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Author: mhirschey Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 211785  
Subject: Wal-Mart, Lawyers, and the Price of Beans Date: 1/5/2006 11:43 AM
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Labor and other input markets are governed by the forces of supply and demand. As is true for all goods and services, demand curves for productive inputs are downward sloping. The demand for all inputs is derived from their ability to produce output, revenues, and profits. Recall that the economic productivity of an input is determined by its marginal revenue product, or the additional net revenue generated by the last unit employed.

For simplicity, consider the case of a law firm where labor is the sole input employed. If an additional lawyer could generate 1,000 billable hours per year, the MPL = 1,000 hours . If the billing rate was $250 per hour, MRQ = $250 and MRPL = $250,000 per year. In this case, the highest salary the firm could pay to employ such an attorney is $250,000 per year.

In a very real sense, neither the law firm nor any employer determines the rate of pay. Customers determine wage levels through their willingness to pay for the goods and services firms provide. If customers increase their demand for legal services, the pay for lawyers increases. If customers decrease their demand for legal services, the pay for lawyers decreases.

Some might tell me that I should be ashamed to admit that I have never hired a lawyer to close any business transaction that I've been involved with, even transactions that involved substantial business interests. Instead, I restrict my dealings to simple transactions with honorable counter parties. I know, I know. I should instead be hiring lawyers at every turn so as to help their employment situation. Similarly, I should use a telephone operator to give me those phone numbers I can never seem to remember. Instead, I look up the number and save 50 cents. Truthfully, I stopped using directory assistance when they began charging for it. Similarly, I pump my own gas, carry my own groceries, and fill my own drink cup at Burger King.

Some might tell me that I also should be ashamed to admit that my favorite place to shop is Wal-Mart. That's where I get my Gillette razors, Tide laundry detergent, Mennen deodorant, and tons of other household items at bargain-basement prices. Don't tell anyone that I never buy clothes at Wal-Mart. Those I get from eddiebauer.com–on sale. When I get the chance, I also fly Southwest Airlines. I love low airline ticket prices, and I love to avoid ticket lines by using their check-in kiosks. Gosh, I've never paid to fly first class.

Some might tell me that I should also blame Wal-Mart, the largest private employer in the world, when my friends talk about feeling guilty about the plight of those less educated, less talented or less hard working than they are. You might think I've got nothing bad to say about Wal-Mart because I like the fact that they provide millions of entry-level jobs –a first step on the economic ladder. You might think I've got nothing bad to say about Wal-Mart because I know that they have provided thousands of managerial opportunities to women and other minorities. You might think I've got nothing bad to say about Wal-Mart because I look at their efficient response to Hurricane Katrina, and thank God they are not based in Washington, DC.

However, I know the truth. Buffett told me. Not Warren Buffett, the philosopher Jimmy Buffett.

It's my own damn fault. I'm too cheap. I'm too cheap to hire lawyers that I don't need, shop at Nordstrom's, or fly “full service” airlines.

God, I'm a mess.

Mark
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Author: kahunacfa Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113410 of 211785
Subject: Re: Wal-Mart, Lawyers, and the Price of Beans Date: 1/5/2006 12:15 PM
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Mark,

I don't hire lawyers either. I ask my daughter, a lawyer, or take free paralegal courses as a Brown & Gold club member at http://www.jccc.edu. Last term I took Employment Law, LAW 266. Next term, I expect to take Administrative Law, if there is still a seat in the class available when I register. If there is not, then I will either take a History or a Psychology or a Music Course, Jazz Listening.

BTW, I also like Wal-Mart as a customer and investor. Wal-Mart may be a great China Play, perhaps.

Kahuna,CFA

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Author: abio87 Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113416 of 211785
Subject: Re: Wal-Mart, Lawyers, and the Price of Beans Date: 1/5/2006 1:35 PM
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Labor and other input markets are governed by the forces of supply and demand. As is true for all goods and services, demand curves for productive inputs are downward sloping. The demand for all inputs is derived from their ability to produce output, revenues, and profits. Recall that the economic productivity of an input is determined by its marginal revenue product, or the additional net revenue generated by the last unit employed.

