Walmart to Increase Wages to $9 an Hour for 500,000 Workers

Walmart announced earnings on Thursday. Between fourth-quarter figures for earnings-per-share, comp sales and revenue was a stunning announcement: The retail giant plans to increase wages for 40 percent of its workforce, some 500,000 employees.

The move will bring wages for hourly associates up to $9 per hour by April, $1.75 above today's federal minimum wage, the company said. The following year, by Feb. 1, 2016, current associates will earn at least $10 per hour.

This is huge news for the company, the largest private employer in America, which has faced mounting pressure from employees and advocacy groups to increase wages. It was the target of a slew of protests last year that culminated in demonstrations at 1,600 Walmart stores on Black Friday. The company has also taken flak for holding canned food drives for its own employees. And a 2014 study estimated that Walmart workers cost taxpayers an estimated $6.2 billion in public assistance like food stamps, Medicaid and subsidized housing.

So, is the big-box giant long bemoaned as the poster child for unlivable wages finally turning over a new leaf? 

"Strengthening investments in our people"

"We're strengthening investments in our people to engage and inspire them to deliver superior customer experiences," Walmart CEO Doug McMillon said in a statement. "We will earn the trust of all Walmart stakeholders by operating great retail businesses, ensuring world-class compliance, and doing good in the world through social and environmental programs in our communities."

Walmart has seen traffic slow recently: Q4 represented the first rise in shopper traffic in more than two years. McMillon's comments indicate that the evolving demands of customers -- made painfully obvious by dips in foot-traffic -- may be part of the reason for the change of heart on wages. Notice the use of the word "stakeholders" -- a shift from the shareholder value mantra to recognizing the needs of all stakeholders (including employees) has been a resounding chorus of advocacy groups.

McMillon reiterated this apparent shift in mindset in a letter to employees about the announcement. It's worth a read in full, but top quotes include: "Our actions must match our beliefs." And, "Our business is pretty simple when we boil it all down; sometimes we make it too complicated."

For its part, Walmart has made a noticeable shift toward more sustainable business practices in recent years. The retail giant is a leading private purchaser of renewable energy and has dramatically cut its energy footprint. It has rolled out policies on chemical ingredients and sustainable food and made headlines for bolstering women-owned businesses and hunger relief organizations.

As is the case in many other industries, labor is generally the last shoe to drop when it comes to getting serious about sustainability. In the grand scheme of things, it's not that hard to head into the board room and pitch an energy efficiency program that will save the company money in quick order. An initiative that will help a company's lowest earners at the expense of the bottom line can be a much tougher sell.

Are we trending toward higher wages?

Opponents of a minimum wage hike say higher wages would tank company revenues and be disastrous to the economy. Shareholders seem to share this concern: Walmart stock took a noticeable dip of nearly 3 percent after the announcement on Thursday. (Although it's too early to tell whether or not shareholders will warm up to the idea.)

So, just how hard will this wage hike hit Walmart?

The company posted a Q4 revenue of $131.6 billion, outpacing analysts' expectations and bringing its fiscal year revenue to $486 billion. It also bested forecasts by earning $1.61 per share. (Believe it or not, that's actually nothing for the retail giant to write home about: McMillon said the company was "not satisfied" with its performance.)

In contrast, this broad-sweeping wage initiative -- which has the potential to pull a half-million struggling workers out of poverty -- will cost the company $1 billion during this fiscal year, McMillon said. A billion dollars isn't exactly chump change, but it's dwarfed by the company's annual earnings. And, although it's more difficult to quantify the benefits of higher employee satisfaction, retention and engagement, it's not hard to argue that Walmart will see a return on its investment. Just ask McMillon:

"When we take a step back, it’s clear to me that one of our highest priorities must be to invest more in our people this year," he wrote in his letter to employees.

Walmart also has the benefit of comparing its own post-wage-hike numbers with those of other leading retailers, like Gap and Ikea, that recently boosted their minimum hourly wages. Industry leaders like Costco -- a direct competitor with Sam's Club -- and Ben & Jerry's do workers one better: The average hourly rate at Costco is more than $20, and an entry-level Ben & Jerry’s worker earns $15.97 per hour, a figure based on the living wage in Vermont. Meanwhile, state and local governments have also shifted to higher minimum wages -- most notably Seattle, which will phase-in a $15 minimum wage starting in April.

Having a mega-retailer like Walmart jump on board with higher wages is huge for advocates seeking a living wage for all. Whether other market leaders will follow suit is yet to be seen, but we'll have our eyes open.

Interested in the living wage conversation? Keep an eye out for a 3p exclusive series -- "In Pursuit of Fair Pay: TriplePundit Explores the Minimum Wage Debate" -- at the end of this month.  

Images: 1) Matt Hamilton via Flickr user Neon Tommy 2) Flickr/SocialJusticeSeeker812 3) Google Finance