Walmart said it’s giving its employees a raise. Then it closed 63 stores

Tax changes will save company $2 billion a year, estimates show
A Walmart employee works on a cereal display at a store in Fayetteville, Ark., on Oct. 12, 2016.
A Walmart employee works on a cereal display at a store in Fayetteville, Ark., on Oct. 12, 2016.

Walmart, the largest U.S. private employer, with more than 1 million workers, said Thursday it plans to raise starting wages from $9 to $11 an hour and hand out employee bonuses ranging from $200 to $1,000, becoming the latest company to give a least some of the credit for new worker benefits to the recently passed tax plan.

But economists and professors cast doubt on whether tax policy changes were the driving force behind the move by the retailing giant, which for years has stood as a lightning rod for criticism over low worker pay.

With the national unemployment rate at 4.1 percent, a 17-year low, there are more job openings in the retail industry now than at any time since December 2000, government data shows.

With its announcement Thursday, Walmart did not mention the difficulty employers are having finding and retaining workers in the retail industry.

“Tax reform gives us the opportunity to be more competitive globally and to accelerate plans for the U.S.,” Walmart chief executive Douglas McMillon said.

Observers said Walmart needed to raise wages now if it wanted to keep step with peers such as Target, which late last year raised its starting wage to $11 an hour, with plans to reach $15 by 2020.

“I would’ve been astounded if they hadn’t raised wages,” said Thomas Kochan, a professor at MIT’s Sloan School of Management. “What’s impossible to sort out is how much of this is because of savings from the tax cuts and how much is because of pressure they’re receiving from employees and labor groups.”

The entry of Walmart into the tax-cut debate accelerates the contentious discussion over how much the tax law, still only weeks old, is truly factoring into these corporate decisions. American Airlines and AT&T, among others, have announced $1,000 bonuses for employees, citing the tax overhaul. Wells Fargo is among a smaller group that has also pledged a $15-an-hour minimum wage after the tax plan’s passage. But experts are more doubtful that there’s a connection. Many expect wages to rise when corporations have more money, but that is supposed to flow from new investments measured in years, not weeks.

Walmart also said Thursday it would expand its parental-leave policies for hourly workers and begin providing $5,000 in aid to workers adopting a child. (The company currently offers six to eight weeks of partially paid maternity leave for hourly workers and no paternity leave.)

But it wasn’t all good news. The retailer also said Thursday that it was closing 63 Sam’s Club stores, affecting thousands of workers. In a tweet, the company said the closures would help “better align” its physical locations with its strategy. (Ten locations will reopen as e-commerce fulfillment centers.)

Walmart said the pay increases apply to all its hourly workers in the United States, including those at its Sam’s Club stores.

The retail giant said the pay raises would take effect Feb. 17 and the bonuses paid sometime after this month. It also plans to give one-time cash bonuses to some part-time and full-time workers, ranging from $200, for workers who have been at Walmart for less than two years, to $1,000, for those who have been working there for 20 or more years.

“Today, we are building on investments we’ve been making in associates, in their wages and skills development,” McMillon said.

News of Walmart’s investment was cheered by supporters of the tax plan, which slashes the U.S. corporate tax rate from 35 percent to 21 percent and includes other features expected to lead to windfall profits for companies.

“We want to thank them,” Treasury Secretary Steven Mnuchin said of Walmart’s decision. “Walmart is the latest company to make such an announcement, directly [as a] result of the tax cuts.”

Walmart’s new $700 million plan pales in comparison with the retailer’s $2.7 billion, two-year plan in 2015 to boost worker pay and benefits, which resulted in across-the-board pay raises that landed all on one day in February 2016, billed as the largest single-day, private-sector pay hike ever.

That’s when Walmart said it would begin paying entry-level workers $10 an hour, after a training period.

Walmart said the new wage increases will add about $300 million in expenses to its budget for the next fiscal year. The one-time cash bonuses, meanwhile, will cost the company about $400 million, or about 0.08 percent of its annual revenue. For 2016, the company reported $485.87 billion in annual revenue on profits of $13.64 billion.

The tax changes will save Walmart $2 billion a year, according to estimates from Making Change at Walmart, a campaign run by the United Food and Commercial Workers International Union.

“The fact is that Walmart is not permanently investing the estimated $2 billion it will receive annually from Trump’s tax giveaway to its workers — it is keeping almost all of it,” said Randy Parraz, director of the Making Change at Walmart campaign. “This is nothing but another public relations stunt from Walmart to distract from the reality that they are laying off thousands of workers and the ones who remain will continue to receive low wages.”

Christine Owens, the National Employment Law Project’s executive director, described the new benefits as a “lowball announcement by Walmart.”

Eleven dollars an hour equals about $19,000 a year for 34-hour weeks, which Walmart considers full time. That’s below the national poverty line for a family of three.

Emeraid Gems earns $11 an hour now after seven years at Walmart. Gems, who lives in Gettysburg, Pennsylvania, said via email that more is needed from the retailer.

“The one-time bonus I’ll be getting won’t help me long-term,” Gems said. “We need $15 and full time to be able to support our families.”

The Washington Post’s Damian Paletta and Andrew Van Dam contributed to this report.

Categories: Business, News

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