For simplicity, consider the case of a law firm where labor is the sole input employed. If an additional lawyer could generate 1,000 billable hours per year, the MPL = 1,000 hours . If the billing rate was $250 per hour, MRQ = $250 and MRPL = $250,000 per year. In this case, the highest salary the firm could pay to employ such an attorney is $250,000 per year.

In a very real sense, neither the law firm nor any employer determines the rate of pay. Customers determine wage levels through their willingness to pay for the goods and services firms provide. If customers increase their demand for legal services, the pay for lawyers increases. If customers decrease their demand for legal services, the pay for lawyers decreases.



I don't wish to seem pedantic, but please remember to use the subjunctive tense when indicated (..If the billing rate were $250 per hour ...)

Cheers ....


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Author: wpdolan One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113419 of 211785
Subject: Re: Wal-Mart, Lawyers, and the Price of Beans Date: 1/5/2006 2:40 PM
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Mark,

Here is why I think Wal-Mart stores could easily comply with a minimum wage:

Wal-Mart has $192B in US net sales in 2005 spread over ~3100 stores.
This means that the average store achieves $62M in net sales per year.
Assume that each store is open 365 days per year and each store achieves approximately $170K in net sales per day. If an average store is open for 18 hours, this translates to $9400 in net sales per hour. (All numbers taken from the 2005 Wal-Mart Annual Report.)

Imagine that the average store has 50 associates working at any one time for minimum wage. If it went up $3/hour, then the store is paying labor $150/hour more. This would cost 1.6% in net sales.

Wal-Mart has such power in negotiations and supply chain management that they could easily raise prices 2% (or even bargain harder and cut costs by some of that) and still be the lowest-cost store in town.

Now, given those numbers, would increasing minimum wage really squeeze jobs out of a Wal-Mart? And would it meaningfully affect the shopping experience of the average American?

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Author: aspenxtrm Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113420 of 211785
Subject: Re: Wal-Mart, Lawyers, and the Price of Beans Date: 1/5/2006 3:13 PM
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"This would cost 1.6% in net sales."

Which doesn't dound like much untill you know that WalMart has margins around 3.5%, so you're talking somewhere around 1/2 their profit.


"Wal-Mart has such power in negotiations and supply chain management that they could easily raise prices 2% (or even bargain harder and cut costs by some of that)"

Walmart is the best in the world at whay they do If they thought they could "easily" do either of these things, I can <U>guarantee</U> they already would have!!

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Author: BuffyII One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113421 of 211785
Subject: Re: Wal-Mart, Lawyers, and the Price of Beans Date: 1/5/2006 3:14 PM
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Here is why I think Wal-Mart stores could easily comply with a minimum wage:
.
.
.
Now, given those numbers, would increasing minimum wage really squeeze jobs out of a Wal-Mart? And would it meaningfully affect the shopping experience of the average American?



Wal-mart does comply with the minimum wage. Depending on whose numbers you believe, lower end workers average between $8-$10 an hour. Wal-mart has also recently advocated the raising of the minimum wage.


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Author: wpdolan One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113422 of 211785
Subject: Re: Wal-Mart, Lawyers, and the Price of Beans Date: 1/5/2006 3:24 PM
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There is a larger point to the example that I should have made more explicit: people continue to raise the objection that a 25% growth in minimum wage would lead to a 25% increase in prices, causing no growth in purchasing power for consumers, and this example shows that it is simply not the case.

Also, by your logic, I could state that Wal-Mart wouldn't fire anyone if the minimum wage increased: after all, Wal-Mart has lean operations, so if there were borderline unnecessary positions, they'd have already been cut.

To ask another blunt question: would most people notice a 2% increase in your grocery bill? Do most Wal-Mart shoppers scrutinize the prices so closely that they'd notice a bill going from $51 to $50? If they did, would they react by taking their business elsewhere, especially when Target would likely bill them $53 or $54?


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Author: aspenxtrm Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113423 of 211785
Subject: Re: Wal-Mart, Lawyers, and the Price of Beans Date: 1/5/2006 3:38 PM
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Wpdolan, good Lord man, you're doing a disservice to the cause you're fighting for! Think before you type!

