The all-in cost will be around $2.7 billion. While some were surprised at the move, it was easy to see coming. Indeed, we\u2019ve long said that the company\u2019s decision to hike wages for its lowest-paid employees would eventually necessitate similar raises for workers higher up the corporate ladder.<\/p>\n
\u201cThe wage hierarchy has been distorted and that distortion had nothing to do with merit,\u201d we wrote, back in August. \u201cHigher paid employees don\u2019t understand why everyone under them in the corporate structure suddenly makes more money and if people who are higher up on the corporate ladder don\u2019t receive raises that keep the wage hierarchy proportional, they may simply quit<\/strong> which means that, for Wal-Mart, raising the minimum for the lowest paid workers to just $9\/hour will end up costing the company around $1.5 billion if you include the additional raises the company will have to give to higher paid employees in order to retain their ‘talents’ and avoid a mid-level management mutiny.\u201d<\/p>\n Sure enough, that\u2019s exactly what happened – only the cost is far higher than even we anticipated.<\/p>\n The problem is that when your business model revolves around \u201ceveryday low prices,\u201d each and every additional penny you give to your employees is a penny that\u2019s not passed on to customers as savings. That\u2019s a problem, given how competitive the discount retail space has become. On top of that, margins are already razor thin and pinching them further has a dramatic impact on profitability as evidenced by the shocking guidance cut<\/a> WalMart delivered in October.<\/p>\n Initially, the company sought to make up for the money \u201clost\u201d to the wage hike by squeezing the supply chain. When efforts to extract more savings from vendors weren\u2019t sufficient, WalMart simply fired some folks, first at the home office<\/a> in Bentonville and then at 269 stores where 16,000 employees learned this month<\/a> that they no longer have a job.<\/p>\n But the employees at the shuttered stores aren\u2019t the only ones affected by the decision to close hundreds of locations. Also out in the cold are local customers who in some cases will now be forced to effectively commute to the grocery store and pharmacy as the family-owned businesses which used to serve small communities were put out of business when WalMart came to town.<\/p>\n
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