WalMart Doubles Down On Wage Hike Debacle, Will Give Everyone A Raise Next Month

Tyler Durden's picture

WalMart’s attempt to pacify the living wage crowd by giving the company’s lowest paid employees a tiny, across-the-board raise has been nothing short of a disaster.

The fiasco started early last year when the world’s largest retailer decided to spend some $1 billion to appease those who claim the company’s hourly workers don’t make enough to live with some semblance of dignity.

To be sure, the veracity of that claim was never in question. Lowly shelf stockers, cashiers, and door greeters most assuredly do not make enough money to get by - especially considering the soaring cost of housing in America.

The question was whether WalMart was making a prudent decision by hiking wages. More specifically, it wasn’t clear whether the benefits the company’s hourly workers would receive from seeing a few extra pennies on their paychecks each month would offset the wave of knock-on effects the wage hike would invariably trigger.

Sure enough, WalMart almost immediately moved to squeeze more “savings” out of the supply chain by attempting to dictate how vendors spend their excess cash, charging storage fees, and demanding that any savings from the yuan deval be passed on directly to Bentonville.

When that proved insufficient to preserve margins, WalMart resorted to Economics 101: they fired some folks. First at the home office in Arkansas and then at 269 stores where more than 15,000 employees learned this month that they no longer have a job.

Oh, and the retailer unleashed one hell of a guidance cut in October, triggering the biggest decline in the company’s shares in 17 years.

Through it all, we suggested that things would likely get worse for the company because after all, you can’t very well hike wages for one group of employees and not everyone else lest you should inadvertently start a revolt among higher paid workers. That is, you have to preserve the wage hierarchy. For someone who has worked at the company for years, painstakingly climbing the corporate ladder and gradually moving up in pay grade, the across-the-board raise for subordinates will seem arbitrary. Why, the loyal employee might well ask, does the shelf stocker who started two months ago deserve a raise but I do not? Here’s what we said back in August:

Some senior Wal-Mart employees have suddenly realized that although they may still be making more than their subordinates, the wage hierarchy has been distorted and that distortion had nothing to do with merit. Higher paid employees don’t understand why everyone under them in the corporate structure suddenly makes more money and if people who are higher up on the corporate ladder don’t receive raises that keep the hierarchy proportional they may simply quit which means that, for Wal-Mart, raising the minimum for the lowest paid workers to just $9/hour will end up costing the company around $1.5 billion if you include the additional raises the company will have to give to higher paid employees in order to retain their 'talents' and avoid a mid-level management mutiny.”

Well sure enough, WalMart announced on Wednesday evening that all hourly workers will receive a 2% pay bump next month.

The cost: around $2.7 billion.

“When the retailer raised its minimum wage last April to $9 an hour, some long-term workers objected to being paid nearly the same as a new hires with less experience,” WSJ writes, “This time Wal-Mart wanted all employees to benefit at once and to clearly communicate the change.”

“Employees want to know they will still be ahead of those who come from an entry-level position,” Judith McKenna, Wal-Mart’s U.S. chief operating officer said.

“At least they are recognizing that the longtime workers who are already making more than $10 need something,” union-backed OUR Walmart’s Tyfani Faulkner added, before noting that she “doesn’t think 2% is enough for employees that often make so little to begin with.”

Precisely. These dribs and drabs may have some symbolic value and may bolster WalMart's image as a good corporate citizen, but let's not kid ourselves: a 2% raise isn't going to be a life changing event for the vast majority of the company's employees who are still going to struggle. 

Does that mean WalMart shouldn't raise wages?


But what it does mean is that the company should conduct a careful cost-benefit analysis before spending billions on wage hikes that not only make the retailer less competitive in a market that runs on the thinnest of margins, but in fact imperil the company's odds of surviving in a world dominated increasingly by E-commerce. 

Don't believe us? Just ask the 16,000 WalMart workers who were laid off last week.

