Sam’s Club Closings After New Pay Hikes Take Effect

Effective January 1st, many states and cities raised their minimum wages up to about $10 an hour with scheduled increases up to $15 an hour in the next few years. There are many who see these increases as a great way to help lift low-income workers out of poverty. However, there are also experts who see this much as an increase – let alone a mandatory one – as being detrimental to the over-all economy. That dire prediction may now be coming to fruition.

Employees at more than five dozen Sam’s Club Warehouses arrived at work on a recent Wednesday morning to find the businesses closed. There was a sign informing them that their location had been shut down. There was no notice to workers that the company intended to close certain locations. A statement from company headquarters stated that a thorough cost analysis suggested that certain under-performing locations should be closed in order to save operating costs. These decisions were made at the same time Wal-Mart announced it was raising salaries for workers as well as providing certain workers with a $1,000 bonus check.

There have been several business that have closed down over the past several years as the economy has struggled to re-bound from the serious recession of 2008. Along with the surge of on-line shopping, brick-and-mortar stores have struggled to stay relevant and profitable in a changing world. With this new requirement of raising minimum wages, the economic impact on struggling businesses may be too great to overcome.

If businesses are forced to pay workers more, then the costs will be passed on to the customers. At this time, it will be difficult for stores to maintain regular business without the added costs of paying higher wages. Indeed, low-income workers need a boost in order to make ends meet, but hurting the small businesses that use to be the bread and butter of the retail world may not be the answer at this time in history.

There are many who question the need for a sandwich maker at a fast-food restaurant to make $15 an hour while those who work as public servants struggle to make those kinds of wages. It is not an easy problem to solve, but it may not be the best solution to legislate what low-skilled workers are earning. Many business owners are upset that they will be forced to pass the extra expense into those customers who have been most loyal.

As the wage increases are phased in over time, it remains to be seen how businesses will adjust to the new normal. As stores are forced to cut-back on costs and reduce the numbers of workers they can pay, it is likely that more and more low-income families will be forced to turn to government assistance in an effort to help keep food on the table and heat in their homes. In the end, the tax payers will likely bear the costs of congresses efforts to even the score.