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February 11, 2005

Wouldn't Raising the Minimum Wage Solve the Wal-Mart Problem?

Discussing the recent Montana proposal to tax large retailers that don't pay a living wage of at least $10 per hour, Ian asks in comments:

Wouldn't increasing the minimum wage enough simply solve the problem? I mean, fundamentally, the problem is that Wal-Mart pays their people so poorly that they require public assistance even though they're working. If they were required to pay a fair wage through the minimum wage law, wouldn't that solve the problem without the need for additional legislation that targets box stores specifically?
The goal with Wal-Mart is not that they just pay the minimum wage but that they not undermine the decent wages paid to many workers in the grocery retail industry, which is higher than the regular minimum wage. Yes, raising the minimum wage is needed across the board, but it's supposed to be a "minimum" for what every company, no matter how small or in whatever industry, should pay their employees. But where companies can pay more -- and competing large retailers show it is quite possible to pay more than Wal-Mart and be profitable, then a higher minimum wage is appropriate in that industry segment.

Many state minimum wage laws actually empower state labor departments to create different minimum wage rates for different industries and industry segments. This power is almost never used today, but it has a long history in the theory of minimum wage law strategies. In fact, the federal minimum wage was once only applied to large retailers, so applying a higher minimum wage to large retailers in Montana has a clear precedent.

Conservatives often complain that liberals impose "one size fits all" regulation, so they should applaud legislation like that proposed in Montana where the regulation is specifically targetted to a market where there is clear empirical evidence that complying with the law is financially reasonable.

Posted by Nathan at February 11, 2005 11:05 AM