Wal-Mart’s decision to hike wages for 500,000 employees has raised hopes that pay increases may be on the horizon for other American workers, too.
The country’s largest private employer, Wal-Mart, announced on Thursday that it would be increasing wages for hourly workers to at least $9 per hour in April, rising to $10 in February 2016. It’s also increasing pay for some managers to at least $13 an hour by this summer and $15 an hour by 2016.
Wal-Mart’s move comes on the heels of a wave of state-level minimum wage increases in 2014, amid ongoing calls from the left to raise the federal minimum wage, which remains at $7.25. But it could also be a broader sign that the tightening labor market is finally putting upward pressure on stagnant wages.
“The Wal-Mart wage hike is a tell that the job market is tightening and that wages are strengthening,” Mark Zandi, chief economist of Moody’s Analytics, said. “The increase in minimum wages in many parts of the country at the start of year was probably a catalyst for the timing of the wage increase, but Wal-Mart would likely not raise wages for their workers across the country if not for the fast improving job market,” he said.
Despite the steadily improving business outlook, employers have not focused on reinvesting their profits in their own workers’ paychecks. In 2014, worker pay rose a mere 2.2% over the course of the year. Adjusting for inflation, the picture was even more grim: Hourly wages “were stagnant or fell across the board in 2014, except for a 1.3% increase among workers at the bottom of the wage distribution,” according to a new analysis from the Economic Policy Institute.
But with unemployment now at 5.7%—down from 10% at the peak of the recession—employers may finally be feeling more pressure to compete for available workers. “When we take a step back, it’s clear to me that one of our highest priorities must be to invest more in our people this year,” Wal-Mart CEO Doug McMillon said.
“For years Walmart has kicked and screamed that raising wages was not a feasible business model. Workers everywhere are glad to see Walmart change their view,” a statement from the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO) said. “With one short announcement, Walmart has shown that raising wages is both possible and attainable, and only the start of a long term effort to create family sustaining jobs.”
Along with the wage hikes, Wal-Mart is instituting changes to give workers more fixed, predictable schedules, reducing some of the uncertainty that has complicated low-wage workers’ lives. Beginning in 2016, some employees will be offered fixed schedules every week. Employees will be able to have their schedules two and a half weeks in advance to make it easier for them to manage personal commitments like “continuing education or a doctor’s appointment,” the company said.
Such improvements could make it easier for the big-box retailer to retain workers. “Wal-Mart’s move is consistent with very strong job gains in retailing and increasing rates of turnover,” says Zandi.
Industry lobbyists argued that Wal-Mart’s move made it clear that private employers, not the government, should take the lead in setting wages for workers.
“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,” the National Retail Federation said in a statement. “Government mandates that arbitrarily require businesses to implement politically driven policy are unnecessary and, in fact, create hurdles to job creation, curtail capital investment and pose as barriers to a sustained economic recovery.”
But it’s unclear whether Wal-Mart would have been spurred to act absent the growing number of states that have passed minimum-wage hikes. It may also be trying to pre-empt a hike in the federal minimum wage, which Democrats have been clamoring to raise to $10.10.