Walmart set to raise wages

With unemployment at it’s lowest rate in the U.S. since 2008, one of the country’s biggest employers is giving their lowest paid workers a raise. 500,000 people are expected to see their wages jump to at least $9/hour in 2015 at both Walmart and Sam’s Club, and further increase to $10/hour the following year.

Some believe a raise for the employee base is well overdue as profits have soared while inflation-adjusted wages have remained stagnant. Since 2007, Walmart’s revenue per employee has increased 18%, while profit per employee has gone up even more. Most of these gains have gone to shareholders of the company.

With employment on the rise in America over the last four years however, the discount super-store giant has come to the conclusion that in a less competitive labor market it is necessary to give their employees some incentive to stay on the job.

This is good news for the economy, especially if other large employers follow Walmart’s lead. Aetna actually already announced a wage increase for 5700 of it’s employees to $16/hr earlier this year; and Starbucks is giving an unspecified raise to it’s store workers.

The wage increases will cost Walmart $1 billion per year, which is bad for short-term investors of the company as quarterly earnings reports will suffer (today the stock is down nearly 3%, despite announcing a dividend increase of 2% per share).

In the long-run however, higher salaries for more people will be beneficial for the majority of America. Hopefully other big employers find higher employment costs a necessity to stay competitive in a job market that continues to realize it’s growing potential.

 

[New York Times]