The article in the Economist (n.p.) is presenting the Walmart, global known actor for low prices in supermarkets, with employing a workforce around the world and the largest company measured in his revenue. The building of the firm focused on the lowering the costs that can bring competitive advantage for the firm and business. The firm has raised the hourly payment for its workers that has been known to be lower than from its competitors. They have raised the wages at one third higher that the federal minimum wage. Based on the report that was a marketing step and strategic investment to stay before competition and this will result on shareholders, suppliers, customers and other employees that will need to pay the increase of the least paid workers. The Economists suggest that raising the minimum wages has already resulted in the negative consequences such as falling profit and share price, closing of 154 shops in America with the possible of 10.000 lost jobs. In the US the campaigners of the raising of the minimum wage were having $15 in mind for the food-and-drink industry. The raising of the minimum wage can therefore bring vast consequences. With the higher minimum for hourly work the dissatisfaction among workers that have been long with the company and have therefore higher wages has emerged.
In the United States a minimum wage is set in the Fair Labor Standards Act and has been adjusted to the inflating prices. The article is connected with microeconomics since it studies the perspectives of individual economic units, business and individuals. From microeconomics perspectives we can find many positive and negative aspects of Walmart choice. Some have already been described in the summary of the article from The Economist. The effects consist of different categories worth mentioning: effects on business, effects on local employment and effects on the individual. Minimum wage affects the labor market, because is a price floor and it causes that the quaintly of labor supplied exceeds the quantity demanded, which results in the unemployment. In Walmart case we have seen that other companies did not raise the minimum wages and that is why the revenue fall was greater as if all of the competitive companies would raise the wages also. The supporters of minimum wage and connected polices see the rise of an income as one way to reduce poverty, which a macroeconomic issue and even though it has some effect on the unemployment it still overages the benefits. The opponents believe that minimum wage is not a good way to combat poverty since it can affect the income of employed and raise the unemployment. The effect of minimum wage on the labor market has shown to be very complex and complicated and that is why the consensus about the issue does not exist (Mankiw and Taylor, 116 – 118).
The minimum wage topic comes under the issues with which microeconomics deals. The supply and demand theory from 18 century, Adam Smith with invisible hand is violated in the case of minimum wage. Supply and demand with the government posing of minimal wage is not equal. What effect does this have on the business and individuals has already been described. In microeconomics the focus is on individual or business, but we can see that micro and macroeconomics have been connected also since the minimum wage is perceived to have an effect on the level and rate of unemployment which comes more into the sphere of macroeconomic. Also in the case of Walmart we have seen that the company has made plans to close some of its shops in the US. They said it is not the step made because of the raised wages for the lowest paid workers, but someone needs to pay higher expenses. The minimum wage can therefore affect business because it erases the ability of the company to negotiate salary based on the workers experience, with increasing of expenses that represents the drawback in the economic growth or it can be a marketing decision to get higher public and customers support. It has an effect on local employment because usually if the company needs to give more for the workforce it can also stops hiring or even reduces the number of employees. It can represent a harder time to get a job for unskilled citizens or can represent the dissatisfaction among already employed since only the minimum salaries are growing. On the other hand it can represent a bigger income that can reduce the poverty. We can see why there are so many different opinions connected with the economic issue of minimum wage that are unlikely to find the common ground.
Work cited
Mankiw, N. Gregory, Taylor, P. Mark. Microeconomics. United States: Thomson. 2006. Print
The Economist. “Walmart and Low-Wage America: High Expectations,” 2016. Web. 14 Feb. 2016.
