Wal-Mart Raises Hourly Wage to $11 in Wake of Tax Overhaul

by Susie Olson January 12, 2018, 0:45
Wal-Mart Raises Hourly Wage to $11 in Wake of Tax Overhaul

Walmart is using the windfall the GOP just gave Corporate America to score a public-relations coup, with a strategic move that would have been smart even without a tax cut.

Walmart on Thursday announced plans to give some employees a one-time bonus and boost its minimum hourly wage to $11-an indication that the lowest earners in the country are finally starting to see some benefit from the nearly decade-long economic recovery.

Walmart's starting pay is now $9 for all hourly employees, or $10 for those who completed a training program.

Doug McMillon, Walmart's president and CEO, wrote in a blog post that given the lowered business tax rate dictated by H.R. 1, also known as the Tax Cuts and Jobs Act, the company now has an opportunity to "accelerate" their "investment plan". Employees are also getting a one-time bonus of up to $1,000.

The starting wage increase takes effect February 17 and applies to employees at all U.S. Walmart stores, including Sam's Clubs, eCommerce, its logistics personnel and workers at its home office in Bentonville, Arkansas.

Chuck Grom analyst at Gordon Haskett Research Advisors said in a note Thursday that not only will the decisions improve morale, which he said will lead to lower turnover and eventually higher sales, but it's also an image boost for Walmart at a time when its image is "already undergoing a significant makeover".

For one, a key competitor, Target, in October raised its minimum wage to $11 per hour, with plans to step it up to $15 by 2020. Walmart has about 2.1 million employees, which works out to be an average bonus of about $190. Company veterans with 20 years will get $1000 dollar bonuses others receive $200 bucks. The one-time bonus will amount to $400 million in the current fiscal year and the company will take a one-time charge in the fourth-quarter of the current fiscal year to account for the charge.

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"The one-time bonus represents an additional payment to associates of approximately $400 million in the current fiscal year, which ends January 31, 2018", Walmart said in a news release.

The company said the moves that will affect more than a million hourly workers in the USA are tied to recently enacted tax legislation that will save it money.

Wage increases at the lower end of the scale are typically a sign that labor markets are tight, said Elise Gould, a senior economist at the Economic Policy Institute. The company also increased it in 2015.

The wage increase comes as a number of Walmart's competitors have upped minimum hourly wages.

It is unclear if Walmart's new offerings are entirely linked to the tax cut, as the company has a history of low wages and benefits, along with a past wage increase that sparked layoffs and employee restrictions. Full-time hourly workers in the United States will be eligible for 10 weeks of paid maternity leave.

"I would've been astounded if they hadn't raised wages", said Thomas Kochan, at professor at MIT's Sloan School of Management.


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