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Walmart’s pay raise highlights how poor we’ve all become

At least they paid for a raise. Walmart

Walmart recently did something that will help its employees, which may very well benefit all lower- and middle-income workers in this country. The “something” is not the wage increase its lowest-paid workers will soon receive. Instead, the thing that Walmart did that should help lower-paid workers was to announce that it was doing anything at all.

Walmart has agreed to pay about 500,000 of its least-paid employees at least $9 an hour starting in April and at least $10 starting next February – a significant raise from the $7.25 federal minimum wage they currently earn. The retailer also said that it will change its policies to make it easier for employees to have a stable and more predictable work schedule.

While the moves may be laudable and should be replicated at other retailers, they mainly serve to remind us how desperate is the plight of America’s working class. Even if the wages of these Walmart employees reached the “lofty” $15 an hour sought by labor groups, they would still be a far cry from what is necessary to raise a family in this country and significantly less than the median household income.

Still, it’s a start.

A skeptical response

Walmart’s announcement was met with plenty of skepticism, with many assuming that the pay hike had more to do with politics or avoiding more labor action than concern for its employees. For example, critics argued that Walmart was attempting to stymie legislative proposals to raise the minimum wage. Or that it was trying to stifle employee and labor organizers’ demands that the company pay all workers at least $15 an hour.

Walmart has candidly admitted that it acted in part because of a profit motive. The company concluded that it needed to increase wages and provide more secure work schedules in order to attract employees and reduce its high turnover rate.

Whatever Walmart’s motives, the announcement is nonetheless seismic. Not because of the size of the pay raise or the reasons the company concluded it was time to give workers more predictable work schedules. Walmart’s recent announcement is significant because Walmart made the announcement.

When Walmart speaks, everyone listens

When the largest private employer in the country talks about anything – including the economic conditions of its lowest-paid workers – everybody listens. And, when Walmart speaks, the government, the media and other retail employers react, even though they might have largely ignored a similar announcement made by another business.

For example, while Walmart has long been criticized for refusing to give its employees predictable work schedules, other retailers follow similar policies.

Until last year, Starbucks’ barristas also had unpredictable schedules and often were required to “clopen” stores, that is, close the store one night then return the next morning to open it. Like Walmart, Starbucks announced that it would voluntarily end this unpopular practice.

No more clopenings for Starbucks barristas. Wikipedia via CC BY, CC BY

The Starbucks announcement was not as widely discussed or dissected as Walmart’s, and few companies reacted to it by declaring they were considering a change to their own clopening policies.

In contrast, in the days following the Walmart news, everyone in the media was talking about it, and business analysts assumed that other retailers would be forced to re-evaluate what they pay their workers and how they set their work schedules. The predictions so far have proved right; retailer TJMaxx just announced that it will match the Walmart raises.

Perhaps one reason Starbucks did not generate the stir that Walmart did is because the coffee chain is a media darling, while everyone loves to hate the world’s biggest retailer. It is more likely, though, that fewer businesses reacted to the Starbucks announcement because Starbucks just isn’t Walmart.

Credit where credit is due

One thing that has been discounted in the rush to scrutinize, criticize and demonize Walmart’s announcement is the unmistakable effect that the pay raise will have on a half-million American workers. The raise will help its lower-income workers spend more – and perhaps even save more.

These workers will soon earn well above the $7.25 federal minimum wage, though even the proposed 2016 hourly wage is less than the $10.10 federal minimum wage President Obama has recommended. Walmart has been criticized, perhaps fairly, for not raising its minimum hourly wage to the $15 “living wage” employee groups and labor organizers have urged.

Obviously, Walmart could have decided to pay its employees more and give its shareholders less and critics correctly note that Walmart’s mass raise isn’t enough to solve its workers financial problems. But, that’s mostly because the raise can’t fix the real reason so many lower- and middle-income workers are struggling: the ever increasing gap between what lower- and middle-income Americans earn relative to what the highest paid Americans make.

Working class need so much

Walmart’s lowest-paid workers will soon earn about $22,000 a year. That annual income is enough to qualify as middle-income for a one-person household, but is about $30,000 less than overall US median household income. Even if these employees earned a minimum of $15 an hour, they would take home just $31,000 a year – still roughly $20,000 less than the median.

Criticism of Walmart may be fair, but the bigger problem is that the employees and most lower- and middle-wage workers need so much. Walmart’s wage increase will help its lower-wage workers look a little more like middle-wage workers. But that’s only because so many middle-wage jobs have disappeared over the last 30 years and many of the middle income jobs lost during the recession were replaced by low-wage jobs.

Since the recession, the strongest employment growth has continued to be in the retail, service and food/beverage sector. And fortunately, wage increases in 2014 were largest for lower-skilled, part-time workers.

Unfortunately, the lowest-paid Walmart workers – like low-skilled, low-wage workers overall – were hit so hard by the recession that these recent increases are doing little to help their economic mobility.

Because lower- and middle-income workers had increasingly small shares of income growth, they are actually beginning to look a lot like each other. Neither group, though, looks much like the highest-paid workers, who earned a disproportionate share of overall income growth since 1980. And no one looks like the top 1%, who saw their income increase by approximately 35% after the recession while wages for everybody else mostly stagnated.

Walmart’s pay hike may just be a masterful public relations stunt. Even so, the announcement forced everybody to think about what lower-income workers need to survive and whether they can survive on the federal minimum wage, Walmart’s minimum wage, or even President Obama’s proposed minimum wage. And it forced at least one major retailer to follow suit and increase its employees’ minimum wage.

Walmart alone can’t solve the biggest problem lower- and middle-income workers in this country are facing. The retailer’s lowest-paid workers will continue to struggle alongside their peers elsewhere until the country commits to finding ways to help them move up the economic ladder.

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