It’s Christmas in February as 500,000 workers nationwide just got a raise -and not because of a government mandate but private action.
Yesterday, retail giant Wal-Mart announced that it would increase its minimum hourly wage for its employees to $9 in April and up to $10 per hour by February of 2016. For 500,000 employees, this is good news, but the impact will be felt beyond Wal-Mart’s doors as new spending stimulating economic activity will spread across the economy.
Wal-Mart employs 1.2 million Americans in its U.S. stores and another 110,000 at its U.S. and Puerto Rico Sam’s Club outlets. Many of its workers already earn more than $9 or $10 an hour as its average full-time hourly wage in the U.S. stores is $12.94. However, this raise comfortably boosts all of their workers above the federal minimum wage of $7.25 per hour.
Not only did Wal-Mart raise wages, but it will provide additional training, offer free or low-cost college credit, and give workers more control over their scheduling which could lead to steadier incomes.
For Wal-Mart this raise will boost employees’ loyalty to the retailer and help retain good talent. It will also boost Wal-Mart’s bottom line in the long run as employees have more discretionary income to spend at Wal-Mart and it improves the retailers’ perception among U.S. customers.
Wal-Mart is sending a signal, will other retailers follow? We can hope so and if history is an indicator, they will. However, this is just the free market at work. It also leaves the decision as to whether a company can afford to give a raise and stay in business with the company instead of a bureaucrat who has never faced the responsibility of keeping a corporation afloat.
A CNBC commentator notes:
Political pressure may be part of the reason why Wal-Mart made this move to be sure. But this wasn't done just for PR reasons or to get the Democrats off its back. Wal-Mart is in business to make money, and clearly the company realized that it would be too hard to compete with other potential employers at the current pay.
There's a historical precedent for all of this. In 1914, Henry Ford famously boosted wages to $5 a day. The story goes that he did that out of the goodness of his heart and to make sure that all his employees could afford to buy the product they were making.
But the truth is that Ford had to boost wages to retain workers. At the time, Ford needed to hire 52,000 people per year just to maintain an average workforce of 14,000. So many people were walking off the line to get better jobs elsewhere, which meant Ford had to spend a lot of money to hire and train thousands of new workers per year. Finally, the company figured out how to stop the bleeding.
Wal-Mart is doing this clearly because more and more opportunities for lower skilled workers are opening up in America right now.
We applaud any private company that chooses to raise the wages of its workers because they value employee loyalty and competitiveness. Like Henry Ford, companies make decisions meant to keep them competitive and in business. That’s the free market at work, correcting wages in the labor market without the direction of government.
For the protestors and advocates who have marched holes in their shoes to get Wal-Mart to raise their wages, you’d think they would be cheering but they’re not. Some claim $10 per hour is not a living wages. What then are the wages they seek, $20 per hour or perhaps $100 per hour? These protestors are never satisfied and their interest and relevancy lies in leading protests. So don’t expect them to stop—protesting in their job.
If nothing else, many workers will now have fatter paychecks and more educational and professional opportunities for advancement – particularly young workers just starting out. Let’s hope policymakers will sit on the sidelines, but that’s wishful thinking.