"Also, by your logic, I could state that Wal-Mart wouldn't fire anyone if the minimum wage increased: after all, Wal-Mart has lean operations, so if there were borderline unnecessary positions, they'd have already been cut. "

As I said before, their margins are like 3.5%. That means that +/- 2% matters a LOT. The entire darn business is "borderline", the money is made at the margins. Lots of people can do retail ok, distribution ok, etc. The difference between "world class" and just "ok", between dominance and Woolworths, is just a couple of percent.

There are logical (if controversial) arguments to be made for raising the min wage, but "because they can afford it" is NOT one of them!!!



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Author: wpdolan One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113424 of 211785
Subject: Re: Wal-Mart, Lawyers, and the Price of Beans Date: 1/5/2006 3:54 PM
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I'm glad you didn't like that argument, because I made it to show that your "if they could do it, they would have" logic is not useful to finding an answer. I don't consider that to be a reasonable, testable, or ultimately provable.

We can discuss whether Wal-Mart can afford to bump prices 2% or not all we want, but it's a moot point. If the minimum wage went up by $3/hr, it would do so for everybody. This would lead to two outcomes: everyone bumps prices by 2% and Wal-Mart keeps cost leadership, or someone tries to keep prices fixed, gushes money, and goes broke, ultimately ceding cost leadership back to Wal-Mart. In either case, a huge increase in the minimum wage translates to a much smaller impact on the costs of manufactured goods.

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Author: HomerBufflekill Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113425 of 211785
Subject: Re: Wal-Mart, Lawyers, and the Price of Beans Date: 1/5/2006 3:56 PM
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"Also, by your logic, I could state that Wal-Mart wouldn't fire anyone if the minimum wage increased: after all, Wal-Mart has lean operations, so if there were borderline unnecessary positions, they'd have already been cut. "

You think the "greeters" wouldn't get the boot?

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Author: aspenxtrm Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113426 of 211785
Subject: Re: Wal-Mart, Lawyers, and the Price of Beans Date: 1/5/2006 3:57 PM
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I give up. In case you haven't noticed, I have been arguing FOR min wage to be raised! Or at least, I have been arguing against the negitive impacts of raising it. But when folks show up with arguments as logically unsound as yours, it taints the whole side. This is really sad, because it's an important discussion.

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Author: MrCheeryO Big funky green star, 20000 posts Top Recommended Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113427 of 211785
Subject: Re: Wal-Mart, Lawyers, and the Price of Beans Date: 1/5/2006 4:11 PM
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...Labor and other input markets are governed by the forces of supply and demand....

That's kind of true, within the context of lawyers having the second most powerful union in the country, something WalMart doesn't have to deal with. The supply of lawyers is controlled through the union regs and the number of law school spots artificially allocated. Just try and set up a law shop without approval from the union. Not like the old days where anyone of moderate intelligence could just "read the law" and hang out their shingle. Despite that, no doubt in my mind there are too many lawyers no matter how you measure.

Kind of too bad WalMart just has become the poster child for the new form of capitalism that says the taxpayer should subsidize the cost of operations for even highly profitable companies. When Henry Ford doubled wages so his employees had more in their pockets to spend he didn't have to worry much about non-market economies like that in the People's Republic, where Walmart apparently sources about 25-30% of its goods. Not sure that is a net/net benefit and the recent bought and paid for Global Insight study purporting to show a small net benefit has disappeared.

Also, I don't see Warren Buffett talking much about these issues. Seems to focus mostly on issues of management compensation and snoozing (or worse) corporate boards and that kind of thing and he used to write about scary stuff

America's Growing Trade Deficit Is Selling the Nation
Out From Under Us.
Here's a Way to Fix the Problem—And We Need to Do It Now.
by Warren E. Buffett

Not sure if he is still in favor of import certificates and how that would affect WalMart and the WalMart shopper. In the old IC plan something would have to give. In the meantime, can't blame anyone for taking full advantage of the existing rules on supply and demand.


