Arguing With Bad Numbers

There's now a Libertarian image floating around the internet that claims Wal-Mart would go out of business if it paid its hourly employees a living wage. It's too bad they use crappy math to make their case. Let's have a look, shall we?

Employees	2,000,000
Avg hourly wage	$8.81
New minimum	$15.00
Raise	$6.19
Increase/hour	$12,380,000
Increase/day	$99,040,000
Increase/year	$36,149,600,000
Prior Annual Profit	$16,800,000,000
Modified Profit	-$19,349,600,000

The argument assumes that all 2 million employees get the full $6.19/hr raise, not just those already making less than $15/hour. It also assumes every employee works an 8-hour day, 365 days per year -- every single person.

Does anyone think that's realistic? I hope not. But you have to dig into the calculations to see what bad assumptions and methods are being used.

What happens if you do the math again, but with more realistic numbers? What if we use a more likely $12/hour rate and only make them work 40 hours per week?

Employees	2,000,000
Avg hourly wage	$8.81
New minimum	$12.00
Raise	$3.19
Increase/hour	$6,380,000
Increase/day	$51,040,000
Increase/year	$13,270,400,000
Prior Annual Profit	$16,800,000,000
Modified Profit	$3,529,600,000

With just a couple of tweaks, Wal-Mart is suddenly back in the black again, profiting $3.5 billion per year.

The claims of Wal-Mart's dire situation only get more ridiculous if you use the $10.10 per hour wage that Obama imposed on Federal contractors, account for the fact that many Wal-Mart employees are part-time, and realize that not all of those two million employees are going to get the raise (since some of them will already be getting more than $10.10 per hour).

Take a few of those issues into account, and Wal-Mart could easily be profiting over $12.5 billion per year without raising any prices.

If there's a case for keeping the minimum wage where it is, this isn't it. The real story is far more complicated, and people with far more expertise have examined the impact of increasing wages at Wal-Mart.