Business

Wal-Mart’s decision to raise its minimum pay is expected to send ripples into the low-wage economy

Hoping to shed its reputation for offering little more than dead-end jobs, Wal-Mart will raise its minimum pay to $9 an hour by April and $10 an hour next year.
Hoping to shed its reputation for offering little more than dead-end jobs, Wal-Mart will raise its minimum pay to $9 an hour by April and $10 an hour next year. The Associated Press

The announcement Thursday by Wal-Mart Stores Inc. that it is raising pay for many of its workers was another sign that the economy is improving and that companies are feeling the pressure from nationwide protests for higher wages.

Wal-Mart, the nation’s biggest private employer, coupled news that it is attracting more shoppers with the announcement that it is giving raises to nearly a half million workers and opening what it says are more opportunities for advancement.

Hoping to shed its reputation for offering little more than dead-end jobs, the company will raise its minimum pay to $9 an hour by April and $10 an hour next year. That is well above the federal minimum wage of $7.25 an hour.

The company said it also will raise the upper pay ranges of other workers and supervisors. It said these actions will lift average full-time wages in April to $13 an hour from $12.85. For part-time workers, the hourly wage will climb to $10 from $9.48.

According to government data that include people who work at auto dealers and other outlets that are likely to pay more than discounters like Wal-Mart, the company’s new wages are still below the $14.65 average that retail workers earn. But it’s above the $9.93 average pay for cashiers and low-level retail sales staff, according to Hay Group’s survey of 140 big retailers.

Wal-Mart said changes to the way it trains and pays workers will cost $1 billion. Nearly 40 percent of its 1.3 million U.S. employees will see a pay increase in the next six months.

“We are trying to create a meritocracy where you can start somewhere and end up just as high as your hard work and your capacity will enable you to go,” CEO Doug McMillon told The Associated Press this week at the company’s headquarters in Bentonville, Ark.

Labor experts noted that around the country, especially in California, Wal-Mart has experienced worker walkouts and protests over its wages. One study of Wal-Mart’s pay practices found that many of its lower-paid workers resort to food stamps and other public benefits.

Some of the protests, which also have struck fast-food restaurant chains, are connected to organized labor-backed calls for “$15 an hour and a union.” The protests apparently are affecting Americans’ opinions. A new Associated Press-GfK poll found that most Americans support increasing the minimum wage.

Labor analysts said that the Wal-Mart pay increase is a step in the right direction but that Wal-Mart has been moving workers from full-time jobs to part-time work, which raises questions about its real impact.

“The company is addressing the very issues that we have been raising about the low pay and erratic scheduling,” said Emily Wells, a Wal-Mart employee active in the national OUR Walmart protest group. She said she is scheduled for about 26 hours a week and “many workers like me are not getting the hours we need.”

Judy Ancel, director of the Worker Education and Labor Studies program at the University of Missouri-Kansas City, said, “Wal-Mart has moved half an inch when they should have moved a block years ago. It’s too little too late. Even if someone was lucky enough to get full-time hours, they’ll still be at poverty or near poverty pay.”

Wal-Mart follows other big retailers that have announced plans to increase pay. Home furnishings retailer Ikea this year gave thousands of workers at its U.S. division a 17 percent average raise to $10.76 an hour. And clothing chain Gap raised its minimum wage to $9 last year and $10 this year.

Several large retailers, such as Costco, and other businesses have joined an organization called Business for a Fair Minimum Wage. Holly Sklar, the group’s chief executive, said it is “important that our nation’s largest private employer is finally beginning to follow many other companies in raising starting pay.”

But Sklar noted that the buying power of the 1968 federal minimum wage would equate to nearly $11 when adjusted for inflation.

Twenty-nine states and the District of Columbia have higher wage floors than the federal minimum of $7.25 an hour.

The pay move by Wal-Mart is expected to send ripples into the low-wage economy, especially among retailers who want to be competitive with or better than Wal-Mart on pay.

“It will have a broader effect than just Wal-Mart employees,” said economist Frank Lenk at the Mid-America Regional Council.

Research has been less clear, Lenk said, about the effect of higher minimum wages on the broader economy. He noted that some pay envelopes may fatten, but other jobs may be lost.

“There seems to be no strong effect one way or another or we’d have more definitive conclusions,” Lenk said.

Wal-Mart has struggled for two years with sluggish sales. But it is now benefiting from lower fuel prices that mean most individuals have more money to spend. Wal-Mart’s pay announcement, coupled with a fourth-quarter earnings report that reflected its first customer growth in two years, was hailed by some as an example of the free market at work.

Matthew Shay, chief executive of the National Retail Federation, said Wal-Mart made a decision that was “best for their employees, their customers, their shareholders and the communities in which they operate.”

Shay said such decisions were preferable to “government mandates that arbitrarily require businesses to implement politically driven policy.”

On the side of employees, the Economic Policy Institute last year led a coalition of economists who petitioned Congress to raise the federal minimum wage to $10.10 an hour by 2016, lifting it 95 cents an hour in three annual stages. President Barack Obama has proposed such an increase.

Those economists calculated that an increase would benefit 17 million workers directly and more with a “spillover effect.”

Analysts said Wal-Mart also has been challenged by online and retail competition. In addition to raises, Wal-Mart said it plans to make schedule changes and add training programs so employees can more easily map their futures.

McMillon, who became CEO last year, said he’s hoping that if the company invests in its workers, they will provide better customer service. And ultimately he hopes that will encourage shoppers to spend more.

The Associated Press contributed to this report.

To reach Diane Stafford, call 816-234-4359 or send email to stafford@kcstar.com. Read more from Diane at kansascity.com/workplace. Twitter: @kcstarstafford.

To reach Mark Davis, call 816-234-4372 or send email to mdavis@kcstar.com. Follow him on Facebook and Twitter at mdkcstar.

A look at Wal-Mart’s plans

▪ Start raising entry-level wages to at least $9 an hour in April and to at least $10 an hour by next February. That includes the less than 6,000 workers who make the federal minimum wage. Sam’s Club locations will offer a starting hourly wage of at least $9.50 or higher in all markets and at least $10.50 by next year.

▪ Raise the floor and ceiling of its pay range for each position in most stores. For example, the pay range for cashiers is $7.65 to $16. The new range will be $9 to $17.55.

▪ Raise the starting wage for some department managers to at least $13 an hour by summer and at least $15 an hour by early next year.

▪ Give newly hired workers a $9-per-hour training wage and when they successfully complete the six-month program, raise it to $10 an hour. Those workers can pursue one of three career paths: hourly supervisor, a specialty path like working in a bakery or deli, or expanded skills in their current role.

▪ Give hourly workers training in areas such as teamwork, merchandising, retail fundamentals and communications. Store leaders like hourly supervisors will get refresher training on leadership.

▪ Roll out a program that offers some workers fixed schedules. The program is being tested in Wichita.

▪ Team up with its nonprofit, Walmart Foundation, to invest $100 million over the next five years in programs that help advance the careers of entry-level workers in the industry.

  Comments