Operation Twizzlers: The Arkansas Fed Unveils New Direct Stimulus

Something extraordinary is happening across the nation – the largest employer of Americans outside of the Federal Government has announced a minimum wage hike for half a million of its cast members.

Here’s Fortune:

Wal-Mart is celebrating a surprisingly strong U.S. holiday season by spreading the wealth a bit.

The world’s largest retailer and the nation’s largest private employer is spending $1 billion to increase hourly wages for its current U.S. store associates to more than $9 per hour, or higher, beginning in April. That increase is at least $1.75 above the federally mandated minimum wage. The decision will impact thousands of full and part-time U.S. employees.

Wal-Mart said by February of next year, all current U.S. associates would make $10 an hour or more. The company is also piloting a training program to help employees move out of entry-level positions and potentially make $15 an hour and more with increased responsibilities.

 

There’s an argument to made that this is the most direct and meaningful form of stimulus that could possibly be unleashed given the sheer amount of people we’re talking about. Also, there’s the fact that the recipients represent a constituency that has seen virtually no benefit from the capital markets-driven recovery these past five years. Wal-Mart employees earning minimum wage are not participating in the stock market and venture capital boom nor do they gain anything from the art-market-and-luxury-apartment free-for-all now unfolding in Miami, New York, Los Angeles and San Francisco.

The best part is that this direct injection of liquidity has a very good chance of actually making its way into the real economy rather than being tossed into the SPY and BND ETFs. This could increase the “velocity of money” in a way that nothing the Fed is doing has so far. Increasing the movement of dollars is significantly more important than increasing the absolute amount of dollars in the system and it’s the one thing central bankers haven’t been able to do. Just because banks and rich people’s accounts are flush with cash, that doesn’t mean they can be compelled to spend or loan it out.

But this is different. It’s a stimulus plan for the heretofore unstimulated.

For Wal-Mart, they may take a short-term hit to margins but the deliciousness is that a large share of this increase in wages will probably find its way right back into the company’s cash registers. Henry Ford famously gave his workers an unsolicited raise with the express purpose of enabling more of them to afford his new cars. Wal-Mart could similarly see a small uptick in revenue for the same reason. Plus, it decreases the chances of Bentonville, Arkansas’s white collar execs from going to hell, which is also good, I guess.