*  *  *

Full press release from WalMart

BENTONVILLE, Ark., Jan. 20, 2016 – More than 1.2 million Walmart U.S. and Sam’s Club associates will receive a pay increase under the second phase of the company’s two-year, $2.7 billion investment in workers. The pay raise, which takes effect Feb. 20, will be one of the largest single-day, private-sector pay increases ever. As an industry leader for competitive pay and benefits, Walmart is also implementing new short-term disability and simplified paid time off (PTO) programs. The combined changes will expand support for associates dealing with extended health issues and provide associates greater control over their paid time away from work. 

“We are committed to investing in our associates and to continuing to simplify our business. When we do so, there is no limit to what our associates can accomplish,” said Judith McKenna, chief operating officer for Walmart U.S. “Our customers and associates are noticing a difference. We’re seeing strong increases in both customer experience and associate engagement scores. Five straight quarters of positive comps in our U.S. business is just one example of how helping our associates grow and succeed helps the company do the same.”

This associate investment was taken into account in the financial outlook discussed last October at the company’s annual analyst meeting. Today’s announcement addresses the details for associates. Specifics are provided below.

A job at Walmart means competitive pay for all associates. Every year, the company promotes 160,000 associates to jobs with higher pay and more responsibility and last year Walmart converted more than 150,000 associates from part-time to full-time. On Feb. 20, 2016, the company will implement one of the largest single-day, private-sector pay increases ever, benefiting more than 1.1 million hourly associates. The changes taking effect include:

  • All associates hired before Jan. 1, 2016 will earn at least $10/hour. 
  • New entry-level associates will continue to start at $9/hour and move to at least $10/hour after successfully completing the company’s new retail skills and training program known as Pathways.
  • Associates already earning more than $10/hour will receive an annual pay increase in February rather than waiting until their anniversary date.
  • Walmart is raising the starting rate of its non-entry level hourly pay bands. Anyone earning below the new minimum will automatically move up to the new minimum.
  • Associates at or above their pay band maximum will receive a one-time lump sum payment equal to 2 percent of their annual pay.
  • When these changes go into effect, Walmart’s average full-time hourly wage will be$13.38/hour. The average part-time hourly wage will be $10.58/hour.

Walmart and Sam’s Club are launching a new, simplified PTO policy, effective March 5, 2016 that will streamline paid vacation, sick time, personal time and holiday time into one category. And the one-day wait to use sick time will be eliminated, as promised. When the plan rolls out in March, both full- and part-time associates will earn PTO based on tenure and hours worked. The plan includes:

  • No waiting. PTO is available to use as soon as it’s earned and can be used for almost any reason.
  • Full-time hourly associates can carry over up to 80 hours (48 hours for part time) of PTO from year to year.
  • Any unused hours at the end of the year above the 80 hour and 48 hour limits willautomatically be paid to hourly associates in the first paycheck every February.
  • Associates will also keep any existing and accrued sick and personal time. These balances will be kept separate, to be used for certain circumstances once all available PTO is used. 

In addition to PTO, Walmart is providing a new, Short Term Disability Basic plan at no cost to full-time hourly associates. Effective Jan. 1, 2016, the plan offers more financial protection to workers who need to be away from work for an extended period of time due to their own medical needs such as an illness, injury or having a baby. The basic plan will pay 50 percent of a worker’s average weekly wage, up to $200, for up to 26 weeks. Walmart is also offering aShort Term Disability Enhanced plan, which costs less than the company’s prior voluntary plan and provides more coverage. Associates would receive up to 60 percent of their average weekly wage with no weekly maximum for up to 26 weeks.

Walmart’s associate investment is about more than wages and benefits: it is designed to provide associates the tools they need to grow with the company and provide great customer service. The company is also creating new training programs, which will create clear career paths from entry-level positions to jobs with more responsibility and higher pay.      

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jcaz's picture

"That price is just tooo fuckin' high!"  Ka-boom!

Looney's picture

Hey, WalMart!

Make everybody a CEO with the executive pay package.

Buy everybody a plane, a mansion, and a goat!

It’s only fair, ain’t it?  ;-)


nuubee's picture

Why not? They'll only have to close 1000 stores to afford that kind of pay, but it's worth it to say they pay everyone a CEO's salary!

undertow1141's picture

Nah not 1000 only 500 will be closing this summer.

