Wal-Mart raises its starting wage, cites new tax law

Chain announces paid parental leave, one-time bonuses on same day it says it will close 63 Sam’s Club stores

Wal-Mart is raising its starting hourly wage from $9 to $11 and expanding its parental leave benefits, the company announced Thursday.

The country’s largest private employer, which has more than 1 million hourly workers, said the changes were motivated in part by anticipated savings from the newly passed tax plan, which offers sweeping tax cuts for corporations. Wal-Mart is the first retailer in the S&P 500 to raise wages citing the tax law, and economists say its across-the-board pay increases could pressure other companies to follow suit.

Also on Thursday, Wal-Mart announced that it was closing 63 Sam’s Club stores and laying off thousands of workers around the country. In a tweet, the company the closures would help “better align” its physical locations with its strategy. No New Mexico locations are on the list of stores slated for closure.

The retail giant, which is New Mexico’s thirdlargest employer, said the changes would take effect in mid-February. For some part-time and full-time workers, the company plans to give one-time cash bonuses ranging from $200 (for workers who have been at Wal-Mart for two to four years) to $1,000 (for those who have been working there for 20 or more years).

“Today, we are building on investments we’ve been making in associates, in their wages and skills development,” Doug McMillon, president and chief executive of Wal-Mart, said in a statement. “Tax reform gives us the opportunity to be more competitive globally and to accelerate plans for the U.S.”

Economists and professors, though, said Wal-Mart had little choice but to raise its wages if it wanted to stay competitive with peers like Target, which raised its hourly starting wage to $11 late last year, with plans to increase it to $15 by 2020. The national unemployment rate is at a 17-year low, making it increasingly difficult for companies to attract — and keep — workers.

“I would’ve been astounded if they hadn’t raised wages,” said Thomas Kochan, a professor at MIT’s Sloan School of Management. “What’s impossible to sort out is how much of this is because of savings from the tax cuts, and how much is because of pressure they’re receiving from employees and labor groups.”

Labor advocacy groups called the pay increase a “big win” for employees but said it fell short of providing a living wage in many parts of the country. A full-time salary of $11 an hour amounts to about $19,000 a year, which is below the national poverty level of $20,420 for a family of three. (Wal-Mart considers 34 hours a week full time.)

“I’m making $11 an hour now after seven years at Wal-Mart [and] I still struggle to pay my bills,” Emeraid Gems, a Wal-Mart employee from Gettysburg, Pa., said in an email. “The one-time bonus I’ll be getting won’t help me long term. We need $15 and full-time to be able to support our families.”

Wal-Mart said the pay increases apply to all its hourly workers in the U.S., including those at its Sam’s Club stores. Full-time hourly and salaried workers will also receive 10 weeks of paid maternity leave and six weeks of paid parental leave. (The company currently offers six to eight weeks of partially paid maternity leave and no parental leave.)

Wal-Mart said the wage increases would add about $300 million in expenses to its budget for the next fiscal year. The one-time cash bonuses, meanwhile, will cost the company about $400 million, or about 0.08 percent of its annual revenue. For 2016, the company reported $485.87 billion in annual revenue on profits of $13.64 billion.

Wal-Mart is the latest major corporation to attribute employee bonuses to the Trump administration’s tax cuts, which would effectively reduce the corporate tax rate from 35 percent to 21 percent. In December, Comcast and AT&T announced plans to give employees a $1,000 bonus following the Trump administration’s tax cuts, even as they laid off hundreds of workers.

On Thursday, Treasury Secretary Steven Mnuchin praised Wal-Mart’s wage hike.

“We want to thank them,” he said. “Wal-Mart is the latest company to make such an announcement, directly [as a] result of the tax cuts.” But not everyone was as happy. “The fact is that Wal-Mart is not permanently investing the estimated $2 billion it will receive annually from Trump’s tax giveaway to its workers — it is keeping almost all of it,” Randy Parraz, director of Making Change at Wal-Mart, a campaign run by the United Food and Commercial Workers International Union, said in a statement.