Raising the Minimum Wage for Working Men and Women in California and the Rest of America

Wal-Mart's 'Neutral Stance' on the Minimum Wage Hurts Business

The discount retailer is forgetting the basic principle of business that those who earn more also spend more.

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FORTUNE — As the debate over raising the federal minimum wage goes on, Wal-Mart (WMT), the nation’s largest employer, has backed away from news reports that it would support higher pay. The discount retailer recently said it’s staying “neutral,” which is really just a veiled way of opposing any increase. It would be easy to dismiss this as just another temporary fiasco for Wal-Mart, but the implications could be far bigger.

One way to view Wal-Mart’s impartiality is that it contradicts capitalist principles. Capitalism is neither emotional nor ideological; it is opportunistic. Not directly supporting a minimum wage hike is a lost opportunity and a bad business decision that can compromise the financial interests of the company if you look at its target market. A significant segment, 40%, of Wal-Mart’s customers make less than $35,000 a year, which suggests that its fortunes are tied to the same low-income segment who receive at or close to minimum wage.

The less those customers earn, the less they have to spend, as analysts saw when Wal-Mart reported disappointing earnings for the fourth quarter of 2013. Profits fell 21%, at least partly due to a decline in government benefits like food stamps. Since wages have a similar impact, Wal-Mart is effectively giving up more sales by not directly supporting a minimum wage increase.

• Category: National, Notable • Tags: Sanjay Sanghoee, Walmart