Walmart’s pay hike isn’t altruistic
Walmart hasn’t suddenly gotten religion. It just wants to stay in business.
The retail behemoth recently announced that it will boost starting hourly wages to $9 beginning in April. That’s a real and significant increase for the estimated 500,000 Walmart workers now working at or close to the federal minimum wage of $7.25. Even better, Walmart is planning for another increase to $10 in February 2016. And it’s throwing in other goodies. It’ll let workers take sick time beginning the first day they need it. It plans to give employees more control over their schedules. And it’s committing itself to a variety of measures to advance hourly workers through the ranks, leading to ever greater positions of responsibility.
What’s next? Profit sharing?
It seems as if Walmart is taking from the playbook of the locally sainted Arthur T. Demoulas, whose ouster as CEO of Market Basket last June ignited wildcat strikes by fiercely loyal workers. Demoulas had earned such loyalty through high wages, generous profit sharing, and a culture that emphasized the contributions of the supermarket chain’s employees.
No one is thinking that Walmart employees would similarly risk their jobs — or even care a whit — if Walmart’s CEO, Doug McMillon, were suddenly out on the street. Still, McMillon sounded positively dewy-eyed as he announced the company’s plans. “Our people make the difference,” he wrote to employees. “When we take a step back, it’s clear to me that one of our highest priorities must be to invest more in our people this year.” Sounding almost confessional, McMillon admitted to past mistakes, such as when the company “made a few changes aimed at productivity and efficiency that undermined the feeling of ownership some of you have for your business.” That was an oblique reference to cutting average store staffing by 57 employees over the last few years, a move that led to often-empty shelves and rotten produce in the grocery aisles.
Perhaps, like Paul on the road to Damascus, McMillon’s conversion was divinely inspired. But activists who for years have been nipping at the heels of the company are claiming their efforts are behind Walmart’s epiphany. “Victory!” exulted Making Change at Walmart, a union-sponsored group. “Under pressure from workers, the company announces raises for half a million employees!”
There’s another, more pragmatic explanation, however: Walmart had no choice. The long-awaited economic recovery, the one that’s given us sky-high stock markets, strong GDP growth, and many new jobs, had never produced any meaningful improvement in workers’ pay. That final piece is now falling into place. And it shouldn’t be a surprise.
Back in 2008 and 2009, as the unemployment rate ballooned to over 10 percent, folks were desperate for any job at almost any wage. But as the number of jobs has climbed and the unemployment rate has declined — it’s now at 5.7 percent — it’s getting ever harder for employers to find the workers they need. To get them, they need to offer better pay.
Quite simply, Walmart, a ruthless competitor for consumers’ dollars, now finds itself in a competition for workers. For example, Costco — a direct competitor of Walmart’s Sam’s Club — has a starting hourly wage $11.50. So why would anyone work for Walmart for minimum wage?
In a close-to-full employment economy, they wouldn’t. Hence, Walmart’s new largesse. Indeed, shortly after Walmart’s announcement, TJX – which owns T.J. Maxx, HomeGoods, and Marshalls – said it too would be raising starting wages. And it’s reasonable to expect that many other companies will follow suit. As these pay raises cycle through the economy, we will, at long last, see a meaningful improvement in the lots of those with moderate to middle incomes.
Of course, that only lasts as long as the economy is doing well. When another recession comes along and unemployment grows, don’t be shocked to see Walmart and other hourly employers seizing the opportunity to cut wages. That’s the cold nature of the business world.
Or perhaps, like Market Basket, Walmart and its ilk will find that higher wages are buying them better, more loyal and more enthusiastic employees — qualities that translate directly into improved stores, happier customers, and more profits. Perhaps, Walmart will learn, people really do “make the difference.”
Tom Keane can be reached at email@example.com.