Walmart wage hike too little, too late
March 2, 2015
Walmart recently announced it will raise the minimum wage of its lowest-level employees twice — first this spring to at least $9 an hour and then to $10 in 2016. This change is expected to challenge other businesses to consider wage hikes, yet it falls short of what is needed. Gov. Andrew Cuomo proposed on Jan. 18 to raise the New York City minimum wage to $11.50 an hour and the stage wage to $10.50, both of which go beyond Walmart’s planned changes. More significant actions are needed to improve wages and benefits for minimum-wage workers in order to combat increasing income inequality in America.
According to the U.S. Department of Labor, the minimum wage has been falling since 1938 when taking inflation into account, representing less purchasing power for those who work at this pay level. Yet the nation as a whole has been getting richer, with its real GDP per capita increasing steadily over time. This disparity signifies the increasing income gap between minimum wage earners and wealthier Americans. More wealth needs to be reach those with lower income to mitigate increasing income inequality in the United States.
Walmart has hardly contributed to closing this deepening income gap. The retail giant is known for its aggressive control of employee benefits and wages, which do not benefit the local economy. Mayor Bill de Blasio has expressed his discontent with Walmart’s cost management policies and feels the company has no place in the city. He has previously criticized Walmart for destroying good jobs and hurting small business, which ultimately forces the government to subsidize a low-paid workforce.
Stingy wages hurt not only the local economy, but also long-term business performance. In 2006, Harvard Business Review found that low wages and benefits lead to high turnover costs and low workforce productivity. The study found that Costco, which provides unusually generous wages and benefits compared to retailers of similar size, showed 16 percent turnover rate, while Walmart’s turnover was 44 percent a year. The City Council has allowed Costco to build several stores throughout New York City. The increase in such measures can offset the costs of generous wages and benefit the company in the long run.
It is undeniably true that Walmart’s recent decision to raise wages will improve the financial situation of its lowest-level workers. However, there should be more generous benefits from all employers. Despite opponents’ arguments that minimum wage hikes would hurt job growth because of higher labor costs for employers, academic studies have conclusively shown otherwise. More generous employee benefits and wages will benefit not only the local community, but also the business itself. Until Walmart takes more actions to improve the benefits of low-level employees, the City Council should continue to block its entrance to the New York City market.
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A version of this article appeared in the Monday, March 2 print edition. Email Kenny Kyunghoon Lee at [email protected]