Need a Solid Sign of US Economic Recovery? Look at Target’s Minimum Wage

0
225
Target Store in Oregon
Target store in Canada
Coquitlam, BC. Canada – July, 8 2013: Target Retail Store facade shoppers comming in and out of the store. First Target store open in BC Canada

Target (NYSE:TGT) stores have announced that it is going to be bumping up its minimum wage to $9 an hour. The current federal minimum wage is $7.50. It appears that Target is doing this not because it wants to look good, or it’s doing it for itself. No. It’s doing it to hang on to workers.

Why? Thanks to the overheating US jobs recovery, there are less and less unemployed people. Whenever you have a shrinkage in the pole of employable people that are looking for work, there is an upward pressure on wages. It’s all basic economics. If there is a huge demand for labor, the price of that labor goes up because employers would outbid each other.

There’s definitely a bidding war going on in the lower end of the US wage market. TJX Companies and Walmart stores have issued minimum wage hikes. Target is just trying to retain its workforce and possibly stay competitive in a wage market that is definitely improving.

If you are looking for a solid sign that the US economy is finally strengthening after quarter after quarter of wobbly or contradictory economic signals, this is definitely a solid indicator. Paired with the historically low levels of labor participation, expect more upward pressure on the low end of the American wage scale. If you have a college degree, this is a hot time in the US. Due to low labor market participation rates, the pool of talented and highly educated workers is fast shrinking and expect inflationary pressures to appear in the form of higher wages in the quarters up ahead.

In light of all this, it makes a lot of sense for the US Federal Reserve to start worrying about inflation. As wages start spiking, there will be a lot more money in the economy. With more dollars chasing fewer and fewer goods, inflation is the natural result.

LEAVE A REPLY

Please enter your comment!
Please enter your name here