This morning, Wal-Mart announced it's raising its lowest wage to $9 an hour, affecting 500,000 workers. According to America’s retail lobby, that’s just proof that the private sector can boost incomes on its own — no government interference required.
“Today’s announcement by Wal-Mart regarding associate wages is just another example of the power of the marketplace,” said National Retail Federation President Matthew Shay, in a statement. “Like many other retailers, Wal-Mart made its decision based upon what is best for their employees, their customers, their shareholders and the communities in which they operate.”
But is that true? Is there really enough upward pressure on wages that Wal-Mart was forced to boost its bottom rung?
There are certainly a lot of good reasons for a company to pay its employees more. A handful of large retailers — including the Gap, Ikea and Aetna — have apparently realized this in recent months. But companies like Costco and Trader Joe’s have known for a long time that better wages reduce turnover and improve productivity, which saves money over the long term.
Still, Wal-Mart apparently hasn't had much trouble filling positions, with so many people looking for work even at the lowest pay rates allowed by law. Its associate jobs require little to no training, meaning that people can be replaced fairly easily. Rock bottom wages just seemed like the most responsible way to maximize profits for shareholders.
Lately, however, the labor market has been tightening up a bit. The percentage of people looking for work hit its lowest level since 2007 in December, with the economy creating a million jobs in three months.
That’s why lawmakers and policy wonks have shifted their attention to wages: The left-leaning Economic Policy Institute has illustrated how the economic recovery hasn’t translated into income gains for most Americans over the past few years, instead flowing mostly into the pockets of people who own stock. If workers have better options, the theory goes, they’ll start to jump ship. If too many of them do that, as Neil Irwin writes at the Upshot, the cost of replacing them starts to eat into the bottom line.
And in fact, it looks like that might be happening. In a new analysis out today, EPI finds that while wages have continued to sink for people at most income levels through the economic recovery, since 2012, they have actually risen for the bottom 10 percent — which suggests that, at a time when the economy is creating more low-wage jobs than high-wage ones, it might actually have to pay a little bit more in order to fill them. And Wal-Mart itself might have figured that putting more money in the pockets of its workers — who are also its customer base — might generate consumer demand that could boost its sagging profits.
But the other thing that’s going on, of course, is a massive and sustained campaign by union-backed groups like OUR Walmart, which have been shaming Wal-Mart about its low wages for several years now (they all claimed victory in the wake of this morning’s announcement). Public opinion is solidly in favor of a higher minimum wage, which would be nearly $11 if it had kept up with inflation since the 1960s. And in the absence of congressional action, cities and states have been boosting their own minimums accordingly — sometimes even with Republican support.
Big companies are probably the best equipped to cope with those kinds of laws, since they’re able to spread the cost out across a giant organization — boosting half a million workers to $9 an hour will only cost it $1 billion over a year, according to this morning’s announcement, which is a small chunk of the company’s $485.7 billion in revenue in fiscal 2015. For its part, Wal-Mart has stayed officially neutral on a proposed federal minimum wage hike. But if the company figures a higher standard is inevitable, it might as well get out in front of it.
The rest of the retail lobby might not appreciate the move, since it puts further pressure on other chains to raise their wages as well. That's why, to make lemons out of lemonade, it’s using Wal-Mart's choice as an argument against further minimum wage hikes. Other low-wage employers agree. “Just because a $10 minimum wage is the right choice for Walmart ... does not mean it should be mandated for all other businesses, regardless of industry or size,” says Michael Saltsman, research director of the restaurant industry-backed Employment Policies Institute.
And there’s another reason why Wal-Mart raising wages on its own terms could help employers. Doing so voluntarily — as well as giving employees more control over scheduling, another key demand of labor groups — potentially protects Walmart from a greater threat: Labor organizing. If employees see that they can win improvements in their working conditions without actually joining a union, they might be less likely to take a step that could give them real bargaining power over the long term.
Ultimately, this is all about control. And Wal-Mart's just doing what it has to do to keep it.