Wal-Mart has announced that it will be raising its minimum wage to $11 an hour for all employees and will also be giving out one-time bonuses.
The current pay rate is at $10, but the company will be seeing some massive gains from the GOP tax plan and has evidently decided to share the wealth.
“Today, we are building on investments we’ve been making in associates, in their wages and skills development,” said Doug McMillon, Walmart CEO. “It’s our people who make the difference and we appreciate how they work hard to make every day easier for busy families.”
Wal-Mart has 4,700 stores across the world that employs 2.2 million workers, with 1.5 million solely in the U.S
Since 2015, this will be the third increase in the company’s minimum wage. The new wage, which will take effect in February, will add $300 million to the company’s annual expenses. The bonuses will cost Wal-Mart an additional $400 million this quarter.
Wal-Mart made $500 billion in revenue last year, which will only increase drastically this year with the new corporate tax rate dropping from 35% to 21%. The new tax plan will be adding billions to the retail giant’s profits.
“We are early in the stages of assessing the opportunities tax reform creates for us to invest in our customers and associates and to further strengthen our business,” said McMillon.
He also said that that the company is considering investing in “lower prices for customers, better wages and training for associates and investments in the future of our company, including in technology.”
The White House was quick to applaud Wal-Mart’s announcement.
“Walmart is the largest employer in the country and to see them make that kind of effort to over a million workers is a big deal… and I think further evidence that the tax reform and tax cut package are having the impact that we had hoped,” said Sarah Sanders, White House press secretary.
The retail space has quickly become competitive with Amazon’s continued success in the e-commerce space. Not to mention, its recent acquisition of Whole Foods.
But Wal-Mart acquired Jet.com and has been keeping up with the E-commerce giant. Its online sales have grown by 50% and it is aggressively expanding its online grocery pickup service.
Although the retail giant is also targeting the grocery business, it’s making a major push into the apparel space.
With the unemployment rate being low and the need for workers high for retailers, Wal-Mart is trying to attract and keep talent with this announcement.
“The wage increase comes at a time when competition for low-wage workers is rising among retailers, e-commerce warehouses and other industries that require a large, unskilled employee base. The monthly U.S. unemployment rate has held at a 17-year low since October. Retail trade workers in the U.S. earned an average hourly wage of $15.51 in December, an increase of about 11% versus five years ago, according to the Bureau of Labor Statistics,” write Wall Street Journal.
Wal-Mart may be taking on this additional cost in labor now, but this doesn’t mean the company hasn’t made recent moves to cut costs.
“To combat wage pressures, Wal-Mart has tried to save on labor costs by limiting overtime, adjusting the number workers per store and more recently by automating many rote tasks. It is adding more self-service registers and using robots to scan shelves for out of stocks. Last year, Wal-Mart had around 15% fewer workers per square foot of store than a decade ago, according to an analysis by The Wall Street Journal. The company says more than half of its U.S. store workers are full-time employees, meaning they work at least 34 hours a week, and that level “has been trending up,” said Mr. Lundberg,” writes WSJ.
Wal-Mart is also being criticized for closing at least 50 of its Sam’s Club stores, which will lead to layoffs.
The new tax plan, along with the fact that states and municipalities continue to raise the minimum wage, has influenced other companies to offer higher wages or bonuses.
“The day the legislation was signed by President Donald Trump, AT&T Inc. and Comcast Corp. said they would pay a $1,000 bonus to most of their U.S. employees, or more than 300,000 people. Wells Fargo & Co. said it would raise its starting pay to $15 an hour,” writes WSJ.
Author’s note: Trump’s tax cut is already working its magic and inspiring prosperity all over the place and this is just the beginning.