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Retailers to feel impact of minimum wage hikes

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NEW YORK — Within hours of each other, the governors of California and New York recently signed bills that will eventually raise the minimum wage in their states to $15. The moves have intensified debate over the possible implications for the retail industry, which relies heavily on workers with low skills who typically receive comparatively low wages.

California Gov. Jerry Brown was the first to make the $15 threshold law. Under the state’s plan, the minimum wage will rise to $10.50 per hour on January 1, 2017, for businesses with 26 or more employees, then will rise incrementally each year until reaching $15 in 2022. Companies with 25 or fewer employees will have a year’s breathing space before having to enact the increases.

In New York, Gov. Andrew Cuomo reached a budget agreement with state legislative leaders that included an increase in the minimum wage in New York City to $15 by the end of 2018, with slower increases elsewhere in the state. Neighboring Long Island and Westchester County, for example, will not have to enact a $15 wage for almost six years, whereas areas of the state north of Westchester County will only have to reach a minimum wage of $12.50 by 2021, raising the current minimum wage of $9 by 70 cents a year over the next five years.

Both states’ legislation includes safety valves that allow the governors to suspend the increases if deemed necessary. The California law, for example, allows the governor to pause wage increases if negative economic or budgetary conditions occur. The New York program contains a similar clause.

“This plan raises the minimum wage in a careful and responsible way and provides some flexibility if economic and budgetary conditions change,” Brown said in a statement.

Opponents argue that increasing the minimum wage will harm businesses and result in higher costs for consumers. That was the theme of an opinion piece that appeared recently in the Oakland Tribune titled “Walmart Stores to Close —Blame the Minimum Wage” by Abigail Hall Blanco, a research fellow at the Independent Institute and assistant professor of economics at the University of Tampa.

“Arbitrary wage increases, such as those dictated through minimum wage laws, do nothing to make workers more productive,” she argued. “They just add costs. While proponents of the minimum wage intend for the burden to fall on ‘greedy’ companies like Walmart, employees and consumers will feel the pain.”

When Walmart announced it would close 115 stores in the United States (and 154 in foreign countries) at the end of 2015, the count included a store in Oakland, Calif., and two in Los Angeles, including one in the Chinatown district that had opened in 2013. In March 2015 Oakland raised its minimum wage from $9 per hour to $12.25, increasing it another 30 cents to $12.55 as of January 1, 2016. Last May the Los Angeles City Council had voted overwhelmingly to increase the city’s minimum wage from $9 per hour to $15 per hour by 2020.

According to an Oakland city councilman, the minimum wage increase was a factor in the closure of the Walmart store, which he said had been very successful for the retailer. The Walmart Neighborhood Market in Los Angeles’ Chinatown, on the other hand, had been surrounded by controversy as it had sparked strong opposition from local businesses since it was first proposed. Nonetheless, a number of local shoppers expressed regret about the closure to the Los Angeles Times.

Ironically, Walmart has recently raised the minimum wage of its employees to $10 an hour, while new entry-level workers receive $9 per hour until they complete a retail skills and training program, after which they move up to at least $10 per hour. The moves increased the average wage of a full-time Walmart worker to $13.38 per hour.

Costco Wholesale Corp., noted for its progressive attitude toward employee compensation, offers a minimum wage of $13 to $13.50 per hour, after raising its minimum by $1.50 from $11.50 to $12 per hour. It was the first increase of the minimum pay in nearly a decade at Costco. The company raises the high end of its pay scale, now around $23 per hour, every year, noted chief financial officer Richard Galanti.

Some observers have noted that Amazon.com will be impacted far less than its brick-and-mortar rivals by such wage increases. The two states with the most Amazon fulfillment centers, Pennsylvania and Kentucky, do not have minimum wages above the federal level of $7.25 per hour.


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