Herd Redirection Committee's picture

Where's Joseb Bessarion Jugashvili/aka Stalin when you need him?

Hey, ladies of Canada, Stalin was a good-looking young leader too! How'd that work out?

"In October 1901, Jugashvili (son of Jew?) fled to Batumi and got work at an oil refinery owned by the Rothschilds. In 1902, a fire broke out at the refinery, and it is strongly suspected Jughashvili was involved.[11] The workers were entitled to a bonus for putting out the fire, but the manager suspected arson and refused to pay. In response, Jughashvili organized a series of strikes, which in turn led to arrests and street clashes with Cossacks. In one attempt to break their comrades out of prison, 13 strikers were killed when Cossacks intervened."

Fascinating stuff.  Also, the refinery workers all got 30% raises, but those involved in the strikes were then fired.  And in typical Stalin fashion, after the 30% raise, Stalin got the refinery workers to strike AGAIN.  Amazing how he wasn't executed, isn't it?  Almost like he was on someone's payroll?  Hmmm.....

Boris Alatovkrap's picture

Only thing need raise at Walmart is sagging chassis of patron scooter-cart.

î You MUST see this picture for great audible laugh!

azusgm's picture

Wal-Mart is closing 6 of their new neighborhood markets within 75 miles of here one week from today. Those stores have been open one year or less. The closures were announced one week ago. That translates into a two-week notice for the employees.

Did Wal-Mart hire Chainsaw Al as their consultant or something? The company is resorting to amputations rather than plastic surgery.

(uneasy feeling)

TheDanimal's picture

If you're not feeling uneasy, you're not paying attention.  The customers don't have the fucking money! It's all going to housing, ObongoCare, auto loans, and student loans.

azusgm's picture

Wait a second. A light is flickering on.

At least three of these six nearby Wal-Marts opened for business on January 7, 2015. They began hiring sometime in October 2014. An article in the local paper stated that Wal-Mart hoped to hire veterans. The info posted in today's press release says that their new associates will start at $9 then be eligible to move up to $10/h after completing their new 6-month Pathways training program.

Behold, the Department of Veterans Affairs "Special Employer Incentives Flyer". The lovely benifits for the employers, including 1/2 the employee's wages, are listed.

"Veterans approved to participate in the SEI program are hired by participating employers, and employment is expected to continue following successful completion of the program. VA facilitates the process by identifying suitable placements and coordinating between all parties."

Voila! Chances are that Wal-Mart gets to enjoy the slave labor workforce for at least six months and gets to ditch the employees without penalty because they continued employment for another 6 months then the stores closed. By building the neighborhood center stores instead of the big box ones, the company has almost new marketable size retail spaces to sell.

Our country has gone upside down. The low-wage people pile into jobs where they are on their feet on concrete floors their entire shifts while the people in the comfy corporate offices sit with their lattes and justify their bonuses by qualifying the company for government welfare.

swamp's picture

They have no skills. They cannot even count change. No responsibilities, AND. no one in the other sectors have had a raise for years and years. Same with SS THIS YEAR. NO RAISE.
Go to school and get a skill if you want a raise. The old fashioned way.

azusgm's picture

The main qualifications a fair portion of these employees have are clean pre-employment drug screenings.


silverer's picture

I thought they could shave some marketing expenses by just running that price drop commercial in reverse.

JLee2027's picture

Walmart should double all wages, lay off half the staff and tell the remainder to work twice as hard. Problem solved.

Temporalist's picture
Used Cars - high prices


When I first saw this I pissed myself.

Kreditanstalt's picture

Tough.   Wal-Mart is already expensive for food when compared to the discount supermarket next door...

Never One Roach's picture

I could deal with the prices there but the peeples! The parking lot needs 24/7 cops to patrol's too dangerous for me .... EVEN ... if I hold thugs at arms length, they're too stong for me.

