McDonald's order. I believe if people demanded American made products, in sufficient numbers, and were willing to pay for their regulations and taxes, manufacturers would be re-shoring plants left and right...and the wages would take care of themselves.

 

[BehindBlueI's]

People obviously do not care. At least they didn't when they were chasing the "New Lower Price" right off the US shores. We had the jobs that gave people the chance to the proverbial middle class. But those jobs also carried costs that the consumer decided they didn't want to pay once entrepreneurs figured out how to get those products manufactured in places where those costs are not present.

Now, that they're gone and there's little hope of ever getting them back the way it used to be, we're trying to make middle class type jobs out of pushing grocery carts or replenishing cans of soup on store shelves or screwing up my McDonald's order. I believe if people demanded American made products, in sufficient numbers, and were willing to pay for their regulations and taxes, manufacturers would be re-shoring plants left and right...and the wages would take care of themselves.

I think you're partially right. Manufacturing doesn't pay what it used to either. However the base employee is still the base employee and stocking shelves isn't that different then a lot of line manufacturing jobs.

 

[GodFearinGunTotin]

I think you're partially right. Manufacturing doesn't pay what it used to either. However the base employee is still the base employee and stocking shelves isn't that different then a lot of line manufacturing jobs.

That's because of leverage. US labor does not have the economic leverage it did in its heyday, up until sometime in the 80's. And even though the government has laws on the books that give unions non-market-derived-advantages, they still can't revive what they had in the past...and they'll likely never will. All a factory has to do is offer a "competitive" salary and a basic set of benefits and they'll have their pick of potential employees. Until they have to compete with each other for "good" employees, that's not likely to change.

 

[bluewraith]

Also interesting are ongoing allegations that "shrinkage" is being manipulated along the chain. Inventory that is on the books is not physically in stores. Wal-mart is pleading ignorance if this is to theft, logistics issues (misplaced items in warehouses, misdelivered items), or playing with the books by store managers and others attempting to write off out-of-date merchandise.

Each Wal-Mart store gets a yearly hand-counted audit done by a third party company. Usually, RGIS or WIS.

Not that that makes a bit of difference.. Both audit firms are paid on a scale based on the stores current inventory dollar total(among other things of course, but dollar total is the main factor). All parties involved benefit from "reduced" shrinkage.

 

[steveh_131]

They will build a spaceship to Mars, too. It's very easy to declare things will be. However they are much harder to prove. They can't just raise prices or they would have done so. Places like CostCo and Amazon mean they can't simply raise prices and keep the same marketshare. They don't produce the product, so while they can try to beat down their suppliers they don't have to.

At this point they are simply lowering their earnings forecast. Profit goes from $5/share to $4.70/share. That is absorbing it.

Losing profits and pissing off their shareholders? You say that like it's inconsequential. Everything is consequential in economics. This is exactly the mindset that I'm talking about. Saying they are "absorbing" it is propaganda-speak to trick people into thinking that this extra money is coming from thin air. It is not.

So, yes, it's very frightening to those of you who play the "higher wages will crash the economy" game. Because instead of adjusting your view to the facts you want to adjust the facts to your view. These companies CAN absorb wage increases if they choose to. It's an interesting that you're afraid of people wondering why they don't. God forbid the average worker continue to get the share of GDP they got in the 70s at the expense of a family that holds combined wealth equating to 43% of the US population.

Nobody here thinks that "higher wages will crash the economy". Higher wages are great. We should encourage the free market so that we can all have higher wages.

Government-mandated higher wages are a different story.

 

[BehindBlueI's]

Losing profits and pissing off their shareholders? You say that like it's inconsequential. Everything is consequential in economics. This is exactly the mindset that I'm talking about. Saying they are "absorbing" it is propaganda-speak to trick people into thinking that this extra money is coming from thin air. It is not.



Nobody here thinks that "higher wages will crash the economy". Higher wages are great. We should encourage the free market so that we can all have higher wages.

Government-mandated higher wages are a different story.

I see you are still confused on what "absorbed" means.

