How are businesses losing money when they can just ‘price gouge’?
Last week, Forbes reported: The Walton heirs have lost a staggering $33.7 billion in the last two days as shares of their family’s retailing giant, Walmart, continue to be pummeled.…
One thing that has characterized the pandemic has been a shortage of workers. To that, numerous businesses have raised wages in order to attract workers. The latest is Walmart, which in an effort to attract truckers is promising wages starting at about $110,000.
As CBS News reports,
Walmart is increasing the pay it offers truck drivers in its private fleet to $110,000 in their first year on the job.
The nation’s biggest retailer said Thursday in blog post that drivers with previous experience working with the company can earn even more based on their tenure and location. Walmart has about 12,000 workers that drive its company-owned trucks.
Walmart said that prior to this increase, the average salary for new drivers was $87,500 in their first year. It also said it hired about 4,500 truck drivers last year, the most in its history.
“We will continue to hire based on need to support growth of the business,” a Walmart spokeswoman told CBS MoneyWatch. She added that the company will also pay for a driver’s cost of earning a commercial driver’s license, which can be around $4,000 to $5,000.
Walmart’s recruitment push comes as the country faces a shortage of truck drivers, which is worsening supply-chain snags and making it harder to get products onto store shelves. President Biden on Monday announced a plan to recruit more veterans and women to the trucking industry.
Walmart said that people can visit drive4walmart.com to apply for a job.
“These latest investments mean Walmart drivers can now make up to $110,000 in their first year with the company,” said Fernando Cortes, senior vice president of transportation at Walmart, and Karisa Sprague, senior vice president of Supply Chain People, in the company’s post.
While the circumstances are less than ideal, there is a lesson here. Labor is much like any other goods and service. Low supply coupled with high demand leads to competition among employers and hence higher wages. This in turn leads to rising incomes.
This is perhaps best demonstrated by what happened in the period prior to the pandemic. In the years between 2016 and 2019, favorable economic conditions led to improved job creation, creating a tight labor market and in turn rising wages. Household incomes rose for all Americans, and especially for those at the bottom ladder. Poverty also fell.
And unlike policies like minimum wage, these wage hikes in 2019 did not come at the expense of businesses or workers who lost jobs, or consumers who were forced to pay higher prices. Instead, wage hikes were mainly a mechanism for the market to incentivize increased labor supply at a time when labor was becoming more valuable in the market.
Legislators looking to raise wages (and therefore incomes) should look no further than policies that grow the economy. These are the policies that create jobs, increase labor demand, and thereby raise wages without inflicting a myriad of unintended consequences like unemployment.
While this is not an ideal situation, what is happening with businesses like Walmart raising wages in the hopes of attracting workers is an illustration of how the market raises wages — by creating demand for workers.