Hooray! Walmart has decided to double its wages. Henceforth, instead of paying somewhere between $8-11/hr for the typical floor-level associate, it will pay them $16-22/hr. Thank God, justice is served!

Would this kind of move actually be good for the types of people who are currently getting Walmart associate jobs? That’s not so obvious. From a 2008 Forbes article on some of the most popular hourly jobs and their respective wages:

Administrative assistants, auto technicians, customer service representativesand construction laborers round out the top five, with average hourly pays of $19.57, $17.54, $14.93 and $14.88, respectively.

Some other average hourly wages, according to the BLS*:

• Medical assistant: $14.69
• Dental assistant: $16.86
• Veterinary tech: $15.13
• Library tech: $15.54
• Bench carpenters: $15.84
• EMTs: $16.53
• Motorcycle mechanics: $16.78
• Food science tech: $17.68
• Home appliance repairers: $17.92
• First-line supervisors of personal service workers: $18.81
• Stonemason: $19.29
• Tax preparers: $20.05
• Carpenters: $21.41

I’ll add:

• Post-doctoral research fellow at Brown University as of 2007: $21-24

These people tend to have significantly more skill, experience, and human capital than Walmart cashiers. What happens if Walmart starts offering to pay cashiers and shelf stockers $22/hr? As it raises wages, the kind of people who compete for Walmart jobs changes. As wages go up, workers with greater skill, human capital, and experience start to compete for these jobs, and, being better workers, they will beat out the kind of workers who are currently getting Walmart jobs. Call this phenomenon job gentrification. If Walmart increases its wage significantly, this will be very good for the people who end up working at Walmart. But that doesn’t mean it will be good for the kind of people who currently are getting the low-paying jobs at Walmart.

I teach one class a year that is all senior business students, most of whom already have jobs lined up post-graduation. I often illustrate this point by asking them at what point they’d be willing to take a job as a Walmart cashier. At $20/hr, few are willing. At $50/hr, most are. At $250/hr, all are.

One other thing missing from popular discussions about Walmart: supply chain management. In popular imagination, Walmart makes big profits because it underpays workers. (Perhaps it does, but I haven’t seen a real argument to that effect yet.**) Some people claim it gets monopsony prices on retail goods. There’s a better case for that. But it’s well-known in business that the principle reason Walmart has been so successful in lowering prices and making huge profits is that it developed a highly efficient supply chain management strategy.

*I’m using mean, not median, wages. As you can see, though, if I’d used median wages instead, my point would hold even more strongly.

**Walmart does engage in significant eminent domain abuse and often receives subsidies for opening up shopping centers.

UPDATE: It should be obvious, but apparently it isn’t: In saying that as Walmart raises wages, it will start to attract higher skill workers, I’m not making the silly claim that every carpenter making $21 will quit as soon as he can make $22 from Walmart. Obviously, there are other factors besides the wage that influence where people choose to work. This is of course compatible with everything I said above.