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Author: kahunacfa Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113429 of 211785
Subject: Re: Wal-Mart, Lawyers, and the Price of Beans Date: 1/5/2006 5:10 PM
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... That's kind of true, within the context of lawyers having the second most powerful union in the country, something WalMart doesn't have to deal with. The supply of lawyers is controlled through the union regs and the number of law school spots artificially allocated. Just try and set up a law shop without approval from the union. Not like the old days where anyone of moderate intelligence could just "read the law" and hang out their shingle. Despite that, no doubt in my mind there are too many lawyers no matter how you measure. - MrCheeryO | Date: 1/5/06 4:11 PM | Number: 113427

My daughter is in the process of opening her own Law Firm. She is a member of the Kansas and Missouri Bar Associations, but she doesn't need the approval of anyone to start her own firm. Where did you get the idea that lawyers need "approval from the union" to set-up their own shop?

Kahuna,CFA


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Author: bookie71 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113431 of 211785
Subject: Re: Wal-Mart, Lawyers, and the Price of Beans Date: 1/5/2006 6:15 PM
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I believe it's called passing the bar exam.

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Author: kahunacfa Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113432 of 211785
Subject: Re: Wal-Mart, Lawyers, and the Price of Beans Date: 1/5/2006 6:28 PM
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My daughter, JD May 2002 passed the Kansas Bar Examination the first time in July 2002; the Missouri Bar Examination the first time in July 2003. I told her that she only has 48 more to go. She almost hit me!

Kahuna,CFA

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Author: RaplhCramden Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113448 of 211785
Subject: Re: Wal-Mart, Lawyers, and the Price of Beans Date: 1/6/2006 8:43 AM
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Here is why I think Wal-Mart stores could easily comply with a minimum wage:...

Imagine that the average store has 50 associates working at any one time for minimum wage. If it went up $3/hour, then the store is paying labor $150/hour more. This would cost 1.6% in net sales.

Wal-Mart has such power in negotiations and supply chain management that they could easily raise prices 2% (or even bargain harder and cut costs by some of that) and still be the lowest-cost store in town.


You have made a nice case that a $3/hr increase in minimum wage amounts to a 2% sales tax imposed on WalMart.

My questions for you
1) If this tax is imposed on WalMart, but not on its competitors who pay higher than minimum wage, will that not move SOME sales away from WalMart and towards the competitors?
2) Will that not lead to some shrinkage in WalMart, leading to fewer jobs for the people who weren't getting better job offers?
3) Will not the fewer jobs lead towards the keeping of the more employable and loss of entry level jobs for those who need them most, the least employable?

Why would you want to tax the supplier of jobs to the least employable?

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Author: RaplhCramden Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113449 of 211785
Subject: Re: Wal-Mart, Lawyers, and the Price of Beans Date: 1/6/2006 8:52 AM
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We can discuss whether Wal-Mart can afford to bump prices 2% or not all we want, but it's a moot point. If the minimum wage went up by $3/hr, it would do so for everybody. This would lead to two outcomes: everyone bumps prices by 2% and Wal-Mart keeps cost leadership, or someone tries to keep prices fixed, gushes money, and goes broke, ultimately ceding cost leadership back to Wal-Mart. In either case, a huge increase in the minimum wage translates to a much smaller impact on the costs of manufactured goods.

No. Wrong.

Stores compete by being slightly different from each other. Target doesn't have higher prices than WalMart because they are stupid. They have higher prices because they are betting that customers will rather spend a bit more in a bit more upscale environment with a bit more upscale service, which costs more. I don't have the statistics, but part of the point was that WalMart, more than the others, competes on low prices and employs a lot more entry level employees in its mix to win the price battle.

If Budweiser is $3, Michelob is $4, and Sam Adams is $5, in a free market, then putting a minimum price on beer of $4 is going to thrash Budweiser's sales volume, with probably a lot of Bud's loss going to Michelob. Also the total amount of beer drunk will go down. This is obvious.

If the businesses who train more entry level workers as part of their business plan are taxed more than those who rely on higher level employees, then THEIR costs will rise, which means their prices will rise, which means to first order, at least SOME of their customers will choose the higher priced, nicer store.

R:



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Author: downisland Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113450 of 211785
Subject: Re: Wal-Mart, Lawyers, and the Price of Beans Date: 1/6/2006 9:02 AM
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PBS.org has a Walmart article where it says that in Walmart's own survey they (Walmart) state that 70% of their employees leave within the first year due to a lack of recognition and inadequate pay.http://www.pbs.org/itvs/storewars/stores3.html Very interesting article loaded with statistics.

