It Just Became Harder to Hate Wal-Mart

Joe Raedle/Getty Images

It’s official: The company everyone loves to hate just became a little bit harder to abhor.

In a surprising move, Wal-Mart announced that it would be giving more than 500,000 workers a bump in wages after releasing fourth-quarter earnings that seem to indicate the fledgling retail giant has found its stride once again. By the end of the year, Wal-Mart plans on paying all of its employees no less than $10 per hour, a move that comes in stark contrast to the company’s long history of paying rock-bottom wages, among other alleged labor issues.

The plan is puzzling, to say the least, but is without a doubt good news for the company’s millions of employees. As the largest private employer in America, Wal-Mart has constantly been pointed to as an example of all things wrong with big business. But this recent move? Well, it does indicate a 180-degree turn from what we’ve seen before from the retailer, and it could be an attempt to rebuild its image or adapt to a shifting labor market dynamic.

Wal-Mart associates will all make at least $9 per hour by April of this year and are scheduled to get raises to a bare minimum of $10 by February 2016. The move will impact approximately one-third of the company’s more than 1.4 million employees. Needless to say, it’s a huge move.

“Overall, these are strategic investments in our people to reignite the sense of ownership they have in our stores,” said company CEO Doug McMillon, per a Huffington Post report. “As a result, we firmly believe that our customers will benefit from a better store experience, which can drive higher sales and returns for our shareholders over time.”

During an interview on CNBC, McMillon further expanded on what was behind the wage bumps. “Right now we want to make sure everybody is crystal clear [on] how vital our store experience is for our future,” he said. “Customers need to be served, and associates need to be happy and love their job.”

What’s truly remarkable about Wal-Mart’s wage spike is the economy-wide effects it could have. Many analysts and economists have been speculating for a while that the economy was due for a wage boom, and this may be the first domino needed to start the chain reaction.

“What Wal-Mart has done today is set the new benchmark for employee pay for big-box stores,” said retail expert Brian Sozzi of Belus Capital Advisors to CNBC. “If you’re a teenager working in an Abercrombie & Fitch and getting paid minimum wage, it might be cooler to work at a Wal-Mart, where you get training and a higher pay,” he added. “It could not only spread to the big-box retailers, but also spread throughout the mall.”

What Sozzi points out is the important thing to keep in mind: Wal-Mart suddenly made the retail sector competitive again for employers, many of which will probably be forced to bump wages for their own employees, or risk losing them. Again, it does seem odd that Wal-Mart of all companies was the organization to fire the first volley in this situation, but making the decision to do it — and voluntarily, at that — should help the economy.

But there are questions that loom large. For example, what will Wal-Mart do to offset the wage hike? And perhaps most importantly, how are investors and shareholders going to react? The answer is that a good deal of shareholders will be angry about it, but there’s plenty of reason to believe that the move will pay off in the long run. If Wal-Mart is able to pay more and attract a stronger workforce, it will save money in turnover costs and attract more customers, all the while dusting up its image quite a bit in the eyes of the public.

Wal-Mart’s wage bump is not the first we’ve seen in the recent past, as companies like The Gap, Ikea, and others have embraced similar strategies. But due to its sheer size and scope, this one single corporate policy change may lead to an economic shockwave across the country. While it may have angered some in the short term, the company will probably end up better off in the long run.

For the first time in a long time, Wal-Mart has become a little less easy to hate, even if the company still has a lot of work to do.

More from Business Cheat Sheet:

More Articles About:   , , , ,