How a Higher Minimum Wage Could Affect These Investments: Target Corporation (TGT), SUPERVALU INC. (SVU), Wal-Mart Stores, Inc. (WMT)

That said, Wal-Mart is easily one of the largest employers in the United States, so it will be a big issue for the company. In fact, a 2007 study from UC Berkeley Labor Center estimated that increasing the minimum wage to $10 an hour would cost Wal-Mart nearly $2.4 billion. While that estimate is over five years old, the scale of the problem is obvious.

And these aren’t the only businesses to monitor.

Eating Out

After the president made his call for a hike in the minimum wage, McDonald’s Corporation (NYSE:MCD) shares traded lower. Was the president’s speech the reason for the drop? Maybe, maybe not. However, McDonald’s is a big employer either directly or indirectly.

About 20% of McDonald’s restaurants are company-owned, meaning it has notable exposure to the issue. The remaining 80% of its restaurants are owned by others in some fashion, meaning those entities will face the increased costs. However, increased costs means lower profits, and that will eventually work its way back to McDonald’s.

There are plenty of other companies in the space to monitor, too. Weaker players, like Wendy’s, and smaller players, like Krispy Kreme Doughnuts, will likely feel the biggest pinch. It could result in a slowdown in expansion efforts or, in some cases, worse fates.

The Whole Bill

Darden Restaurants, Inc. (NYSE:DRI) could feel a particular pinch, because it owns and operates virtually all of its more than 2,000 restaurants. Across its well-known Red Lobster and Olive Garden brands, as well as its smaller brands, the company employes more than 185,000 people. With so many direct employees, it will have to foot the entire bill.

And that expense will snowball, too. Since most employees are very aware of what others earn, no matter how hard an employer tries to limit that knowledge, those not earning the minimum wage will also be calling for salary increases. So the entire cost structure of running a business will have to change.

Monitor this Issue

While mom-and-pop stores will probably feel the biggest brunt of an increase in the minimum wage, it will have a big impact on any company that hires at or around that pay level. While strong companies won’t go out of business because of this, smaller and weaker competitors will clearly feel a bigger pinch.

The article How a Higher Minimum Wage Could Affect These Investments originally appeared on Fool.com and is written by Reuben Gregg Brewer.

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