The Cable

This Chart Shows Why Some U.S. Companies Are Reluctant to Raise Wages

Those who watched the first Democratic presidential debate on television Tuesday night probably noticed commercials like the one below, created by the United Food and Commercial Workers International Union (UFCW). It calls on Wal-Mart, the American retail giant, to raise wages and improve employment practices. This particular spot calls out both Republican and Democratic candidates ...

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Those who watched the first Democratic presidential debate on television Tuesday night probably noticed commercials like the one below, created by the United Food and Commercial Workers International Union (UFCW). It calls on Wal-Mart, the American retail giant, to raise wages and improve employment practices.

This particular spot calls out both Republican and Democratic candidates by name, including the respective front-runners Donald Trump and Hillary Clinton. It is part of the #OurWalmartVoices campaign, launched by UFCW, in an effort to raise awareness about what the union calls “poor wages and benefits,” as well as “decreasing hours and difficult scheduling,” according to a press release. (You can watch the second advertisement here.)

Clinton and Sen. Bernie Sanders have both vowed to raise the federal minimum wage, currently at $7.25, and income inequality is a major theme of the Democratic primary.

Wal-Mart has taken small steps to pay workers more. In April, it raised its minimum starting hourly salary to $9 and on Wednesday, Wal-Mart’s CEO, Doug McMillon, said he still plans to raise it to $10 in 2016.

But it comes at a price: an additional $2.7 billion in projected expenses over the next two years. Combine that with lower sales and flat revenue projections, and the company’s stock suffered on Wednesday its worst day of trading in 15 years.

Check out the chart below. It shows the price of Wal-Mart Wednesday morning, as the company announced its earnings projections. Over 90 minutes, some $20 billion in value was erased. Wal-Mart’s stock eventually closed down 60.03 points.

McMillon said he was still committed to increasing pay because it was “the right decision to make.” But what happened to his company’s stock shows that Wall Street is impatient and could give other firms caution on bumping up salaries. A 10 percent daily drop in stock price is enough to make any CEO think twice about upping pay and other benefits.

“People in the technology industry have been predicting that brick-and-mortar-based businesses like Wal-Mart are going to end up really struggling, and I think that that’s actually now coming to the fore in this powerful way today,” Founders Fund partner Geoff Lewis said on CNBC.

Photo credit: Tim Boyle/Getty Images

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