Wal-Mart Stores Inc. (WMT) said it's raising wages at nearly a third of its 4,000 U.S. stores and introducing wage caps at all stores in an effort to remain competitive with other retailers and meet a need for workers and managers as it continues to expand.
Workers at more than 1,200 stores will see their paychecks grow by an average 6 percent, and the world's largest retailer said it will begin introducing wage caps for the first time on each type of job in all stores.
The nation's largest private employer said Monday the changes would help it remain competitive with other retailers and meet a need for workers and managers as it continues to expand.
Wal-Mart has more than 1.3 million U.S. employees, which it refers to as associates.
The announcement comes less than two weeks after Chicago became the largest city in the nation to require big-box retailers to pay a "living wage," despite objections from Wal-Mart and other businesses. Chicago's City Council adopted an ordinance requiring major retailers to pay at least $10 an hour plus $3 in fringe benefits by mid-2010. Mayor Richard M. Daley could veto the measure but would need two aldermen to drop their support in order to avoid having his veto overridden.
Gerald Celente, director of The Trends Research Institute in Rhinebeck, N.Y., an independent think tank that follows economic and other trends, said Wal-Mart appeared to be reacting to negative publicity about its pay following the Chicago ordinance.
"The increase in starting salary is a very smart thing to do," Celente said.
Wal-Mart denied any connection to the Chicago vote. The pay increases began before the vote and have taken effect at more than 1,200 stores spread across the country, Wal-Mart spokesman John Simley said.
"It's part of a wider effort that's been under way for more than two years, not related to the Chicago ordinance," Simley said. He said the pay restructuring started in June 2004 when Wal-Mart introduced new classifications for each type of job.
The retailer's pay and benefits have been under fire from union-backed critics, who call them skimpy. Wal-Mart has defended its average full-time hourly wage of $10.11 and launched lower-cost health plans this year with premiums as low as $11 month in some areas.
"We've created about 240,000 jobs in the last three years and we are continuing to grow. We need to ensure that we have the most appropriate classification and pay programs to meet our growth needs," Simley said.
The changes help in two ways, Simley said. Higher starting pay makes Wal-Mart more attractive to new workers and the wage caps give current associates an incentive to move up to higher positions if they want to make more money.
Some associates are already making more than the new caps allow for their positions, Wal-Mart said without providing numbers. But no one will receive a pay cut as long as they are in that position, the company said in a statement.
Union-funded campaign group WakeUpWalMart.com called the pay caps an effort to drive out workers who had been there longer, in order to cut costs.
"Wal-Mart should be ashamed," WakeUpWalMart.com spokesman Chris Kofinis said.
Wal-Mart's Simley said the changes were not aimed at cutting costs and would not impact the company's earnings.
Retail analyst Don Gher from Coldstream Capital Management in Bellevue, Wash., which manages about $1 billion in assets including Wal-Mart shares, said both the pay raises and the pay caps were in line with practices at many other retailers and in other businesses.
"It is nothing that is ground breaking. It appears to be something where they continue to tweak their system," Gher said.
The Bentonville, Ark.-based retailer did not specify the new starting rates or give examples for the new pay caps. Simley said the numbers vary too much by local market conditions across the country to provide an accurate average figure.
The new caps come in the form of pay ranges established for each type of job.
Starting rates will be increased at more than 1,200 stores, with the average hike about 6 percent, Simley said.
"This does not translate into an across the board pay increase for all associates," Simley said.
He said the pay changes would not have an impact either way on Wal-Mart's personnel costs for the year.
Susan Chambers, executive vice president of the company's People Division, said in a statement that Wal-Mart remained competitive with benefits including health care, 401K plans, profit sharing and annual incentives.
Chambers said that was why "people stand in line to apply for Wal-Mart jobs."
As of July 31, the company operated 1,146 Wal-Mart discount stores, 2,098 Supercenters that combine a supermarket with general merchandise, 567 Sam's Clubs warehouse stores and 107 Neighborhood Market grocery stores.