Markets Work

Over the last several months there have been a considerable number of demonstrations aimed at increasing wages for low income employees, particularly in the fast food industry.  The prevailing demand is an improvement to $15 per hour from the current federal minimum wage of $7.25 per hour.

In the meantime, various other jurisdictions, including states and cities have enacted legislation with some immediate increase in the minimum wage and a path to longer term targets in the $15 range.

Currently, approximately 3.3% of the work force is paid the federal minimum.

Investors should note that, a number of major retailers, including McDonalds, Wal-Mart, Target and Costco, have announced increases in their starting pay and corresponding increases for many workers who are already earning more than the minimum.

Managements understand the importance of a competitively paid workforce.  Turnover is expensive and disaffected employees do not make for positive interactions with customers.

Markets work.  Recent unemployment and economic data suggest that wage increases are appropriate, regardless of regulatory approaches, and managements have responded.

All comments and suggestions are welcome.

Walter Kirchberger, CFA®