Wage rise may keep critics at bay
A fair wage for a day’s work has not often applied to the retail workplace. Walmart has long been the bogeyman of the dead-end retail job. But in recent years it has tried to wear a kinder, more progressive face. A few years ago it announced that it would lift its minimum wage to US$11 ($15.20) even as the federal mandate stood at just US$7.25 an hour. Yesterday, it raised its own bar, boosting the average minimum for 425,000 “associates” to at least US$15 an hour. The rise happens to coincide with Washington’s efforts to raise the federal minimum wage to that level.
The group’s largesse came just as it announced a blowout fiscal 2020. Free cashflow exploded by 70 per cent to US$26 billion, as the retailer paid out US$9b to shareholders in dividends and buybacks. It has plenty of capacity to raise wages – a US$3 an hour boost, for example, would cost about US$2b – while keeping shareholders’ pockets full. But activists and liberal politicians will not be so easily satisfied.
Employers and business interest groups once howled about mandated wage increases acting as job killers. But then, in a tight labour market, basic economics dictated that employee remuneration should increase. Economic studies have generally shown that employment levels hardly declined when state and local minimum wages rose. A recent study from the Congressional Budget Office concluded that any job losses would be mostly offset by the number of people lifted from poverty.
For the likes of Amazon and Walmart, whose massive scale allows them to better absorb wage increases, the real battle concerns staff unionisation and workplace conditions (the New York attorneygeneral has just sued Amazon over the latter). Kroger, America’s largest pure-food retailer, has recently shut stores in cities that have mandated “hazard” pay for frontline workers. Its operating margin of roughly 3 per cent is slightly lower than Walmart’s at 4 per cent. Investing that difference to keep Walmart’s critics at bay looks worthwhile.