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Wal-Mart's move pressures Target

Friday, February 20, 2015 - 01:42

Wal-Mart's decision to hike wages could push retailers and restaurants to boost pay. That could hurt corporate profit margins but help the economy. Fred Katayama reports.

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Everyday low prices may not mean everyday low wages for employees at Wal-Mart ... and soon at other companies. The move by the U.S.' largest retailer to hike its minimum wage in America could spill over to other companies. PNC Financial Services senior economist Gus Faucher says Wal-Mart's move marks a turning point. SOUNDBITE: GUS FAUCHER, SENIOR ECONOMIST, PNC FINANCIAL SERVICES (ENGLISH) SAYING: "Wal-Mart tends to be on the lower end of the pay scale, so you're looking at other retailers and fast food restaurants. It's those types of places that hire generally unskilled labor. We're seeing the labor market tighten broadly, both high- and low-skilled operations. And, so, I think, we'll see increasing pressure on businesses throughout the economy to raise wages in order to retain workers." Within retail, analysts say, keep an eye on Staples and especially Target. They pay their workers wages on par with Wal-Mart. Target carries similar products to boot, so it could be hit with employee turnover if it doesn't up the ante soon. Restaurants have already begun boosting pay. Starbucks did so last month, and Panera Bread said the talent wars are pressuring it to do the same. Higher wages do two things: push restaurants to raise menu prices and give consumers more money to spend at restaurants and other places. Faucher sees wages rising 4.5 percent this year. He says companies will try to raise prices to try to cover the higher labor costs. SOUNDBITE: GUS FAUCHER, SENIOR ECONOMIST, PNC FINANCIAL SERVICES (ENGLISH) SAYING: "They'll try to pass some of it along, but they have a limited ability to do so given that we're still recovering from the recession. So, I think businesses will take a hit to their margins." But overall, he says, higher wages are better for the economy because that'll boost consumer spending.

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Wal-Mart's move pressures Target

Friday, February 20, 2015 - 01:42