Walmart to give 500,000 workers a raise
Yesterday, Walmart announced it will raise the pay for roughly 500,000 of its hourly employees along with implementing new training and scheduling programs to attract and retain the best available talent as the employment picture continues to improve.
Beginning in April, hourly workers will earn at least $9 an hour, $1.75 above the current federal minimum wage, with the number increasing to $10 an hour next February. Greater emphasis is being placed on helping hourly workers navigate their career paths so that they can rise as high as their talent level and efforts will take them.
Many see the move by Walmart as a reaction to widespread reports of out-of-stocks caused by understaffed stores. Others say the world’s largest retailer is looking to put pressure on smaller competitors that are less able to financially handle a similar across-the-board hike. Still others say the move is an attempt to get ahead of the movement lobbying for an increase in the federal minimum wage.
For it’s part, Walmart maintains that it is simply going back to its roots.
"Sam Walton knew that an inspired, dedicated team of associates was the way to exceed our customers’ expectations," said Doug McMillon, CEO of Walmart Stores, in a statement. "He often said ‘Our people make the difference.’ I feel a big responsibility to carry on what that phrase represents: the care and commitment that Sam had for Walmart associates."
Mr. McMillon, who worked his way up from loading trucks at a Walmart distribution center to run the company, appears sincerely committed to helping workers advance their careers.
"Today’s cashier is tomorrow’s store manager. Tomorrow’s store manager may have my job, so we want to make sure that opportunity is there for people, as it has been for so many of us in the past," he said In an interview on CNBC’s "Squawk Alley."
In a surprising admission on the CNBC show, Mr. McMillon said he voted for an increase in Arkansas’ minimum wage in the last election. Any governmental attempt to set wages is strongly opposed by groups representing retailers.
- Walmart announces Q4 underlying EPS of $1.61 and additional strategic investments in people & e-commerce – Walmart Stores
- Wal-Mart CEO on pay hike: Employee morale will help business – CNBC
- Half-Million of Wal-Mart’s US Workers to Get Pay Raises – The Associated Press/ABC News
- Doug McMillon was raised to run Walmart – RetailWire
Discussion Questions
Will Walmart become an employer that job candidates will want to work for as a result of its announced changes? In the end, will the moves being made by Walmart benefit or hurt its business?
I think the bigger benefit is the slow repair of Walmart’s horrible public image.
I get a boatload of daily and weekly updates from groups of Walmart employees. They have been lobbying the country at large for better treatment for some time. And I’m quite happy to see this small improvement in their lives. Three cheers for them.
Let’s put this in perspective—a billion dollars worth of pay hikes for a company with $400 billion in annual revenue is little more than a rounding error financially, but the PR boon and competitive pressures it will place on other retailers is worth far more over the long haul.
I hope this is a portent of more and better things to come: An end to shoe-horning new stores into locations where the store doesn’t blend in, less cut-throat tactics with vendors, and doing more for the communities within which it resides.
That would be the biggest benefit of all to its business. Then people who would not walk into one might actually consider it as a shopping alternative.
Walmart is an also-ran on making this decision and has received a lot of negative press about the wages paid to employees. There is nothing in this announcement about what happens to the wages of the rest of the hourly workers who now make $9 an hour. Salary compression is a consequence of this decision. Whether job candidates find the entry level wages attractive depends upon how competitive this salary is compared to competitors in a particular location. I doubt if the decision will have much impact on business.
Henry Ford made American labor history by paying his workers a mind-numbing $5 a day. He did it so they’d have enough money to be able to buy the cars they built, thereby returning their wages back to the company. He also had a few labor problems the inflated wage didn’t seem capable of smoothing over.
So Walmart’s decision here can’t really hurt its business, but it remains to be seen if it will help it. That said, I believe the most important assets retailers can invest in are their people. If they aren’t happy the customers will NEVER be happy and the enterprise will fail.
I also don’t know if this move alone makes Walmart a destination employer, but I can tell you it puts them significantly ahead of the majority of the retail pack.
The cynical approach that some offer that Walmart is trying to leverage scale to drive out competitors only comes from those who have chosen not to run a business, either of their own or for a private enterprise.
Walmart’s objective is clearly stated by Doug McMillon—get to the roots of Sam’s belief and take care of associates first and foremost. Associates are the first and final line of interaction with customers. Find good people, make them feel part of something bigger and successful, train them, praise them and pay them a fair wage. McMillon and Walmart are doing the right thing, as the labor market shrinks.
With only 62.8% of work-eligible adults being part of the labor force, all retailers should be looking for and retaining quality and loyal associates.
Let the cynics and politicians debate what the minimum wage should be. Smart businessmen and businesswomen understand the importance of the front-line associates. The move will help their business.
I’ll (again) agree with Paula. Walmart’s customer base reflects its employee base, and there isn’t an American alive who hasn’t heard about the company’s record profits and underpaid workforce. This is just one move Walmart will need to make to improve its reputation.
