Walmart Increases Employee Wages…Will Others Try To Catch Up?

  • April 8, 2015 at 12:23 PM EDT
  • By Glenn Taylor
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Glenn head shotIn what has felt like a game of “follow the leader” over the past few months, numerous retailers such as Walmart, TJX and Target all have raised their minimum wages for entry-level employees. Walmart spearheaded the initiative in February when it announced that it would raise entry-level wages to $9/hour by April. By next February, wages will boost yet again to $10/hour.

Although not increasing hourly wages, Dollar General plans to offer employees more hours per week so they can make more money in the long run.

Like Walmart, McDonald’s paved the way for its industry by increasing wages in company-owned restaurants to at least $1 above local minimums. While many critics and employees alike believe the company could do more to improve wages — such as extend them to all franchise locations — the fact that the wage hike happened in the first place now gives restaurants and fast food businesses the opportunity to further the conversation.

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Employing as many as 1.5 million workers, Walmart is home to approximately 1% of the American workforce, and acquires by far the most employees in the retail industry. It can be argued that at the very least, Walmart has a significant influence in the way the rest of the industry pays their employees. In particular, TJX and Target’s pay increases both appeared to come in response to the Walmart hike.

Economist Paul Krugman at The New York Times explained in a column: “Walmart is so big that its action will probably lead to raises for millions of workers employed by other companies. Second, and arguably far more important, is what Walmart’s move tells us — namely, that low wages are a political choice, and we can and should choose differently.”

The improvement of the economy, sparked by an unemployment rate that has dipped from 9.9% in March 2010 all the way to 5.5% in March 2015, has given retail employees greater leeway in where they can look for job. The mean hourly wage for retail salespeople in the U.S. is $12.38, according to the Bureau of Labor Statistics, so a company such as Walmart likely sees that professionals have greater opportunity to jump ship if they find a better wage. With the move to $9/hour, and eventually $10/hour, Walmart and its big box counterparts are essentially trying to protect themselves against high turnover rates sparked by low wages. Additionally, the wage increase gives these retailers the opportunity they need to attract prospective employees — particularly those that have more skills.

Walmart has been under fire for years due to claims of mistreatment by its own store employees, and has been the subject of advocacy groups such as OUR Walmart, which has demanded the retailer to raise its starting pay to $15/hour. While the present wage hike doesn’t quite fulfill those wishes, nor alleviate prior claims of understaffing that lead to uneven workloads throughout different shifts, it does set the precedent that Walmart is willing to make concessions to improve on some of its visible, long term issues.

Retail Wage Hikes Remain Relevant In 2015

Aetna CEO Mark Bertolini said he expects a “groundswell” of wage increases for the lowest-paid employees at large corporations in the coming months. Beyond the major wage hikes, retail sector wages as a whole have increased over the past year by 2.8%, almost double that of the entire private sector (1.6%), according to the Bureau of Labor Statistics.

While there is still plenty of speculation regarding which retailers will make wage-related changes within the next few months, businesses that have made moves thus far have certainly caught the eyes of a few CEOs. As reported by USA Today, the CEOs of both Kohl’s and JC Penney have stressed in analyst calls that they are closely watching the effects of the Walmart case.

“A lot of our entry people come in on the basis that they’re going to be a sales associate and end up growing throughout their career into other opportunities,” said Myron Ullman, CEO of JC Penney. “So we obviously are going to watch what’s going on and make sure we’re not going to lose them to a competitor and make sure we get the right people and have them properly compensated.”

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