Why Wal-Mart May Move to Support Minimum-Wage Hike

The company may have a lot to gain from a federal increase.

Demonstrators march and block traffic in a major intersection outside a Walmart store during rush hour September 5, 2013 in Hyattsville, Maryland.
National Journal
Matt Berman
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Matt Berman
Feb. 20, 2014, midnight

The largest private em­ploy­er in Amer­ica, a com­pany that pos­sibly re­cently paid a ma­jor­ity of its em­ploy­ees less than $25,000 an­nu­ally, is con­sid­er­ing sup­port­ing an in­crease in the fed­er­al min­im­um wage.

For Wal-Mart, the move might make a whole lot of sense.

Dav­id To­var, a Wal-Mart spokes­man, told Bloomberg Wed­nes­day that his com­pany is “look­ing at” sup­port­ing a fed­er­al wage in­crease. “Whenev­er there’s de­bates,” he said, “it’s not like we look once and make a de­cision. We look a few times from oth­er angles.” For now, the com­pany re­mains neut­ral.

To­var did give one reas­on why the com­pany might sup­port an in­crease. Boost­ing the wage, he said, would mean that some Wal­mart shop­pers would “now have ad­di­tion­al in­come” to spend at the store. At the same time, “it’s really hard to mod­el be­ha­vi­or based on these kinds of changes,” To­var told Bloomberg.

Wal-Mart has a total of 1.3 mil­lion U.S. em­ploy­ees. About 300,000 of those em­ploy­ees earn an av­er­age of $8.75 an hour, ac­cord­ing to Berke­ley’s Labor Re­search Cen­ter. Boost­ing the fed­er­al min­im­um to $10.10 an hour from the cur­rent $7.25, which is the pro­pos­al from Pres­id­ent Obama and Sen­ate Demo­crats, could have a big im­pact just from the store’s own em­ploy­ees.

Some eco­nom­ists are on board with the idea. “If sud­denly all these low-wage work­ers have more in­come, they are likely to spend that money right away,” Dav­id Cooper of the left-lean­ing Eco­nom­ic Policy In­sti­tute told The Huff­ing­ton Post last fall. “If an em­ploy­ee at Mc­Don­ald’s or Pizza Hut sud­denly has ad­di­tion­al in­come,” he said, “they could spend it at Wal­mart.”

There’s not yet enough data out there to sug­gest the move would work, and Wal-Mart would most likely want to have more to go on than just the opin­ion of a few wage-in­crease ad­voc­ates. But for a com­pany with a prob­lem­at­ic im­age when it comes to how it treats its work­ers, back­ing a change here could be a gain in it­self. CVS isn’t the only U.S. mega-store cap­able of mak­ing a big PR move that could come with ser­i­ous up-front costs.

And Wal-Mart wouldn’t be alone in rush­ing out ahead of a pos­sible fed­er­al in­crease: On Wed­nes­day, Gap an­nounced that the com­pany would in­crease its own min­im­um wage to $10 an hour by June 2015. That de­cision will im­pact about 65,000 U.S. em­ploy­ees. “Our de­cision to in­vest in front­line em­ploy­ees will dir­ectly sup­port our busi­ness, and is one that we ex­pect to de­liv­er a re­turn many times over,” said the com­pany’s CEO.

Sup­port­ing an in­crease also wouldn’t be a first for Wal-Mart. Back in 2005, CEO Lee Scott urged Con­gress to raise the fed­er­al wage from $5.15 an hour. “We can see first-hand at Wal-Mart how many of our cus­tom­ers are strug­gling to get by,” Scott said then. “Our cus­tom­ers simply don’t have the money to buy ba­sic ne­ces­sit­ies between pay checks.” Con­gress even­tu­ally began a series of wage in­creases, which first took ef­fect in 2007 and cul­min­ated in an in­crease to $7.25 start­ing in 2009.

A dec­ade ago, Wal-Mart went all in on the ar­gu­ment that it could be a win­ner as a res­ult of a wage in­crease. There’s no reas­on to think the com­pany can’t do it again now.

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