Walmart minimum wage to keep staff rise piles pressure on rivals

Mar 3rd 2015

After decades of shop floor and political campaigning, US retailers are finally finally beginning to increase their minimum wages. While the increase is benefiting millions of workers across the country, its driving force is market competition.

Walmart’s decision last week to increase the wages of 500,000 staff to at least $9 (£5.80) an hour – $1.75 above the federal minimum – from April comes as retailers are struggling to find and retain good entry-level employees.

Doug McMillon, Walmart’s chief executive, who was paid $26m last year, said: “These are strategic investments in our people to reignite the sense of ownership they have in our stores. As a result, we firmly believe customers will benefit from a better store experience which can drive higher sales and returns for shareholders over time.”

Burt Flickinger, managing director of retail consultants Strategic Resources Group, said Walmart had suffered a staff exodus since Gap increased its minimum wage to $9 last year, and promised to lift it to $10 in 2015. Flickinger saidWalmart now had one of the highest staff turnover levels of US firms. “With higher turnover comehigher costs of hiring, training and lower productivity per person,” he said.

TJX, which owns budget chains Marshalls and TJ Maxx, (TK Maxx in the UK), pledged to increase its minimum wage to $9 an hour in June and to $10 in 2016. TJX chief executive Carol Meyrowitz said: “This pay initiative is an important part of our strategies to continue attracting and retaining the best talent to deliver a great shopping experience for our customers, remain competitive on wages in our US markets and stay focused on our value mission.”

Analysts said pressure was mounting on other retailers to follow suit in order to ensure they can attract enough talent. “What I’ve been telling people is that Walmart just raised the federal minimum wage,” said Maryam Morse, retail practice leader at Hay Group.

David Schilling, senior programme director for human rights at the Interfaith Center on Corporate Responsibility, said: “It’s not just the retail sector. It could be fast food, restaurant workers. When it’s a big player like Walmart, the ripples go forward.”

Target, which operates about 1,800 stores across the US, has not increased its minimum wage but conceded that it was under pressure to pay competitively. “We’re all the time assessing the marketplace to determine competitive wages,” said chief financial officer John Mulligan. “We feel confident that we’ll be paying the teams appropriately.”

The US federal minimum hourly wage has stayed at $7.25 since 2009 despite Barack Obama urging Congress to introduce a $10.10-an-hour minimum. But 29 states and the District of Columbia pay a higher minimum wage.

This week, Andrew Cuomo, governor of New York State, said all waiting staff and others whose wages are supplemented by tips, will get a raise of their minimum wage to $7.50 an hour by the end of the year. Cuomo wants the NY state’s minimum wage to increase to $10.50 an hour and New York City’s minimum to rise a dollar higher.

Chicago has gone further, increasing the city’s minimum from $8.25 to $10 an hour from July, and $13 by 2019. After it hits $13 in 2019, it will be pegged to inflation. While Seattle’s mayor Ed Murray is increasing the west coast’s minimum to $15 - the highest in the country’s history - over the next seven years.