Beware labor-intensive companies
Walmart’s fall today exposes vulnerability to potential wage increases
I’ve argued this point before, but Walmart’s collapse today should be a case in point. Shares of the retail giant sunk nearly 10% on Tuesday.
Here’s a back of the envelope calculation:
Walmart has 2.3 million employees. Say they work an average of 35 hours a week, or 1820 hours a year. The $2 pay raise, announced in January from $9 to $11 applied to all of them would cost $8.372 billion per year.
That is roughly half of WMT’s pre-tax income during the past 12 months ($15.123 billion).
Of course, the pay raise doesn’t affect all employees, but the scale of the problem indicates how exposed labor-intensive, minimum-wage businesses are to even modest increases in pay.