What's behind Walmart's wage hike?

By raising workers' pay, is Walmart becoming a better citizen or trying to fend off organized labor?

Walmart
(Image credit: (Chris Hondros/Getty Images))

Attention, Walmart workers: You're getting a raise, said Jake Novak at CNBC. America's biggest retailer announced last week that it will pay its workers at least $9 an hour beginning in April and $10 next year, easily beating the national minimum wage of $7.25 an hour. Given that at least 500,000 of the company's 1.3 million U.S.employees stand to benefit, this move matters. And it's proof that "the free market works" without government interference when it comes to boosting wages. You know that old adage, you have to spend money to make money? said Megan McArdle at BloombergView​. That's Walmart's basic calculus. It needs "a more dedicated and experienced workforce" to help reverse sagging sales, and as the labor market tightens, it has become harder to attract and retain quality employees. By "treating its workers better," Walmart is simply betting that it will "get better workers."

In the low-wage economy, "every little bit helps," said The New York Times in an editorial, and Walmart's move could prompt Target, Home Depot, and other big-box retailers "to follow suit." But surely "a hugely profitable corporation like Walmart," which raked in $16 billion in profits last year, "can readily afford to do better." Already, two-thirds of its stores are covered by state and local laws that mandate pay higher than $7.25 an hour, said Lydia DePillis at The Washington Post. But by raising wages across the company "on its own terms," Walmart might be trying to head off what it considers a "greater threat": "labor organizing," which has brought the company no shortage of PR headaches.

Let's pause to put these supposedly "generous" wages in perspective, said Michael Maiello at The Daily Beast. Part-time workers, who make up about half of Walmart's workforce, will make just $17,500 next year if they work 35 hours a week, 50 weeks a year. Full-time employees will make on average just $26,000 working 40 hours a week, 50 weeks a year. That means "even after the raises," most Walmart employees "will be living below, at, or barely above" the federal poverty line of $24,250 for a four-person household. And who do you think picks up the slack when that happens? Taxpayers, said Barry Ritholtz at BloombergView. Most Walmart employees make so little they are forced to rely on "a full array of federal and state welfare." Walmart says the new raises will cost the company $1 billion in 2015. But "the U.S. taxpayer has been subsidizing the wages of this publicly traded, private-sector company to the tune of $2.66 billion in government largess a year."

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No one is denying that "working on the floor of a Walmart store is still going to be a hard job at a pay level that makes it hard to get by," said Neil Irwin at The New York Times. But I'm heartened by Walmart's wage hike. If more big employers are willing to pay more to attract and retain even low-skilled workers, it suggests the economy is on the right track. Those workers will spend the money they earn, "and get it circulating through the economy," which will in turn "spur more investment and hiring." And if that happens, "it won't just be Walmart workers getting a raise in 2015."

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