Wal-Mart Raises Wages

Wal-Mart recently announced that it plans on raising the wage it pays it employees further above the minimum wage.  This move demonstrates how strong the economy has been lately that wages are finally starting to rise.  As Paul Ziobro and Eric Morath write in their Wall Street Journal article, Wal-Mart Raising Wages as Market Gets Tighter, “Wal-Mart Stores Inc. plans to boost pay for its U.S. employees to at least $10 an hour by next year, well above the minimum wage, signaling a tightening labor market and rising competition for lower-paid workers.”  This demonstrates that the market for low paid workers is increasing as there is less available workers.  The unemployment rate has been decreasing which has made it harder for these companies to find and keep a workforce.  Wal-Mart is making this move in hopes of retaining their current workers and luring other good workers to Wal-Mart.

This is putting pressure on other companies to match these wage gains, or fear losing their workforce.  The market for lower-paid workers is becoming increasingly competitive forcing Wal-Mart to raise its wages.  As Lisa Baertlein says in her article, McDonald’s pressured to hike pay as Wal-Mart raises, economy improves, “McDonald’s Corp and its franchisees may have few options but to begin raising hourly wages as an improving U.S. economy creates competition for good workers and as mega-employer Wal-Mart Stores Inc sets a higher bar on pay, according to labor experts.”  In order to attract the right kind of workers, these companies must set a competitive wage rate.  If McDonalds (or practically any other company) were to leave their wage rate at the minimum wage, or hypothetically speaking, pay people less than minimum wage, then they will slowly lose their current workforce as the workers start leaving to take higher paying jobs at other companies.  They also will find it hard to replace them with competent workers because unless someone was truly passionate about their work as a cashier, they wouldn’t work very hard for such a paltry wage.  This is why Wal-Mart is finally raising its pay that will cost an estimated $1 billion.  Having unhappy workers is a recipe for losing business, so these companies have to take the necessary steps to keep their employees happy and working hard.

This also is a positive sign that the wage rate is starting to grow again as the economy is finally coming alive.  While this might cost companies a lot more money, this will help the economy continue to grow as wages begin to rise.  This announcement most likely confirms what Janet Yellen and the Fed already knew and reinforces their plans to start raising interest rates as the economy continually improves.  Lets hope other companies make similar moves to raise their wage rates as well.

One thought on “Wal-Mart Raises Wages

  1. Curtis Simeral

    Do you think that public opinion had a lot to do with this or that it mainly stemmed from shrinking unemployment? I’ve seen a few articles tearing WalMart up for paying wages so low that its employees were forced to only shop at its stores and other similar sentiments and was wondering what your take was on those types of reactions in factoring into this wage increase.

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