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Author: RaplhCramden Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113452 of 211785
Subject: Re: Wal-Mart, Lawyers, and the Price of Beans Date: 1/6/2006 9:24 AM
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PBS.org has a Walmart article where it says that in Walmart's own survey they (Walmart) state that 70% of their employees leave within the first year due to a lack of recognition and inadequate pay.

I read the article, thanks for the link.

So 70% of employees are able to get a better job within a year. Does that not classify as an OUTSTANDING training program?

The only alternative explanation is that these people could have had the better job in the first place, but that they were somehow hoodwinked into thinking that Walmart was the better job. Year after year these excellent minimum wage employees make the same mistake as their friends and neighbors made just the year before. And nobody blows the whistle as a wake up call.

The second explanation is implausible.

Viewing WalMart as a training program, than having the majority of its trainees coming from poverty and going on to better jobs should be worn as a badge of honor, an achievement which would be lauded if accomplished by an inner city high school.

R:

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Author: COJones100 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113453 of 211785
Subject: Re: Wal-Mart, Lawyers, and the Price of Beans Date: 1/6/2006 9:26 AM
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So 70% of employees are able to get a better job within a year. Does that not classify as an OUTSTANDING training program?

My God! Seven of ten decide they can't take it any more and it heralds a new paradigm in training?

Other than that, how did you like the parade, Mrs. Kennedy?

Aside from that, how was the play, Mrs. Lincoln?

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Author: divebomber One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113454 of 211785
Subject: Re: Wal-Mart, Lawyers, and the Price of Beans Date: 1/6/2006 9:28 AM
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Now, given those numbers, would increasing minimum wage really squeeze jobs out of a Wal-Mart?

No, Wal-Mart currently pays above minimum wage and has been advocating for an increase in the minimum wage. If minimum wage was increased, small retailers that currently pay minimum wage would squeezed and forced to raise prices giving Wal-Mart an even bigger advantage.

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Author: RaplhCramden Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113456 of 211785
Subject: Re: Wal-Mart, Lawyers, and the Price of Beans Date: 1/6/2006 9:36 AM
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So 70% of employees are able to get a better job within a year. Does that not classify as an OUTSTANDING training program?

My God! Seven of ten decide they can't take it any more and it heralds a new paradigm in training?

Other than that, how did you like the parade, Mrs. Kennedy?

Aside from that, how was the play, Mrs. Lincoln?


OK, so you have demonstrated you are hysterical.

What would be more fun for me would be if you would address the logic.

If those 70% of WalMart employees could have gotten a better job BEFORE they took the job at WalMart, then why did they take the WalMart job? If they are being tricked, then why, year after year (nothing new about WalMart) do they CONTINUE to stream into Walmart, only to come out within a year realizing that they have better opportunities?

Do you think they are all stupid?

R:

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Author: COJones100 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113457 of 211785
Subject: Re: Wal-Mart, Lawyers, and the Price of Beans Date: 1/6/2006 9:40 AM
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What a charming post, Raplh!

Should I go after your own (entirely bogus) assumption that these seven of ten got better jobs, first? Discuss the thousands of reasons someone might take a job in the first place (proximity, friends, discount, benefits, pay, nearby features, etc.)? Should we discuss why you feel they were "tricked" and what this suggests about your own childhood?

Or, should we start off with "Do you think they are all Einsteins?" since it's clear you don't know the first, third or fourth thing about Logic?

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Author: downisland Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113459 of 211785
Subject: Re: Wal-Mart, Lawyers, and the Price of Beans Date: 1/6/2006 9:54 AM
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The original Post on this subject was: Walmart- Great Managers? I think that a 70% employee turnover rate would be an issue for any well managed company. I've never seen a company with so much bad PR. The Chinese sweat shops, the fact that 85% of their merchandise is foreign manufactured, the fact that they now want to sell food, cars and mortgages. There are so many serious issues with this company that I don't think the return is worth the moral price of investing with them and I'm sorry WEB didn't see it that way too.