DaveA's picture

You must mean Aldi -- no free bags (free wholesale boxes though), no baggers, and no cart collectors. You insert a quarter to unlock a shopping cart and get it back when the cart is returned. Most of the time the store has only two people on the clock: a stocker and a cashier. It sells everything a typical American would eat, quality is decent, and prices are very low. They sell a gallon of milk for $1.99 -- that's what I paid in 1995!!

OCCULTARE's picture

And how much are walmarts top execs paying themselves?

Just empirically, it seems dishonest to blame Grampa Greeter's big earnings boom but say nothing of whats happening with the owners and management.

PirateOfBaltimore's picture

Not having a greeter would not hurt my experience at Walmart.


Good luck not having leadership and management.


edit: I presume pay is based on scarcity of resources, experience, and responsibilities, rather than fairness.  There's nothing scarce about people who can wave at people walking through the front door.  There's nothing scarce about cashiers.  There's nothing scarce about shelf-stocking skills.  Nor should any of these be a career.

silverer's picture

To all the laid off Walmart employees:  Bernie Sanders will not be the end to your problems, but Hillary would surely be the beginning.

besnook's picture

game theory says the people will chose the problem they know rather than a a problem they don't know how it will turn out. known fears are better than unknown fears. that's why the trump/sanders race is the best, a choice between two unknown fears.

Dead Canary's picture

First, snow is bad for GDP. Then warm is bad for GDP. Maybe it's the Earths atmosphere in general they don't like.

buzzardsluck's picture

Seems like they are setting the stage for a direct govt. bailout at some point (as opposed to the govt EBT yo indirect daily bailout).

PirateOfBaltimore's picture

"EBT is a bailout for Walmart" is bullshit.


It's a bailout for unskilled individuals who think stocking shelves and greeting people is a career.  It's not.


The labor market is still largely dictated by supply and demand.  There is an abundance of qualified labor to do the tasks above.  THAT is why said jobs do not garner a premium in pay.  Anyone can do them.

besnook's picture

what you don't get is all this unskilled/semiskilled labor are the gm factory worker of 1970 when they were paid $15/hr for the same skills these people have.

back then the meme was, as gm goes so goes the nation. they were the largest employer of the time. everyone had money then. fast forward, walmart is the largest employer and the average wage is half of what a gm worker made back then in nominal terms. it was/is easy to see where the usa is headed.

Herd Redirection Committee's picture

It all goes back to Henry Ford and the Model T.  How much did Ford pay his Model T assembly line workers?  Enough so they could afford a GODDAMN MODEL T!

Because Ford knew, if a middle class factory worker, working hard, couldn't afford a car, no one would be able to (except the wealthy, but thats not exactly mass market appeal, is it).

Have you known anyone in your LIFE who has worked in a factory?  I know I haven't.

besnook's picture

i have two uncles on my wife's side, both retired now. one had a high school education and trained as a mechanical engineer by ge and the other was trained as a chemist by gm with an associates degree.

buzzardsluck's picture

Define factory job.  Henry Ford wasn't a bad guy btw.


EBT is a bailout for walmart      bought and paid for many years now so they could drive others out of business.


My unspoken point was exe walmart will claim they are failing due to labor costs and then demand the govt 'bail them out'.

WorkingClassMan's picture

Hey, that's okay!  They can simply import more HB1s at the top, and keep the borders open for the illegal aliens at the bottom.  These people are happy with low pay, no benefits, no protections and no freedom.  It's a marriage made in Heaven for the criminals running the goobermint and their masters in Big Business!


Yay for Tyson!  Yay for walmart!  Yay for Micro$oft and Fedbook! 

PirateOfBaltimore's picture

1970 was before automation and full blown fiat. Anyone who today does not better themselves beyond screwing nuts on bolts repetitively (I.e. stocking Walmart shelves) has no excuse. These sorts of jobs haven't paid shit in 30 years. Stop trying to make them careers.


Bring on the down votes, but welcome to the reality of labor markets. Anyone who assumes they can have the same profession with quality of life as their parents is a fool in most cases, particularly in low/unskilled labor. If there are no barriers to entry to a particular labor position and it at one time paid well, it will fall in price until it reaches equilibrium for the value it provides as more labor is supplied.