 

[poptab]

They will build a spaceship to Mars, too. It's very easy to declare things will be. However they are much harder to prove. They can't just raise prices or they would have done so. Places like CostCo and Amazon mean they can't simply raise prices and keep the same marketshare. They don't produce the product, so while they can try to beat down their suppliers they don't have to.

At this point they are simply lowering their earnings forecast. Profit goes from $5/share to $4.70/share. That is absorbing it.

So, yes, it's very frightening to those of you who play the "higher wages will crash the economy" game. Because instead of adjusting your view to the facts you want to adjust the facts to your view. These companies CAN absorb wage increases if they choose to. It's an interesting that you're afraid of people wondering why they don't. God forbid the average worker continue to get the share of GDP they got in the 70s at the expense of a family that holds combined wealth equating to 43% of the US population.

I'm pretty sure you two are talking past each other.

Everyone that studied college Econ knows about price elasticity.

You can't talk around the fact that the only reason most business is in business is to make money.

 

[steveh_131]

I see you are still confused on what "absorbed" means.

I'm not confused. I know propaganda when I see it. Not that it was your intention, necessarily, I've seen it pop up often. But there is no such thing.

The extra costs are paid by someone. Always. There are no exceptions. There is no magical absorption of the costs.

 

[Mr Evilwrench]

What I'm seeing here is premature conclusion of success. They pushed on something and the gates of hell didn't immediately open up, so "hey look, it works, nananabooboo doubters!" Just watch the prices. Experience tells us they will rise, but these things take time.

 

[drillsgt]

Losing profits and pissing off their shareholders? You say that like it's inconsequential. Everything is consequential in economics. This is exactly the mindset that I'm talking about. Saying they are "absorbing" it is propaganda-speak to trick people into thinking that this extra money is coming from thin air. It is not.



Nobody here thinks that "higher wages will crash the economy". Higher wages are great. We should encourage the free market so that we can all have higher wages.

Government-mandated higher wages are a different story.

This is the important issue, if Walmart wants to pay more and make less it's up to them. There's a difference though in Walmart doing it and a small business owner downtown being told to do it whether they can afford to or not.

 

[BehindBlueI's]

I'm not confused. I know propaganda when I see it. Not that it was your intention, necessarily, I've seen it pop up often. But there is no such thing.

The extra costs are paid by someone. Always. There are no exceptions. There is no magical absorption of the costs.

Saying they are "absorbing" it is propaganda-speak to trick people into thinking that this extra money is coming from thin air. It is not.

So you think when a sponge absorbs water, the water disappeared "into thin air" and it was magic? Weird. Just out of curiosity, are you familiar with the accounting term "absorbed cost"? It certainly doesn't mean the cost magically disappeared. If I make a widget and direct costs are $5, that doesn't reflect my entire cost. I need to add in insurance, taxes, etc. If those things total $10k and I make 100,000 widgets my absorbed cost is 10 cents per widget. It didn't disappear. It wasn't magic. It raised my costs per widget. If you aren't confused on what "absorb" means than you are intentionally trying to confuse the issue.

The very first post explains the reduction in shares per earnings. I get your need to blow this off as propaganda, adapt facts to your beliefs instead of your beliefs to facts.

And you're doing so because of this:

But if it doesn't then I think we need to all understand what is going to happen. They will raise prices or lower product quality. Liberals want to believe that the executive will just sell a jet and it's a happy ending for everybody, but that's not how the real world works.

This binary understanding of options with zero understanding of price elasticity. I'm surprised any company ever goes out of business given INGO Economics and the ability to simply dictate price and now, apparently, the quality the consumer will accept. If you're losing money, just raise the price and the market will magically accept that new price because your costs are higher. How does anyone go under? Why does anyone bother to be efficient and attempt to eliminate shrinkage and the like?

Wal-marts consumers are very price focused. Their own statements show that in 2014 75% of their customers cited "low prices" as the primary reason they shop there. (That's up from 50% in 2004, btw). Raising prices reduces market share. Wal-mart is not special. They are not a monopoly. There is nothing they sell that cannot be purchased or substituted at another retailer. Their pricing power is primarily on the back end, they are such an economic powerhouse they can beat suppliers and logistics companies to death, and sometimes do. They have very limited power on affecting their own retail pricing.

