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Walmart joins growing US march on wage hikes

Feb 27 2015 13:45

New York - Walmart, the largest retailer in the United States, is increasing wages, and economists are hoping to see a chain reaction.

Barack Obama rarely comments on a single company's earnings report, but retailer Walmart made news this month when it announced raises for hundreds of thousands of workers along with its earnings.

The US president observed that Walmart had joined other companies raising wages, "not just because it's the right thing to do, but because it's good for business."

Walmart plans to increase its starting wage by April to at least $9 an hour and $10 by February 2016. An estimated 40% of the company's 1.3 million US workers would see an increase, at a cost to the company of about $1bn this year.

The announcement comes after years of lobbying by organised labour, which has been calling for Walmart and other low-wage employers to raise pay.

A similar movement targeting the fast-food industry since last year has called for minimum pay of $15 an hour.

In November, voters in four states passed referenda raising minimum wages. Among the 50 states, 24 now have pay floors above the federal law of $7.25 per hour.

For years, Obama himself has called for Congress to raise the minimum wage to $10.10 an hour, to no avail.

"We're announcing a series of important changes that demonstrate our commitment to you, our associates," Walmart chief executive Doug McMillon wrote in a letter to employees.

Politics and altruism aside, the company's pay hikes come amid growing signs of strength in the US labour market. Other retailers including The Gap, Costco and Ikea have set similar wage floors since last year.

TJX Cos, which owns discounters TJ Maxx and Marshalls, announced similar pay increases Wednesday.

Chief executive Carol Meyrowitz said the company was "making additional investments in our store associates to maintain our focus on offering our customers an excellent shopping experience."

Walmart's low-wage reputation may have been making it hard to attract and keep productive workers.

On the jobs website glassdoor.com, the firm has a rating of 2.8 out of 5, with only 44% of users saying they would recommend working there to a friend.

Competitor Costco has a rating of 3.9 stars with 80% of users recommending it as an employer.

Walmart's annual turnover of hourly staff has been about 44%. "The Walmart business model is broken," said finance blogger Barry Ritholtz.

In January, hourly wages in the United States rose by 0.5%, the fastest increase in more than six years.

US employment is at 5.7%, down from 10% in 2009, and consumer spending is rising. Long-term unemployment is declining, more part-time workers have been able to find full-time hours.

"The pace of quits - often regarded as a barometer of worker confidence in labour market opportunities - has recovered nearly to its pre-recession level," Federal Reserve chairperson Janet Yellen said on Wednesday.

"We have seen announcements of wage increases. ... in specific cases, I can't say what was behind it," she told a committee in the House of Representatives.

"But in this stronger job market, where firms find it more difficult to hire the kind of workers that they want, you should expect to see more upward pressure on wages.

And in that sense, hopefully it is a good sign that the economy and the labour market are improving."

walmart  |  wages  |  retail
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