Could McDonald's and Wal-Mart Survive a $15-An-Hour Minimum Wage?

 

NEW YORK (TheStreet) -- McDonald's (MCD), Wal-Mart (WMT), Target (TGT) and other large employers have been voluntarily boosting wages as the labor market tightens, but could they handle a mandated jump all the way up to $15 an hour? 

It's a question being asked now as several major U.S. cities, including San Francisco and Seattle, have approved just such a jump, while others, such as New York City and Washington D.C., are considering them. Los Angeles, the second-largest city in the country, recently approved a jump in the city's minimum wage from $9 an hour to $15 an hour by 2020.

The federal minimum wage now stands at $7.25 an hour, less than half that level.

For food-service and retail companies that rely heavily on minimum-wage employment in these cities, "Time will tell," said Bob Schulz, managing director, Retail Ratings Team at Standard & Poor's.

"Usually these sorts of things land in the middle, where there's some negative impacts, some positive, some costs passed on to consumers, and it depends on each company's specific situation whether they're net better off," Schultz said.

He added that in the broader national picture, for the companies S&P rates, which include about 120 of the largest retailers and restaurants, there will not be any specific ratings changes due to the required higher minimum wages in certain cities.

"If it was a federal scale, that would have a bigger impact," he said.

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