Wal-Mart, the nation’s largest employer, said Thursday that it will increase the pay of nearly 40 percent of its workforce, a sign that the improving economy is putting pressure on companies to boost wages for entry-level workers.
Starting in April, Wal-Mart workers will earn at least $9 per hour, or $1.75 above the federal minimum wage. By February 2016, those workers will make at least $10 per hour.
The move by the big-box retailer — which has long been a punching bag of labor groups — could force other major companies to raise wages to compete for workers. It also underscores how corporations, along with state and municipal governments, are acting to raise the pay of low-wage workers even as a Republican-led Congress has written off the idea.
“The labor market is improving, and it’s just harder to get people at those wages which are clearly poverty-level wages,” said Peter Cappelli, a professor at the University of Pennsylvania’s Wharton School who studies human resources and employment policy.
Wal-Mart’s pay raise, which will affect 500,000 workers, follows moves by other large retailers, including Ikea, which in June made a similar announcement for its U.S. workers, and Gap, which made an announcement last February. More recently, health-insurance giant Aetna said it would raise its minimum wage to $16 per hour beginning in April.
Widespread wage growth has been the missing ingredient in an economic recovery that has included steady job growth and rising consumer confidence. But according to a new analysis by the left-leaning Economic Policy Institute, wages have actually risen for the bottom 10 percent of workers since 2012. So as the economy is creating more low-wage jobs than high-wage ones, a company might have to pay a little bit more to fill those positions.
The pay bump is part of a $1 billion effort by Wal-Mart to improve its reputation among workers. It also includes a raise for department managers, whose pay will increase to $13 per hour this year and to $15 per hour in 2016.
The retailer also announced plans to give workers more control over their schedules. By 2016, some hourly workers will have fixed schedules, and all associates will know their schedules at least 21/2 weeks in advance.
Erratic schedules have been a hot-button issue in the service sector after a recent New York Times story highlighted the challenges that these varied hours can pose to working parents. Starbucks overhauled its scheduling policy to bring more consistency to its baristas’ schedules.
In another measure aimed at increasing worker flexibility, Wal-Mart said it would eliminate a one-day waiting period for using paid sick time. Under its current policy, workers who call in sick must first use a personal day if they want to be paid for the missed time; they can start using sick time on the second day.
“These changes will give our U.S. associates the opportunity to earn higher pay and advance in their careers,” Wal-Mart chief executive Doug McMillon said in a statement. “We’re pursuing a comprehensive approach that is sustainable over the long term.”
Wal-Mart said it believes that the changes in workplace policy will help it attract and retain better workers, and, in turn, improve the shopping experience for customers, who have complained about empty shelves and long checkout lines. Although the retailer had a surge in traffic to its stores in the most recent quarter, traffic at its U.S. stores has generally been flat or declining for the past two years, and the company has been eager to find ways to attract more customers. Improved service, executives believe, could help that effort.
Wal-Mart says its $1 billion investment in pay and other worker initiatives is the largest it has ever made. But the expense still makes a relatively small dent in the balance sheet for a company that pulled in nearly $500 billion last year. And the effort won’t meaningfully move the needle in wage growth for the aggregate U.S. labor force.
Currently, the lowest-paid Wal-Mart workers make the $7.25 minimum wage. Under the new plan, their pay will increase 24 percent. But only about 6,000 employees are paid at that rate.
Bentonville, Ark.-based Wal-Mart is a key target for labor activist groups, who have urged the company to improve its health-care benefits and increase pay. On Thursday, some Wal-Mart watchers said the new plan does not go far enough.
Christine L. Owens, executive director of the National Employment Law Project, called the changes “inadequate.”
“Wal-Mart has not committed to giving employees the full-time hours they want and need, nor made any commitment to respect employees who are fighting for better working conditions,” Owens said in a statement.
Experts say Wal-Mart’s approach to raising wages was not necessarily the most cost-effective: It could have raised pay standards on store by store with an eye toward the cost of living and state minimum wages at each location. But the splashy announcement of across-the-board raises might be worth the trade-off.
“It could create some goodwill for them” not just among workers but also in communities where stores are located, said Laury Sejen, managing director at human resources consulting giant Towers Watson.
The move drew praise from the business community; on Twitter, Yahoo chief executive and Wal-Mart board member Marissa Mayer praised the move as “a great leadership decision.”
Wal-Mart’s stock fell about 3 percent Thursday, though that was probably because of investors’ disappointment in financial guidance that the company provided for its coming fiscal year. After previously saying it expected sales growth of 2 to 4 percent, the company now expects growth in the 1 to 2 percent range, largely because of the stronger dollar.
Still, Wal-Mart reported solid earnings for the fourth quarter, with revenue increasing 1.4 percent, to $131.6 billion. Sales at stores open more than a year were up 1.5 percent at its traditional Supercenters and were 7.7 percent at its smaller-format Neighborhood Market stores. Executives said lower gas prices probably fueled spending at its stores.
Lydia DePillis contributed to this report.