Wal-Mart’s Pay Raises Are Paying Dividends

Wal-Mart Learns to Live Without Everyday Poverty Wages
Employee turnover is down, but will profits rise?
Bloomberg, June 11, 2015

 

 

 

I have been writing critiques of Wal-Mart’s wages and employment policies for years (see “How Wal-Mart Became A Welfare Queen” and “Wal-Mart’s Minimum Wage Breakdown“). Today, I break with tradition and offer up some positive perspectives on the retail giant’s recent actions.

A brief history of Wal-Mart and its enormous retail staff is telling. The company’s 2.2 million employees make it the world’s biggest private employer. It also is one of the largest employers in the U.S., with 1.3 million workers in 4,540 stores.

Wal-Mart has historically given shabby treatment to its huge workforce. As we noted recently, labor was seen as a cost rather than a driver of sales. Wal-Mart never seemed to think of its associates as human capital, just a cost. Beyond low wages, there was a history of forcing full-time employees to work part time to minimize even the meager benefits the company offered.

But financial success trumped philosophical enlightenment, and for most of Wal-Mart’s history the way it treated employees didn’t hurt results very much. Wal-Mart became the world’s biggest company byrevenue and it ranks among the 20 most profitable.

What we also know is that the way Wal-Mart treated employees was a major reason that turnover was very high compared with the rest of the retail industry. The 2001 documentary film “Store Wars: When Wal-Mart Comes to Town” reported that turnover was about 70 percent a year, much higher than the rest of the retail industry, though it has fallen since then.

Two months ago, Wal-Mart said it would increase its minimum hourly wage to $9, higher than the federal minimum of $7.25.  That affects about a half-million of its workers; many others are in states with higher minimums or have worked their way into positions paying more than the minimum. Wal-Mart’s bottom pay scale will rise to $10 an hour next year.

As we suggested last time out, this has had a positive impact on employees. Last week, at the company’s shareholder meeting, Chief Executive Officer Doug McMillon made several announcements about the raises:

— “Our job applications are going up and we are seeing some relief in turnover.”

— Wal-Mart is expanding its $1 billion program in wages, training and employee relations.

— The company is raising minimum wages for another 100,000 U.S. employees.

— The company will also be raising wages above next year’s $10 minimum rate.

— It will improve working conditions for 1 million U.S. hourly workers.

— My favorite improvement: No more “constant loop of Celine Dion and Justin Bieber music blasted into stores from headquarters.”

These are not minor adjustments. The company seems to have found some religion when it comes to how it treats its workers. Given the increasing competition for employees, it may have little choice. To remain competitive in reducing turnover and attracting new employees, it needed to do something.

Perhaps the company’s stock price is the motivation. It hit a 52-week low on Tuesday, down 20 percent since January.

The company also is struggling to address the issue of slowing growth. First-quarter earnings fell about 6 percent from the year-earlier quarter, and sales were little changed. Some of this could be attributed to the recovering economy, as customers who can now afford to shop elsewhere often do.

But it’s likely more than that. As we noted in February, the Wal-Mart shopping experience is one to avoid if you can — merchandise is often in disarray or missing, the aisles can be messy, the staff often is surly. My personal experience is that the stores are dingy and depressing. Apparently, I am not the only one who sees them that way. Greg Foran, who runs Wal-Mart’s U.S. Stores unit, noted“If we look at what customers say about our business, about half of [our stores] are where we would want them to be, and the other half need improvement.” That is corporate speak for 50 percent of our stores stink.

The bottom line is this: The strengthening economy and competitive labor market have forced changes on the retail giant. So far, it seems to be having a beneficial effect for the employees.

Time will tell if it’s enough to turn around the world’s biggest retailer.

Originally: Wal-Mart Learns to Live Without Everyday Poverty Wages

 

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  1. constantnormal commented on Jun 11

    Note to admin:

    … the “Continues here:” link is goobered up, with some spurious charts in front of the “www”

    Note to Readers: until it gets fixed, just delete the junk in front of the www in the url and reload the page

  2. Iamthe50percent commented on Jun 11

    Stock price is falling like a stone, however. Net loss including dividends is 2% so far for the year. Maybe this is just petulant Republicans punishing Wal-mart? I kind of doubt it because they are quite capable of separating their wallets from their mouths.

    • Futuredome commented on Jun 11

      That is what happens when you get out competed. See Staples.

  3. willid3 commented on Jun 11

    well declining sales probably had a weather component, and part of it was there wasnt any thing to buy when you did go. and that sent as lot of customers else where.

    one of the problems with just in time employee, is that the work that was done to keep the store stocked with goods stops happening as employees no longer have down time to address that. keeping things clean and presentable is also hard to for the same reason

    • rd commented on Jun 11

      There are a handful of specific things I pick up at Wal-Mart because they are cheaper or not available somewhere else. However, it is not my first store choice in general mainly because of the stocking problems and the inherently long check-out line waits. I can get a week’s groceries for a family through the checkout line at Wegmans faster than I can buy a handful of items in the “Express” checkout at Wal-Mart.

      Clearly Wal-Mart executives don’t shop in their stores. They probably just order everything from Amazon.

  4. Joe commented on Jun 11

    I think the road Walmart was on is one already traveled by Sears and Kmart. I have a problem with “we found enlightenment when the misery go so bad that even management noticed it….”

    Prior Teamster/AFL-CIO/current retired but still a UA member and UC Berkeley grad. “You don’t need to be a weatherman to know which way the wind blows.”

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