Walmart, the world’s largest private employer, announced on Thursday that it was raising its starting hourly wage from $9 to $11 per hour, introducing a more generous parental leave policy, and offering one-time cash bonuses based on length of service for its US workforce. CEO Doug McMillon revealed the changes in a note to employees:
[W]e’re raising our starting wage to $11 an hour for Walmart U.S., Sam’s Club, Supply Chain, eCommerce and Home Office hourly associates effective in February. We’re also providing a one-time bonus to hourly associates that pays a larger amount the longer you’ve been with our company. Associates that don’t benefit from the new starting wage increase are eligible for the bonus and it will range from $200 to $1,000 depending on your length of service. …
I’m also excited to tell you that we’re making an important change to benefits by expanding our paid leave policy to provide full-time hourly associates with 10 weeks of paid maternity leave and six weeks of paid parental leave. This expanded parental leave also applies to salaried associates and to parents who adopt. We will also contribute $5,000 to the cost of adoption.
McMillon cited the corporate tax cut passed by the US Congress in December as part of what prompted the company’s decision. Several other major US employers, including AT&T, Wells Fargo, and Boeing, have also announced plans to invest part of their tax savings in raises or bonuses, though most companies have said these savings will mainly be spent on debt repayment, dividends, and stock buybacks.
According to Bloomberg, Walmart’s minimum wage hike will cost the company around $300 million on top of plans that were already in place to raise wages in the next fiscal year, and the bonuses will cost an additional $400 million. The company, which employs 1.4 million American workers (a full 1 percent of the total US workforce), had already increased its investment in wages in recent years by about $2.7 billion. For comparison, Walmart reported net income of $1.75 billion in Q3 of 2017.
These increases came amid an increasingly tight and competitive labor market and have helped to combat negative public perceptions of Walmart’s employment practices. McMillon has attributed the company’s strong performance in recent years to larger investments in its workforce that have helped improve customer service. Target, one of Walmart’s chief competitors, raised its entry-level wage to $11 per hour in October and aims to increase it further to $15 per hour by the end of 2020.
This competition among large, low-wage employers has been effectively raising the minimum wage for retail workers in the US, even as the federal government has declined to raise the statutory pay floor and state and expert opinion is divided over whether minimum wage hikes at the state and local level are really helpful to workers.
Walmart also confirmed on Thursday that it was closing 63 of its Sam’s Club warehouses in the US, leaving an estimated 9,450 people out of work — though the company says it will try to transfer as many of the affected employees as it can to other locations.
This post was updated to include the Sam’s Club news which emerged later in the day.