What Walmart Raises Mean for President Biden's $15 Minimum Wage Plan -- Update
February 18 2021 - 3:29PM
Dow Jones News
By Eric Morath
Walmart Inc.'s pledge to lift its average hourly pay above $15
comes in the middle of a Washington debate on whether to more than
double the federal minimum wage.
The big-box retailer's goal is politically significant because
it aligns with President Biden's proposal to raise the federal
minimum wage to $15 an hour from the $7.25 an hour that has been in
place for 11 years. It also comes from the nation's largest private
employer, with stores located in different labor markets across the
country.
But Walmart's announcement Thursday isn't an endorsement of Mr.
Biden's plan, which is part of a $1.9 trillion Covid-19 relief
proposal by Democrats in Congress expected to pass the House later
this month. The company supports a higher federal minimum wage, but
not $15 an hour. While it plans to raise pay for 425,000 hourly
workers from an average above $14 in January 2020, its minimum
starting wage would remain at $11 an hour.
Still, the company's move could play into both sides of the
federal minimum-wage debate.
Democrats who support Mr. Biden's wage plan can argue Walmart's
pay raises are proof employers can afford wage increases despite
the pandemic's economic disruptions, economists and analysts say.
Republicans who oppose doubling the federal pay floor will likely
see it as an example of effective free-market forces, arguing the
government doesn't need to intervene.
"We can rely heavily on the private sector to reward workers,"
said Douglas Holtz-Eakin, president of the American Action Forum
think tank and former economic adviser to President George W. Bush.
"A federal mandate of $15 an hour is dangerous in many parts of the
country with lower costs of living."
AFL-CIO Chief Economist William Spriggs, who served in the Obama
administration, said Walmart's pay increase shows businesses can
afford to lift wages on the heels of a pandemic.
"If we're going to have a strong recovery we're going to need
much stronger wage growth," he said. "This pandemic has shown us
that when you only pay people $8 or $9 an hour, they don't have the
financial wherewithal to be resilient in an unexpected
downturn."
The nonpartisan Congressional Budget Office said earlier this
month that raising the federal minimum wage to $15 an hour by 2025
would cost 1.4 million Americans their jobs. But it also could
deliver raises for up to 27 million workers and lift 900,000
Americans above the poverty threshold.
The minimum-wage increase faces multiple hurdles in the Senate,
where at least two centrist Democrats have said they oppose
including it in the aid package. Democrats can't afford to lose a
single vote among their own ranks as they prepare to advance the
package under reconciliation, a special process tied to the budget
which would allow them to pass it with just a simple majority,
rather than the 60 votes most bills need.
No Senate Republicans have publicly signaled support for a $15
minimum wage.
Whatever the outcome is in Congress, Walmart adds to evidence
that wages are moving higher in the private sector.
"Walmart is an extremely large employer. So if they're raising
wages, that's going to have a ripple effect up," said Diane Swonk,
chief economist at professional-services firm Grant Thornton LLP.
"The private sector is already embracing wage increases," she
added.
Amazon.com Inc., Target Corp. and Costco Wholesale Corp. have
minimum starting wages of at least $15 an hour.
The National Federation of Independent Business, a lobbyist for
small businesses, said last month the Democrats' proposal to
increase the minimum wage to $15 an hour would mostly occur at
businesses with less than 500 employees, resulting in 900,000 fewer
jobs at those firms. The NFIB said nearly 700,000 of those jobs
would be lost at businesses with fewer than 100 employees.
The Labor Department doesn't break out minimum-wage employers by
size. In 2019, 37.3% of minimum-wage earners worked in the
hospitality industry, including restaurants. Nearly 23% worked at
retailers. That likely includes many small retailers as larger
employers including Hobby Lobby, Gap Inc. and Home Depot Inc. start
workers above the federal minimum.
Walmart employs about 1.5 million hourly workers, or about 1% of
the U.S. workforce. Even at $15 an hour, the retailer would pay
below-average wages for rank-and-file workers in the retail
industry. Average hourly earnings for nonsupervisory retail workers
in the U.S. was $18.17 an hour in January, according to the Labor
Department.
Walmart, which also on Thursday said U.S. comparable sales rose
8.6% in the quarter ended Jan. 29 amid increased online demand,
said its planned pay structure helps provide entry-level jobs. "We
do want to be thoughtful about where the beginning of that ladder
is for employment and ensuring that you can get people into the
workforce," said Brett Biggs, Walmart chief financial officer, in a
Thursday interview.
--Kristina Peterson and Sarah Nassauer contributed to this
article.
Write to Eric Morath at eric.morath@wsj.com
(END) Dow Jones Newswires
February 18, 2021 15:14 ET (20:14 GMT)
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