Overall that isn’t much of a raise. Those 500,000 workers were probably very close to $9 anyway and would have reached that level just from inflation and cost of living. Not that many Walmart workers were at minimum wage. In my opinion it’s just a PR stunt. Obviously moving on to $10 an hour, well, Walmart is not a charity. They won’t be paying $10 an hour to an employee worth only $8. I did speak to a manager about this and he told me that the least productive workers would be phased out, putting more responsibility on the workers who have been moved up to $10 an hour. In many parts of the country Walmart has starting wages from $14 to $17 per hour like in the oil fields of west Texas or North Dakota. My personal opinion is that Walmart has reduced its hiring standards to a point that its work force was deterring customers and contributing to a loss in sales. Walmart knows this and realizes they need to upgrade their hiring standards.
Compare the employee programs at Walmart with those of Wegmans, Publix or Costco and you will see how difficult this task is of regaining the culture that Sam Walton started with. Money is not the largest part of the work environment that Walmart needs to address to solve their problems. The training, advancement opportunities, scheduling priorities and maybe most importantly facing the fact that there are not enough people in the key front-line roles that impact shopper satisfaction will go further to help the company become a better place to work.
Only when shoppers can find products, move through registers faster and get positive vibes from employees willing to help them will the results show in the increased sales that Mr. McMillon is looking for. This is a long-term project in a company as large as Walmart. It will be interesting to see if shoppers and Wall Street give them the time.
I’m not sure this will be enough to draw in job candidates. Walmart is going up against years of bad press about their treatment of employees. This is a decent start though, and a true, long term commitment to helping their employees thrive would benefit Walmart’s business. Happy employees make for happy shoppers which make for happy bottom lines.
If this move generates a general wage escalation across the country, Walmart wins big. It is estimated that this will add $1 billion to the economy. As others follow, not just retailers, it will add billions more. Unlike those at the top of the economic ladder, who spend only about 30 percent of their incremental gains, these workers spend 100 percent. A large amount of the multiplier effect of this new money will make its way back to the largest retailer, who is—drum roll please—Walmart.
That may sound a bit cynical, but I also applaud them for getting back to Sam’s roots. The cost to this company is quite small. Hopefully it is just a first step in bringing the workforce back into the Walmart family.
When you’re the largest retailer on the planet, you are under that well-deserved microscope. Given Walmart’s size and reach what they do gets magnified in business and in the media.
This latest move to increase the hourly wage floor is laudable but would fall short if it weren’t part of a larger strategic effort to improve the overall working environment in the stores so they can attract and retain the employees they need. These include more consistent scheduling and opportunities for employee advancements.
Doug McMillon has many challenges ahead, but he is taking tangible steps to improve the shopping and the associate experience—therefore helping the business and the company’s image. It will take time and the rest of the organization walking that talk.
This should help if training and selection are done properly by being more selective with new employees. How could it hurt? Customer satisfaction is the most important part of being successful. Need to go back to basics. “In order to make a profit, satisfy the customer.” Compliments of Peter Drucker.
There is no huge benefit until it makes the cash register ring. That is not going to happen unless you can find someone to answer your question, that employee has a smile on his or her face and, oh, there is stock on the shelves.
I’m a little surprised by the level of cynicism regarding this move but maybe that is simply a reflection of the age we live in. I’m inclined to give Walmart the benefit of the doubt about their motives with this, at least until we see it implemented.
Not everyone who works at Walmart hates their job or the company and if the company follows through on training and opportunities for advancement it would seem to enhance the prospects of many. The hope of Walmart management (and of course the proof in the pudding) is whether or not it is reflected in employee attitudes and performance and ultimately customer satisfaction. And for anybody who doubts it, if you are making $9/hour, getting a dollar raise is a big deal.
Poor Walmart. They get criticized and scrutinized for everything thing do. There doesn’t have to be any motivation besides doing what’s best for your people, and know that it will pay off in better service.
Way to go Mr. McMillon! Some people may not say it was enough or too late, but I’m sure the employees who received the raises are grateful to have more money to support their families.
I think increasing wages initially and later on merit will definitely help morale. However Walmart in-store employees truly have bad attitudes, aren’t willing to help when you have a question, do not acknowledge customers, talk in groups while not working and have over-burdened department managers who cannot complete all departmental duties. The biggest problem with Walmart? Store senior management! They never walk the stores, you never see them and you do not have access to them. I see a huge malaise of laziness inside this chain and I visit many of them on a weekly basis.
The true cause of the demise of any retail chain, department store, grocery store and even a mom and pop store comes from management. I hear many complaints from Walmart store employees who complain of non-caring store managers who have unrealistic goals, who are absent, and ones who never embrace or acknowledge areas of development within departments or with employees. Sad, sad, sad situation. Giving an increase in wages will not help the situation until Walmart corporate corrects the issues in management at store level.
Walk the stores in various areas and you will see the difference in each of them: Some good, some not so good. In essence they all should look and be managed the same. Look at Target. Demographic base is so much different from Walmart. And I think it comes at the cost of Target hiring better managers, store employees and cohesion among the ranks by initiating respect, and the outlining of company policy and procedures within the ranks.
Walmart is simply following what other retailers are doing: Getting in front of the reality that minimum wages are going up in more than 30 states. For them to present this as “generosity” is laughable. They are merely following the law.