Business self-interest is often yours too.

Walmart applies tax savings to raise minimum wage from $9 to $11

By —— Bio and Archives--January 14, 2018

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Walmart applies tax savings to raise minimum wage from $9 to $11
Last Sunday I talked about why it’s actually a good thing for the economy if businesses use their tax savings for stock buybacks, because it puts more capital in the hands of investors who will likely find productive uses for the cash. This was a partial rebutall to the bluster from Democrats like Elizabeth Warren that businesses would do nothing to “help workers” with the tax cut.

Anything you do to funnel more money into the productive sector of the economy helps workers, because it helps everyone.

But it is also true that many companies are sharing their tax savings directly with employees. The latest to do so is Walmart, which announced this past week that it’s going to raise its company minimum wage from $9 to $11.

Consider the impact of that: If you earn the minimum at Walmart and you work just 25 hours a week, the tax cut just put another $50 a week in your pocket. Not bad. And that comes out to $2,600 a year. So much for the claim that the tax cut doesn’t do anything to help the middle class. It’s working exactly as we thought it would. Corporations are channeling the capital in ways that help them with their own bottom lines, and often that means paying their own employees higher wages.

Now, some of the left will claim Walmart is only doing this as a PR stunt. Let me tell you something. That’s an awfully expensive PR stunt. If it’s not in the interest of your business to raise wages, you just increased your labor costs expontentially in the hope of getting a few positive headlines. That is not worth it, and Walmart surely understands that.

No, Walmart is raising wages because it’s good for the company to reduce employee turnover. When you have a constant churn of employees leaving and new employees coming in, that costs you a lot of money both in training time, lower productivity and more hourly wages paid because new employees need time as trainees. If the higher wages keep Walmart’s workforce more stable, it will definitely prove to be a beneficial move for the company as well as for the employees. But first your cash flow has to provide the capital to pay the wages. The lower corporate tax rate makes that possible.

So now that I’ve explained that Walmart is going to benefit as a corporation by paying these higher wages, some on the left will get upset because they didn’t do it out of the goodness of their hearts. I have news for you. That’s not why anyone makes economic decisions. And companies who give money away without getting some benefit in return don’t stick around long enough to pay anyone anything.

But in capitalism, when one party benefits, those associated with that party usually benefit too. This is what liberals don’t understand about business. Business deals are not I win and you lose. When deals make sense, everyone benefits because everyone is better off.

This is exactly what we told you the tax cut would do, and many didn’t believe us. Maybe now they’ll stop listening to people like Elizabeth Warren, who don’t know anything about business, and start listening to those of us who do.

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