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Author: RaplhCramden Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113464 of 211785
Subject: Re: Wal-Mart, Lawyers, and the Price of Beans Date: 1/6/2006 12:03 PM
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Should I go after your own (entirely bogus) assumption that these seven of ten got better jobs, first? Discuss the thousands of reasons someone might take a job in the first place (proximity, friends, discount, benefits, pay, nearby features, etc.)? Should we discuss why you feel they were "tricked" and what this suggests about your own childhood?

Or, should we start off with "Do you think they are all Einsteins?" since it's clear you don't know the first, third or fourth thing about Logic?


Game set and match! How could I argue with that?

At least we have a clear winner, even if we disagree about who that might be.

R:

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Author: wpdolan One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113468 of 211785
Subject: Re: Wal-Mart, Lawyers, and the Price of Beans Date: 1/6/2006 1:35 PM
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All I intended my original post to say was this: if Wal-Mart had paid its workers minimum wage, and minimum wage went up significantly, prices would go up by a much smaller percentage to create the extra revenue. The implication of that statement is that raising the minimum wage would have a smaller effect on prices for the average consumer than most people (in the "socially responsible investing" thread) suggested, and therefore claiming that the a minimum wage hike would cause no net increase in purchasing power for minimum wage workers is dead wrong.

I recognize that there are many assumptions in that quick bit of math. Yes, it assumes that most workers there get the minimum wage, which according to many is not a fair assumption. Thus, the 1.6% increase may overstate the case. Yes, I am very aware that price differentiation is not the only basis of competitive advantage -- however, it is Wal-Mart's, and so in any case of a change to the marketplace, a discussion of cost leadership is still important. Yes, I know that Wal-Mart has 3-4% profit margins most years. Even still, I believe that most shoppers would be insensitive to a 2% price hike, because I don't believe that most people fix their budgets that tightly. Anecdotal evidence (mounting credit card debt, the negative savings rate) shows that Americans are not as cost-conscious as they should be.

Beyond that: it remains surprising to me that people on both sides of the minimum wage discussion, including me, are heated up about it so quickly. I have definitely posted in more haste than I should have and apologize for doing so, especially to aspen. I, for one, am frustrated because we're mostly throwing around assertions based on tightly held beliefs instead of using data to come to an evidence-based conclusion. I did not want this to turn into a Wal-Mart argument; I wanted to hear fact-based opinions on the minimum wage and use an appropriate BRK holding to do it. Maybe Wal-Mart is too inflammatory a subject to use as an example for that discussion.

The funny thing is that I by and large agree with Mark about most of his post. I'd even extend his comments: I think that our consumption habits will eventually be value destructive to the US due to the trade deficit and wasteful expenditure of resources for products with minimal incremental utility. I also think that our failure to spend money to increase education harms our knowledge leadership as a nation and wastes the talent of many people. Further, I believe that our failure to provide access to proper education bastardizes the American dream because many poor people never get the education that will let them escape poverty.

Anyhow, given that context, arguing over hypotheticals for one employer about a short-term fix feels like arguing over how many angels can fit on the head of a pin, and I rather regret my role in starting that.

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Author: ziggy29 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113469 of 211785
Subject: Re: Wal-Mart, Lawyers, and the Price of Beans Date: 1/6/2006 1:39 PM
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Bottom line, IMO: If the minimum wage were increased, Wal-Mart would have to raise its prices somewhat to maintain at least an acceptable profit margin. But other retailers probably would have to increase prices too, and because they aren't as efficient as Wal-Mart or have the economies of scale that Wal-Mart does, they might have to raise prices *more* than Wal-Mart does.

And thus, even though it raises its prices, Wal-Mart's prices are even lower than before when compared to its competition.

This is why a minimum wage increase isn't bad business for Wal-Mart.

#29

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Author: EsamMoney Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113470 of 211785
Subject: Re: Wal-Mart, Lawyers, and the Price of Beans Date: 1/6/2006 1:58 PM
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>>Bottom line, IMO: If the minimum wage were increased, Wal-Mart would have to raise its prices somewhat to maintain at least an acceptable profit margin. But other retailers probably would have to increase prices too, and because they aren't as efficient as Wal-Mart or have the economies of scale that Wal-Mart does, they might have to raise prices *more* than Wal-Mart does.