I thought ZHers understood economics? 


chubbar's picture

the gist of the article appears to indicate, at least to me, is that any employer offering a job must ensure that the pay offered allows for an undefined standard of living for the employee. In other words, the pay isn't dictated by the value the job getting done presents to the company, the pay is dictated by the needs of the employee. Do I have that about right?

It's really no wonder that employers are trying to get robots to do these jobs.

Note: I hold no animosity towards hourly workers. I'm not an employer either. These jobs used to be held by high school kids and retirees. I certainly don't have the answer for how to fix this so employees are paid what they consider fair and the store can survive.

WorkingClassMan's picture

How about sealing the borders, stopping the H1-B program, and no longer allowing scumpanies the ability to offshore jobs to slave nations?  How about punishing corporate types who encourage illegals being hired and who actively work to break down the standard of living of the working people?


Let's start there.

PirateOfBaltimore's picture

You could have just said "tarriffs on labor".

jcdenton's picture

There are already laws on the books ..

Walmart (owned by Bain Capital for the Romneys, Salinas, and the LDS) is the highest violator of illegal immigration. Apply these laws (and they will at some point) and Wally World will go bankrupt. Other complicit mega-chains will soon follow suit.

I remember back in the 90s, before and after the internet (WWW), before Best Buy and Frys. There were dozens of computer and electronic stores to choose from. There was competition.

We miss driving around town, in reasonable traffic, from one brick n mortar to another. Handling the merchandise ourselves. Having only ourselves to blame if we dropped it. If we had to return a lemon, then we could do it that same day or week.

Back then, we paid $500 for a 15" CRT (NEC Multisync). And that was a great deal! We all made at least $20 an hour. Gas at the pump was around $1.00. Rent and even mortgages were reasonable. We ate out more than we cooked for ourselves. (Especially us bachelors).

We didn't even have cell phones, and most did not have pagers. Still, life was good.

Today, most don't even have land-lines with answering machines. We pay $200 or less for a 24" LCD/LED. We are lucky if we can make $15 an hour or better. It wasn't too long ago, that we were paying $3 to $4 at the pump.

We didn't have Steam, but we were happy enough to go to the nearby Gamestop and buy the box in the store. We didn't mind downloading patches and updates. Food tasted better back then. A lot less GMO.

We can go back to those days ..

So our 32" 4K is going to cost $500. So what. A year later, after all the mal-investment is flushed out; that same 32" 4K is going to be half the price. And we are going to start making $20 per hour or better. And gas will be no more than $1.50. Rents and mortgages will be cut in half. Food is going to start tasting better, and better for us. Even that $500 graphics card a year ago, has now been cut in half. Our smartphones will even be smarter and more powerful. Most desktops will be replaced by these. Even laptops. You plug your smartphone into a docking station with full keyboard, mouse, gaming graphics addition, and storage. Into as big a screen you can afford. Probably will be our TV as well. All Made in America.

Yes, it can and will happen .. (Read Me First)

jcdenton's picture

Rest assured, it is going to be fixed ..

In ways most will not imagine it will be fixed .. (Read Me First)

All the answers and clues are provided. No conspiracy here. Nothing is hidden. You just have to dig a little ..

"In the age of information, ignorance is a choice." ~ unknown 


PirateOfBaltimore's picture

That seems to be what everyone here thinks, chubbar.


Except that's not how labor markets operate, and low/unskilled labor is particularly efficient due to there being no barrier to entry for supply (i.e. skills) leading to massive supply for a relatively static, and declining (due to automation), level of demand.


This should come as a surprise to no one.

swamp's picture

No skills. No responsibilities. No language. Nothing. No other sector gas had a raise in years

These unskilled jobs were never meant to pay for a middle class life.

newdoobie's picture

whoa there slick, I was waiting in line last week and the cashier was teaching a young EBT patron EXACTLY how to select and ring up her purchases to maximize her benefits. That right there is skills, most people need a degree in social work to understand that stuff.

