Walmart has long come in for criticisms, for various reasons, but the low wage it pays its retail associates has been a prime target. It has long lagged behind many other retailers. Recently though, Walmart announced plans to increase wages for its hourly employees, moving the rates above the current federal minimum wage. It still might not reach the ranks of Costco, where employees earn an average of close to $20 per hour, but Walmart will guarantee a minimum wage of $9 by April, then $10 by February 2016.

The move reflects several motivations for the largest private employer in the United States. First, bumping wages gives it an opportunity to respond to criticisms and enhance its image, among both outsiders and its own workforce. Many workers have demonstrated outside their stores, calling for higher wages. Responding to their demands likely helps Walmart retain these employees and perhaps prevents them from talking badly about it in the press.

Second, national trends suggest that the federal minimum wage might continue to increase. For example, 29 states already set a minimum wage higher than the national level. In addition, President Obama has suggested raising the federal minimum to $10.10, though Congress has not acted on that recommendation yet. By instituting the increase now, Walmart can get ahead of the curve.

Third, a stronger job market and decreasing rates of unemployment require retailers to compete for good employees. Raising wages is one of the most obvious ways to do so. For example, if Walmart pays more than Target, potential employees may be more likely to hire on with the retailer, and then stay around instead of switching jobs. Considering the powerful influence Walmart has, we might expect to see wage increases announced soon by its competitors too.

Discussion Question:

What are some other tactics Walmart and other retailers might use to attract talented salespeople?

SOURCE: Hiroko Tabuchi, “Walmart Raising Wage to at Least $9,” The New York Times, February 18, 2015, http://www.nytimes.com