2014 February 22 Saturday
Gap Store Minimum Wage Headed To $10 Per Hour

CEO Glenn Murphy probably thinks he'll get a more productive workforce.

Burt P. Flickinger III, managing director of the Strategic Resource Group, a retailing consulting firm, said Mr. Murphy used to run Shoppers Drug Mart, a pharmacy chain in Canada that tended to pay higher wages than its rivals. “By doing that, they got more productivity per person and they really eclipsed the other Canadian drug chains,” he said.

Even if minimum wage does not increase unemployment it might increase unemployment of the least skilled. More able people might be enticed to work more if they can get more per hour worked. Consider that more able (smart, motivated, skilled) people tend to live with each other rather than with less able people. So one can live off the work of the other and stay home. But bump up wages enough and at the margin and then some idle but able workers will decide to go get a job (and I know examples of such people).

As these relatively more able people decide to work more they will show up at the Gap or other establishments and the hiring manager will recognize their qualities and favor them for new positions. If more productive people do the work either the quality of services improves or fewer people are needed to do the work.

In order for retail establishments to survive online competition they are going to need to offer services that require a more skilled workforce. For example, a retail clothing outlet could employ seamstresses to customize clothes and even to make custom clothes on the spot.

Another consequence of higher wages: more investments in labor-saving equipment. I think we are moving toward a society where the least skilled and most skilled will be increasingly separated geographically. In cities with lots of highly paid workers and high housing costs the average service establishment (e.g. restaurant, beauty parlor) will use more automation.

You can read nuanced discussions of the effects of higher minimum wages. But all the measures of short term effects will get swamped in the long run by changes in business strategies and technological innovations.

My guess is that in the long run the economy will have little use for the least skilled workers and the main effect of a higher minimum wage is to accelerate the arrival of that eventual future.

Share |      By Randall Parker at 2014 February 22 09:18 AM 

sheldon said at February 26, 2014 4:39 PM:

I would rather live in a lower class neighborhood inhabited by upper class people than an upper class neighborhood inhabited by lower class people.

amac78 said at March 11, 2014 7:57 AM:

Here's an interesting article from 2010, contrasting a cheap Chinese laundry in Brooklyn with an expensive Chinese laundry in the writer's home country of Australia.


The difference: illegal sub-minimum wage workers washing and pressing in NYC, legal minimum wage workers performing the tasks Down Under.

[sarc] Obviously, what the U.S. needs is... more mass immigration! Laundry is rotting in the fields! [/sarc]

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