Wal-Mart has taken a position on the minimum wage by setting its own minimum wage. Wal-Mart says it will increase its minimum wage to at least $9.00 per hour by April and to at least $10.00 per hour by February of 2016. This will affect some 500,000 Wal-Mart associates. It is a big step for the 48-year old CEO, Doug McMillon, who states that he believes this move will help to improve customer service; McMillon earlier said he thought this had slipped across the Wal-Mart universe based on results and on his surprise store visits.
What is this likely to mean for all the rest of us employers? There may be some downward availability of temporary labor that could drive that cost up at least in the short term. We do not expect this action to materially impact the bulk of our client employers. Wal-Mart’s competitors will have to decide if they will follow the leader. Stockholders are already registering some concern over this move; it will be interesting to track the price of Wal-Mart shares over the next few months. Wal-Mart shares dropped 3.2% on the announcement.
In the world that WFA Staffing and its client employers occupy, the Wal-Mart move is probably more ‘water-cooler’ talk than anything else. Things are not likely to change much, if at all, except for the large box retailers…and it may not change much for them either.
For the customers that patronize Wal-Mart, there may be an improvement in customer service although that is difficult for anyone to accurately assess. The result will be shown over time as Wal-Mart posts sales numbers and profit numbers. The profitability of a large box retailer that raises its labor cost may lag as the company takes the hit that the increased expense will cause. Any sales increase will probably be more gradual and any profit increase will be slower yet.
It is difficult to see how Wal-Mart will be able to avoid raising prices through an increase in sales volume since that would likely only happen gradually. There is also the question of what the reaction of the major competitors of Wal-Mart will look like. If they choose not to follow suit, they might eke out a more apparent pricing advantage.
It might well be that Wal-Mart will find at least some of this extra money by driving even harder bargains with its suppliers. That is not an unusual approach for this company. The reality for many of those suppliers is simple; they are very dependent upon the volume they do with Wal-Mart, and consequently do not have much leverage over the retail giant. When Wal-Mart hollers “jump”, they do their best to clear the new hurdle…or they suffer the loss of business that might threaten their existence if they do not have substantial bank balances.
In the meantime, WFA Staffing will continue to work to earn your business by fulfilling your staffing needs with good people at competitive prices.
Alan Campbell, Account Manager