Walmart’s Wage Increase Raises the Floor for Low-Wage Worker Pay

I’ve bashed really big, cash-rich corporations for not paying a livable wage, and offered up some alternative retailers/restaurants that are paying a livable wage. Americans should not settle for pay of less than $10.

Apparently, Walmart now agrees. And I’d like to give them some credit.

Walmart is giving a pay increase that will raise the floor pay for its full and part-time associates to a minimum of $9 per hour in April and $10 per hour next year.

You can question the purity of the motives (fear of employee unionization, employee protests, getting ahead of an inevitable federal minimum wage hike, etc. – all have been speculated), but I give them credit for proactively making a move that is ultimately great news for ALL low wage workers – not just Walmart employees.

walmart wage increaseWalmart is, by far, the largest private employer in the United States, with 2.3 million employees. This will raise the income of 500,000 of them. The move, in a way, sets a new median low bar for low wage retail and restaurant workers.

Think about this: let’s pretend you are standing in front of a 150 degree Fahrenheit deep-fryer at a McDonald’s across the street with scalding hot grease flying at your eyeballs or braking your back unloading boxes at a Target a few big box stores down the road, and you are making the federal minimum wage of $7.25 per hour – why the hell wouldn’t you at least put in an application to work at Walmart and get a 38% pay hike?!

If Best Buy, Burger King, or even McDonald’s had made this move first, not many would follow. Walmart making this move raises the low bar for everyone because other companies will (hopefully) feel the pressure to follow suit to avoid mass deflection and turnover.

Walmart’s stock sank 3% on the news (the projected expense of the wage increase is over $1 billion), however, I think investors and the company itself will find that the move will pay long-term dividends. Just think of all of the benefits that will be gained by Walmart:

  • ability to attract better employee talent, which leads to more productivity and customer satisfaction, which leads to higher profit margins
  • higher retention, which results in significant cost savings for having to hire and train new employees
  • better public relations and less time, money, energy spent on fighting unionization and employee protests
  • more of your 1.3 million employees can afford to buy your product

And perceived shareholder value in investing is all relative. Target, for example, might have slightly lower employee costs after this move right now, which may offer a short-term relative stock gain, compared to Walmart. However, it is now inevitable that they will have to boost employee pay as well. When they do, the stock prices will adjust.

Worried that the wage increase will raise the cost of your cheap Walmart goods? It’s been estimated that even if 100% of a $10.10 minimum wage increase was passed on to consumers (very highly unlikely), the average impact on a Walmart shopper would be 1.1% of prices ($0.46 per shopping trip).

Now, we can argue about whether $10 an hour is truly a livable wage (there is “living” and there is “thriving” – and $10 does not allow someone to thrive) – but lets save that for another day.

For now, a tip of my hat to Walmart for raising the low bar for those who need it the most.

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