And thus, even though it raises its prices, Wal-Mart's prices are even lower than before when compared to its competition.

This is why a minimum wage increase isn't bad business for Wal-Mart.<<

It's also not bad business for Wal-Mart because Wal-Mart caters to lower end consumers. If they make more money, Wal-Mart sells more. And there are minimum wage employees at far more companies than just Wal-Mart.


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Author: ziggy29 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113472 of 211785
Subject: Re: Wal-Mart, Lawyers, and the Price of Beans Date: 1/6/2006 2:33 PM
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>> It's also not bad business for Wal-Mart because Wal-Mart caters to lower end consumers. If they make more money, Wal-Mart sells more. And there are minimum wage employees at far more companies than just Wal-Mart. <<

Right. Part of the reason Henry Ford paid his workers an then-unprecedented $5 per day is because he felt it was good business to pay his workers enough to afford to buy Ford vehicles.

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Author: COJones100 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113475 of 211785
Subject: Re: Wal-Mart, Lawyers, and the Price of Beans Date: 1/6/2006 4:13 PM
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And there are minimum wage employees at far more companies than just Wal-Mart.

For a while, yet.

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Author: Bryce102 One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113479 of 211785
Subject: Re: Wal-Mart, Lawyers, and the Price of Beans Date: 1/6/2006 7:33 PM
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"""PBS.org has a Walmart article where it says that in Walmart's own survey they (Walmart) state that 70% of their employees leave within the first year due to a lack of recognition and inadequate pay.http://www.pbs.org/itvs/storewars/stores3.html"""

Don't believe everything you read, or at least question things that don't sound right. It only takes a little common sense to understand the error of the article writer. It could be that only 20% to 30% of unskilled workers quit each year (a typical rate IMO) but of those 20% to 30%, 70% of them quit because of lack of recognition or inadequate pay. However it stretches credibility to think that 70% of all Walmart employees quit every year, and for just those two reasons.

That statement also implies that the turnover rate would have to exceed 70% because there would be some employees who quit each year for reasons other than "lack of recognition" or "inadequate pay". For example, employees typically quit for "personal reasons", health problems, having babies, conflict with the Supervisor, moving out of area etc. Add that to the 70% and you can see what I mean. That would mean that Walmart would have to start out each year or any point in time 1 year apart with nearly a whole new crew. That would be catastrophic blow to any company.

The article writer either misunderstood the facts or was unprofessionally inarticulate and in error in my opinion.

Bryce 102

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Author: tnk4800 Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113480 of 211785
Subject: Re: Wal-Mart, Lawyers, and the Price of Beans Date: 1/6/2006 8:07 PM
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"If Budweiser is $3, Michelob is $4, and Sam Adams is $5, in a free market, then putting a minimum price on beer of $4 is going to thrash Budweiser's sales volume, with probably a lot of Bud's loss going to Michelob. Also the total amount of beer drunk will go down. This is obvious. "

Obviously your not a beer drinker nor an investor in Bud.
tnk4800



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Author: luke77 Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113486 of 211785
Subject: Re: Wal-Mart, Lawyers, and the Price of Beans Date: 1/7/2006 1:13 AM
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"Bottom line, IMO: If the minimum wage were increased, Wal-Mart would have to raise its prices somewhat to maintain at least an acceptable profit margin. But other retailers probably would have to increase prices too, and because they aren't as efficient as Wal-Mart or have the economies of scale that Wal-Mart does, they might have to raise prices *more* than Wal-Mart does.

And thus, even though it raises its prices, Wal-Mart's prices are even lower than before when compared to its competition."


This makes sense, but is it a safe assumption to make that a minimum wage increase would have much (if any) effect on the wage walmart pays to its workers? Depending on who you listen to, walmart pays anywhere from $8-11/hr to introductory "associates" in its stores. Are any of walmart's workers actually making minimum wage (or very close to it)? It seems like even if the minimum wage is raised to, say, $7/hr, it won't "force" walmart to adjust their compensation (unless I'm totally wrong and walmart does indeed start people at minimum wage).

