Markets Work

For the last several years, there has been an increase in the political rhetoric relative to wages, and more specifically, the national minimum wage of $7.25 per hour, which was last changed in 2008.  However, there has been some movement by state and municipal governments to establish local minimum wage rates at levels well above the national rate.  Much of the political and labor movement demands have focused on $15.00 per hour as an appropriate minimum wage.  While there has been no visible movement toward an actual increase in the national minimum wage, the market has stepped into the breach.

Recently, Target announced that it will raise its minimum wage to $13 an hour in June, from $12 currently, and remains committed to an increase to $15 by 2020.  Amazon raised its minimum wage to $15 in October.  Costco also recently raised its minimum wage to $15.

Retailers have been finding it tough to attract workers, with unemployment at its lowest level in nearly 50 years.  Obviously, the market based response should be, and was, raise pay.

All comments and suggestions are welcome.

Walter J. Kirchberger, CFA