Coverage: Wal-Mart raising wages

Some might say it’s been a long time coming, but Wal-Mart Stores Inc. is finally raising wages for entry-level employees.

Sruthi Ramakrishnan and Nathan Layne had this story for Reuters:

Wal-Mart Stores Inc (WMT.N) said it would raise entry-level wages to $9 an hour, a 24 percent increase from the U.S. minimum wage that some employees now earn, succumbing to longstanding pressure to pay its workforce more.

The world’s largest retailer said the increases would cost it $1 billion and impact 500,000 employees, or about 40 percent of its workforce, although the hike falls short of what some labor groups have been agitating for.

The move comes amid a growing debate in the U.S. over the widening gulf between the rich and low-income workers. Wal-Mart has been a prime target of critics who say its low-wages and inflexible scheduling are a big part of the problem.

The White House praised the move, pointing out that 17 states have already moved to boost their minimum wages above the federal level of $7.25 an hour and renewing its call on the Republican Congress to boost the wage on a national level.

The New York Times story by Hiroko Tabuchi said that Wal-Mart lags other major retailers in terms of payment:

Walmart lags major retailers like Gap and Ikea, which have taken steps recently to set hourly wages at or above the $9 level, in an effort to reduce turnover and attract more lower-wage workers. Even those higher pay scales fall short of compensation offered by the likes of Costco, known to offer wages closer to $20 an hour, or the Container Store.

But Walmart’s move could force other major retailers like Target and Home Depot to follow suit. “Wage increases could be imminent for other companies,” said Oliver Chen, retail analyst at Cowen & Company in New York.

Aside from competitive pressure to hire and retain low-wage workers, political pressure for higher wages has been building. Several states and cities have raised the minimum wage far beyond the federal minimum. Seattle, for example, raised its minimum wage to $15 an hour, and San Francisco approved a tiered approach to reach $15 in a few years.

CNN Money’s Chris Isidore wrote that the strengthening labor market could have spurred Wal-Mart to increase wages:

The improved labor market, with employers hiring at their strongest pace since the 1990s, is giving workers a boost: The average wage nationwide climbed by 2.2% over the previous year, according to the Labor Department. The number of employees willing to quit jobs to look for or take new positions is also rising.

While Walmart says the higher wages should help reduce its turnover rate, Schumacher said these plans were in the works well before the recent pick-up in the job market. But Walmart is following the path blazed by others, including clothing retailer Gap (GPS) and furnishings retailer Ikea, which already raised the wages of its lowest paid employees early last year.

Alison Griswold wrote for Slate that the move could be motivated in part by all the criticism Wal-Mart has fielded:

Back in October, Walmart hinted that a move like this was on the horizon when McMillon told reporters, “It is our intention over time that we will be in a situation where we don’t pay minimum wage at all.” The chain has been under significant pressure from labor activists to improve its scheduling and worker policies and to raise wages. Tens of thousands of Walmart employees are thought to be on food stamps nationwide, though Slate has estimated that to pay all its workers a living wage Walmart would have to raise its prices by just 1.4 percent. More than angering labor activists, Walmart’s policies have also hurt its business. The company suffers from high turnover and notoriously bad customer service. Its stores are known for being direly understaffed, chaotic, and disorganized.

The point is that Walmart has taken flak from all sides for its labor policies, which might help to explain the conciliatory tone of McMillon’s taped announcement. “Sometimes we don’t get it all right,” he said. “Sometimes we make policy changes or other decisions and they don’t result in what we thought they were going to. And when we don’t get it right we adjust.” Raising wages a couple dollars for 500,000 employees might not fix everything, but it isn’t a bad way to start.

Brittny Mejia, Shan Li, Christi Parsons and Sarah Parvini wrote for the L.A. Times that nearly 40 percent of its workers would get a boost:

With its new changes, the company’s average full-time wage will rise to $13 an hour, from $12.85, the Associated Press reported. For part-time workers, the hourly wage will be $10, up from $9.48, the AP said.

Wal-Mart said it expects 500,000 full-time and part-time employees at Wal-Mart stores and Sam’s Clubs in the United States, nearly 40% of its 1.3 million U.S. employees, to benefit from the pay raises.

Sanders Mosley recently quit his second job, giving up work as a security guard in Hollywood to dedicate 40 hours a week to Wal-Mart.

Mosley said a raise to at least $10 “would make life easier,” but he hopes the pay boost is higher than that. That way, he said, he wouldn’t have to worry as much about budgeting money for rent, child support and gas.

And when you look at the effect that increased pay could have on the average Wal-Mart worker, it’s hard to imagine that the company has waited so long to make the move. It’s a low margin business, but paying people creates good will, stability and could be the start of restoring some good will.