Wal-Mart to Spend $1 Billion Raising Employee Pay to at Least $9 an Hour
Half a million Wal-Mart employees are about to get a raise.
The mega-chain announced on Thursday that it was raising its company-wide minimum wage for hourly associates, ensuring that employees earn at least $9 per hour -- $1.75 more than the current national minimum wage.
The change will affect approximately 500,000 full-time and part-time Wal-Mart and Sam's Club workers (about 40 percent of its total employees), who will receive raises in the first half of fiscal 2015 as the policy takes effect in April. By Feb. 1, 2016, current associates will earn at least $10 per hour, Wal-Mart reports, with new associates starting at $9 per hour and moving to $10 per hour after a six-month training program.
Wal-Mart says that this fiscal year it is investing more than $1 billion in these initiatives. Additionally, Wal-Mart and the Walmart Foundation are committing $100 million over five years to increase entry level workers' economic mobility, with a focus on the retail and service industries.
"These changes will give our U.S. associates the opportunity to earn higher pay and advance in their careers," Doug McMillon, CEO of Wal-Mart Stores, said in a statement. "We're pursuing a comprehensive approach that is sustainable over the long term."
The pay raise will be accompanied by a revamped scheduling program, intended to allow employees greater control over their schedules. Store management structure will also be realigned, in an attempt to encourage closer relationships between associates and supervisors.
Currently, Wal-Mart reports that the vast majority of its employees earn more than minimum wage, with average hourly wage at $11.82 for hourly workers, not including managers. However, research by the National Bureau of Economic Research indicates cashiers, typically Wal-Mart's lowest paid employees, currently make an average of approximately $8.48 per hour. Wal-Mart says that with the changes, average part-time hourly wage will be $10 by April and average full-time hourly wage will be $13.
"In recent years we’ve had tough economic environments, a rapidly growing company, and fundamental shifts in how customers are shopping," McMillon said in a letter to associates posted on Wal-Mart's blog. "We also made a few changes aimed at productivity and efficiency that undermined the feeling of ownership some of you have for your business. 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."
As one of the largest retail chains in the world, Wal-Mart has been a major focus of minimum wage protests, with activists demanding that companies raise employee wages and that the government increase legal minimum pay standards.
Wal-Mart's choice to issue a concrete plan of action to raise minimum wage to $9 echoes Gap's decision to increase minimum wage almost exactly a year ago on Feb. 20, 2014. As major players in the retail industry take action, the pressure will only heat up for restaurant chains to make similar changes – especially fast-food chains like McDonald's.
Kate Taylor is a reporter at Business Insider. She was previously a reporter at Entrepreneur. Get in touch with tips and feedback on Twitter at @Kate_H_Taylor.