Donald J. Trump's picture

Think of the cost savings if they would just lay off 1.2 million people and close all the stores.  Their avrrage salary would be in the millions and the stock would go through the roof.

bid the soldiers shoot's picture

And Walmart's revenue would fly up your nose like the cheap cocaine you use.

adr's picture

Walmart is over. The largest private employer in the USA will be gone in the next few years.

I predicted it years ago after selling product to them. I saw that the business of being Walmart was going to cost more than the amount of money they could possibly bring in. There is nowhere left for vendors to make cheaper products and no margin left to squeeze. Walmart was selling backpacks for $3.97 made in Cambodia. I've spoken to four factories and they have no idea how it could be possible to manufacture that product for that price and make any money. In fact they all said they would lose money even using the worst quality zippers and fabrics made on Earth.

One factory owner did have an idea how it could be done. He said that manufacturing the bags wasn't the goal. By employing workers the factory owner would get rights to the land he developed. The land is where the money is. You start building a few apartment skyscrapers and sell off the apartments to international investors and make millions.

Another market distortion made possible by Central Bank QE. All over China factory owners were getting land from the government for opening factories and employing Chinese citizens. They would build ghost cities because international conglomerates would buy every apartment in the block hoping to turn around and sell them to someone else for a profit. Nobody was ever meant to live in the buildings, just another stupid fool chasing fool con game.

As fucked up and you think things can get, it goes so much further.

Make_Mine_A_Double's picture

yes sir...and that ain't the half of it.

I was at a confab with the (x) largest retailer in the USSA last week. The cost compression is FUCKING RELENTLESS and these folks are much better organized than Wally.

I predict in 10 years time you will have no more than 5 retailers in North America that control 98% of the retail market. I am talking general merchandise from coffins to coffee.

Because of QE these guys have bulked up so much that the barriers to entry now are insurmountable.

So the same shit coast to coast supplied for min wage labor and vendors - enjoy 1984 sheepeoples.

besnook's picture

kinda funny that the end of crony capitalism results in step one of a communist system, no choice in the market.

Make_Mine_A_Double's picture


Oh fuck it don't get me started. I have a minor in socialist economics...


adr's picture

That is already happening. A group called BSN has been buying out every independent sporting goods store that is left in the USA. If you want to sell to a small store, you have to sell to BSN. If they choose a cheaper product and you can;t give them a better price, then you're out.

The Sports Authority is going bankrupt, City Sports is already gone, Hibbett's is on life support, leaving Dick's as the last one standing. But Dick's business is all smoke and mirrors. They carry almost no inventory and play more accounting games than Apple.

I have a more dire prediction though. Instead of five retailers controlling everything I think you will have zero retailers controlling nothing. There will simply be no profit to be made. The economy actually died in 1999. Only the expansion of debt has kept the terminal patient alive. The brain is gone but the body is still breathing thanks to QE.

I know of 100 or so people who stopped doing business over the past six years. Anyone over the age of 50 is just selling off and getting out. Hopefully having enough to ride out till the end. For those under 50, you're essentially fucked. There are a handful of companies like Shinola that are doing ok, but without the customers that are created through Wall Street gains, they are toast as well.

swamp's picture

That is because buyers want quantity over quality and are insatiable in their crap consumption.

White Mountains's picture


People are saying "Everything is made so crappy these days"!

Two products, one costs a dollar more than the other because it has higher quality parts and is made to a higher standard. 

These very same people will go straight for the cheapest price - quality be damned - and buy the cheaper one.  9 times out of ten.

Result: the factory that makes the better quality item goes out of business

Then, when the cheaper item breaks:  "Everything is made so crappy these days"!

Too F'in Funny.

Same with "livable wages".  Everyone wants a liveable wage but they won't buy products made by companies that pay a liveable wage.

rwe2late's picture

Same for food purchases.

 Some of the cause are the poor choices made by those consumers

who could afford to buy differently.

But the "system' works to squeeze both sellers and buyers.

Profits are made by selling cheap products for more than they are 'worth',

and made by workers paid least as possible.

Most everyone 'buys' into the self-destructive cycle.

Just look at many comments here lambasting pay raises as a poor 'business' decision which will cut into Walmart's profits!