Wal-Mart Stores Inc. is boosting its starting hourly wage to $11 and delivering bonuses to employees, capitalizing on the US tax overhaul to stay competitive in a tightening labor market.
Target, one of Walmart's top labor competitors, announced they would increase their starting hourly wage to $11 in September, vowing another increase to $15 by 2020. Corporate tax rates were slashed from 35 percent to 21 percent and now companies like Walmart are following through on expectations that businesses will pass those savings on to employees.
"Tax reform gives us the opportunity to be more competitive globally and to accelerate plans for the USA", said the company's CEO, Doug McMillon. "So, we're pleased to tell you that we're raising our starting wage to $11 an hour for Walmart U.S., Sam's Club, Supply Chain, eCommerce and Home Office hourly associates effective in February".
The bonus amount will be based on length of service, with associates of at least 20 years' standing qualifying for $1,000.
(Not long after it announced the wage increase, reports emerged that it was closing dozens of Sam's Club stores.) As for parental leave, it is increasingly becoming the law of the land, too, with NY and California requiring companies to offer expanded paid maternity and paternity leave.
Walmart's expanded benefits will provide for 10 weeks paid maternity leave and six weeks for parental leave. It will also create a benefit providing financial help to employees who are adopting a child, helping to cover adoption agency fees and legal expenses, according to CNBC.
While it's not entirely clear how large an impact the new tax law will have, Walmart should see a significant benefit.
The company said the change is in addition to wage increases already planned for many US markets in the coming fiscal year. The company's quarterly revenue was up 4.2% compared to the same quarter last year. sell-side analysts forecast that Wal-Mart Stores, Inc. will post 4.43 earnings per share for the current fiscal year.
Hourly-paid employees will get the higher rate from next month. The tax law gives the retailer an opportunity to be more competitive globally and to accelerate investment plans for the United States, he said.
"Given how low unemployment is, they would have had to hike wages anyway, the tax bill just made that move easier", said Edward Jones analyst Brian Yarborough. Many expect wages to rise when corporations have more money, but that is supposed to flow from new investments measured in years, not weeks. Also, EVP John R. Furner sold 1,200 shares of the company's stock in a transaction dated Friday, November 17th. Costco established a $13.50 minimum wage in 2016.
Walmart in 2015 spent $1 billion to lift their pay to $9 an hour, and then boosted it by another dollar the following year - but only for those employees who complete a 90-day training course.