It seems to me that a minimum wage increase would have a much greater effect on the business of food & beverage companies, businesses providing cleaning services (like maids-r-us), and perhaps construction companies.

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Author: JeanDavid Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113488 of 211785
Subject: Re: Wal-Mart, Lawyers, and the Price of Beans Date: 1/7/2006 9:06 AM
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This makes sense, but is it a safe assumption to make that a minimum wage increase would have much (if any) effect on the wage walmart pays to its workers? Depending on who you listen to, walmart pays anywhere from $8-11/hr to introductory "associates" in its stores. Are any of walmart's workers actually making minimum wage (or very close to it)? It seems like even if the minimum wage is raised to, say, $7/hr, it won't "force" walmart to adjust their compensation (unless I'm totally wrong and walmart does indeed start people at minimum wage).

Ignoring the side-effects of increasing the minimum wage, if the idea were to increase it so that a full-time worker could support a family of 4 on a minimum wage, one would have to figure out what that would cost. A recent estimate for around here (northeast USA) is about $30,000/year. This is above the poverty line, because the poverty line was established only to provide short-term subsistance. It is not even nutritionally adequate for long-term use.

So with all these assumptions, this hypothetical minimum wage worker working full time (2000 hours per year) would require something like $15/hour.

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Author: EsamMoney Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113492 of 211785
Subject: Re: Wal-Mart, Lawyers, and the Price of Beans Date: 1/7/2006 1:24 PM
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<<Right. Part of the reason Henry Ford paid his workers an then-unprecedented $5 per day is because he felt it was good business to pay his workers enough to afford to buy Ford vehicles.>>

No... Raising minimum wage means ALL companies who pay low wages have to pay their employees more. Henry Ford only paid his employees more. That is completely different.

In addition, I know multiple people who work at Wal-Mart, and all of them make above minimum wage.

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Author: MrCheeryO Big funky green star, 20000 posts Top Recommended Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113510 of 211785
Subject: Re: Wal-Mart, Lawyers, and the Price of Beans Date: 1/9/2006 9:32 AM
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...In addition, I know multiple people who work at Wal-Mart, and all of them make above minimum wage....

I think almost all employers now pay above minimum wage, probably for the very good reason that you just cannot find a sufficient number of employees that are willing and able to work at minimum wage, certainly not the federal minimum wage and certainly not if you have a workforce of over 1 million people as WalMart does. The BLS studies say the percentage of the workforce at or below minimum wage has dropped from about 8% early 1980s to a bit over 2% today. They are talking about the legal workforce, I assume. Failing to keep minimum wage inflation adjusted has made it irrelevant for the most part.

So agree that it is largely a symbolic issue (although not symbolic for those right at the bottom) and wouldn't affect WalMart, the nation's biggest employer, directly at all. Makes you wonder why the issue gets so much attention and attempts to raise the wages for the small number affected is fought so ferociously. Economics, or ideology? Or a symbol of something bigger happening in employment economics in America?

I see an anecdote about bad jobs and most of us have had them. In the summer before college a friend and I worked some temp jobs. One job was unloading a flatbed trailer of 50 pound bags of dried animal blood used for God knows what. Dried until it started to rain, of course. Still, we finished the job and shortly afterwards were hired on by the city, through the temp agency, at union rates. Made paying for school alot easier, although now of course many cities outsource summer work to low paying contractors and that opportunity is gone.

But anecodotes really don't address some of the issues that WalMart has, partly unfairly imo, come to symbolize because they are the biggest. That's why it's too bad that Global Insight study has disappeared because it supposedly had access to alot of internal WalMart data on wages and benefits and employees, etc. I do find it odd that a study WalMart sponsored seems to have completley disappeared for some reason.

Then again, I find it odd that the federal government--which tracks darn near everything that happens to you or me--has to date almost no real, hard data and time series studies on employment offshoring and outsourcing. It's almost like they don't want to know what's going on, or something. Odd in a time when the US economy is said to have created only 1.9 million payrolls, 1 million of those government payrolls, in five years. A record that is stunningly bad judged by any historical standards. What's going on? We don't really know. all we get is a bunch of cheerleading these days from the usual sources. The financial press, certain members of the Fed, many a so-called think-tank, and of course the government.


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