In short, you are the Walmart exec of 2013. If we raise wages, consumer prices will increase dramatically, so everyone should encourage us to keep wages low. Then that doesn't happen, Wal-mart admits it didn't happen, and people try to blow it off as propaganda. Then Wal-mart 2015 exec says this will eventually increase sales, which if the business is working right, will mean extra revenue. Perhaps. A better experience may draw people who currently shop at Meijer or Target. In the end, Wal-mart didn't raise prices like they said they would because they can't, and they know it.

 

[steveh_131]

So you think when a sponge absorbs water, the water disappeared "into thin air" and it was magic? Weird. Just out of curiosity, are you familiar with the accounting term "absorbed cost"? It certainly doesn't mean the cost magically disappeared. If I make a widget and direct costs are $5, that doesn't reflect my entire cost. I need to add in insurance, taxes, etc. If those things total $10k and I make 100,000 widgets my absorbed cost is 10 cents per widget. It didn't disappear. It wasn't magic. It raised my costs per widget. If you aren't confused on what "absorb" means than you are intentionally trying to confuse the issue.

The very first post explains the reduction in shares per earnings. I get your need to blow this off as propaganda, adapt facts to your beliefs instead of your beliefs to facts.

Yes, your post kind of explained it. But the liberals don't read the post, they read the thread title and imagine money appearing in poor peoples' pockets.

This binary understanding of options with zero understanding of price elasticity. I'm surprised any company ever goes out of business given INGO Economics and the ability to simply dictate price and now, apparently, the quality the consumer will accept. If you're losing money, just raise the price and the market will magically accept that new price because your costs are higher. How does anyone go under? Why does anyone bother to be efficient and attempt to eliminate shrinkage and the like?

There is, of course, the possibility that these increased wages will cause them to go under. You're absolutely right. Since this is Walmart, and since the government isn't forcing them to raise those wages, I don't predict that happening. They still have options that will keep them in business.

I get what you're trying to do. You support higher minimum wages. The economic conservatives of us say "No way, that will cause prices to go up or businesses to go under." You see this as an opportunity. "Look at Walmart! They raised wages and nothing bad happened! The losses are all just "absorbed"!

Someone is going to absorb those losses. Who will it be? The consumer, in the form of higher prices? The employees, in the form of lost jobs? The shareholders, in the form of smaller returns on their portfolio? The suppliers? Why do you get to pick who wins and who loses? Is the 70 year old guy, trying to live off of his retirement returns less important than the kid working at Walmart?

Unless, of course, the free market dictated those wage increases. If it did, then great. More wealth is being created and the employees rightly get some of it. Free market at work.

 

[bwframe]

What I'm seeing here is premature conclusion of success. They pushed on something and the gates of hell didn't immediately open up, so "hey look, it works, nananabooboo doubters!" Just watch the prices. Experience tells us they will rise, but these things take time.

Yes, and Wally World can play it out to their benefit to never have to accept any blame for their controversial PC move. Over time steady price increases can be attributed to many things, be they legit or not. Lies, damned lies, and statistics.

 

[bigbaloo95]

Its not all just propaganda and advertising. Some of this wage increase is supply and demand. Here in northern Indiana there are too many places hiring for 9-15 dollars an hour for Wal-Mart to get the employees they want. They are driven further down the hiring pool and left with the webbed footed and inbred unless they increase wages to compete for the mouth breathers they want.

 

[bigbaloo95]

P.s. McDonald's and kfc in my area upped their pay scales correspondingly. Someone has to make our fast food too.

 

[steveh_131]

Its not all just propaganda and advertising. Some of this wage increase is supply and demand. Here in northern Indiana there are too many places hiring for 9-15 dollars an hour for Wal-Mart to get the employees they want. They are driven further down the hiring pool and left with the webbed footed and inbred unless they increase wages to compete for the mouth breathers they want.

Absolutely, I agree. At times, the market demands higher wages. Fortunately we have a [somewhat] free market that accommodates this.

The propaganda is to take this situation, where the market may be demanding higher wages, and try to twist it to fit a higher government mandated minimum-wage agenda.