Walmart and the Minimum Wage

Author: 8th and Walton

minimum wage

Headlines are blaring, “Is Wal-Mart just the first victim of rising wages?” and “Wal-Mart stock drops 3% on impact of wage hike” but the portrayal of Walmart as a victim of labor costs is inaccurate.

First, they’re looking at the wrong things. Sure, people who already earned more than minimum wage didn’t receive a raise as their entry-level colleagues did, and it’s easy to get a quote complaining about that. Does that mean that Walmart associates as a group are less happy with their jobs now than they were before the pay raise? Of course not. Will $13.00 an hour skilled workers, jealous of their minimum wage colleagues, agitate for $10.00 an hour next year? Obviously not. Walmart’s pay raises benefited half a million workers, and tracking down dissatisfied quotes won’t change that fact.

In the current political climate, Walmart’s wage hike may have kept Walmart stores from being forced to change their minimum to $12.00 or $15.00 an hour. But Walmart was not forced to pay $9.00 an hour to Walmart workers. And that brings up the second point: Walmart is making an investment.

The rise in wages was just part of a billion dollar investment Walmart is making in Walmart staff, including store associates. Making sure that workers see Walmart as a desirable employer, one that offers a path to career advancement, increases productivity and worker satisfaction. Walmart is also investing in press and online content pointing out that Walmart, the largest private employer in the U.S., provides good jobs for millions of people worldwide.

This investment represents less than 1% of Walmart’s operating budget. It was one of the factors cited by Walmart in explaining disappointing earnings reports, along with fluctuations in the value of the dollar and shrinkage. But an investment can take time to pay off, and this one should benefit Walmart and Walmart suppliers in the long run.

Those who oppose a rise in the minimum wage will seize on this factoid — that Walmart mentioned the cost of higher wages in discussions of lower earnings — but Walmart’s wage increases are a sound business decision, not a sign of victimization.

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