Even without tax reform, Walmart needed to raise wages

Markets Reporter
Yahoo Finance

Walmart (WMT) has raised its minimum wage to $11 an hour.

In an announcement on Thursday morning, the retail giant said that as a result of the tax cut passed by the Trump administration late last year, it would increase its company-wide minimum wage to $11 from $10 an hour, while also paying bonuses to employees of up to $1,000. Walmart also announced increased parental leave benefits and a $5,000 credit for child adoption.

And while the corporate tax cut — which brings the statutory U.S. corporate tax rate to 21% from 35% — gives Walmart (and others) a political impetus for paying worker bonuses or increasing wages, the labor competition we’ve seen in the retail space over the last few years makes clear that higher pay is a necessity for Walmart to retain the talent it needs to run its stores.

Walmart employees got an increase in their minimum wage on Thursday, the same day the company announced it would close dozens of Sam’s Club locations.
Walmart employees got an increase in their minimum wage on Thursday, the same day the company announced it would close dozens of Sam’s Club locations.

In 2015, Walmart first announced that it would increase wages for 500,000 workers by taking its U.S. company-wide minimum wage to $9 an hour. A year later, Walmart upped this internal minimum wage to $10.

But Walmart isn’t alone in the retail sector in increasing the minimum wage that it pays employees. This past September, Target (TGT) announced that it would increase its internal minimum wage to $11 an hour. In 2015, McDonald’s (MCD) announced an increase in its internal minimum wage. And TJ Maxx (TJX) has also done the same in recent years.

With or without a tax cut, pressure to increase worker pay has been building in the economy and the retail sector. One way or another, Walmart was going to bow to this pressure and increase pay to retain workers.

And a separate piece of news from Walmart on Thursday also outlines how the retail landscape and market forces are pushing its strategic thinking far more than tax considerations. As Business Insider’s Hayley Peterson reported, Walmart closed 63 of its Sam’s Club wholesale stores on Thursday. Notably, 10 of these closed locations will be turned into ecommerce distribution centers.

So on the same day Walmart announced increased pay for about a million of its 1.2 million U.S. employees, the company shuttered dozens of locations as pressure from Amazon (AMZN) and other ecommerce players weights on its core brick-and-mortar stores.

Politics may have given Walmart cover to announce a wage increase while its core business remains under attack from competitors and the labor market. But nothing about the challenges the company faces is changing, which means this won’t be the last time the company closes dozens of stores, or the last time they announce a raise for thousands of workers.

Myles Udland is a writer at Yahoo Finance. Follow him on Twitter @MylesUdland

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