An overlooked argument in the minimum wage debate is that a high minimum wage gives big businesses an artificial competitive advantage over their smaller competitors. As I noted recently:
When states are considering hiking their minimum wages, big companies like Walmart routinely lobby in favor of the increases. They know that while they can afford the extra payroll, the mom-and-pop store down the road might not be able to. Advantage: Walmart.
As if on cue, the Huffington Post reports today that Costco CEO Craig Jelinek came out in favor of increasing the minimum wage to $10 per hour, even higher than President Obama’s proposed $9 per hour. The article notes that Costco has a reputation for paying its employees very well, and would be mostly unaffected by such an increase.
Who would be affected? Costco’s smaller competitors, who would have to raise prices and/or trim their workforces to make payroll. Advantage: Costco.
Given how popular minimum wage increases are with non-economists, Jelinek stands to reap some good PR for Costco from his announcement. And maybe he really believes that a minimum wage hike would be a net good for the working poor. But another plausible explanation is rent-seeking — using government regulations to gain artificial competitive advantages (and profits). And that’s something a struggling economy could do without.
