Wal-Mart Increases Hourly Wages & Leaves

Wal-Mart has been adopting various strategies and taking enormous efforts to restore its reputation and adapt to the online era. The store chain even removed the term ‘Store’ from its store names. In 2015, it increased labor wages to $9 for an hour and raised hourly wages to $10 for those completing 90 days of training period. Though the move met with a backlash from long-term employees, it helped the firm to sustain in the competition in which rival stores offered more wages. Recently, it raised hourly wages to $11 for new employees and announced bonuses for long term employees. The world’s largest retailer took this step after three years to stay competitive in the fiercely competitive market in the wake of online era.

Along with staying strong in the competition, the U.S. retailer attempts to restore trust and improve image after its reputation tarnished over demeaning treatment to employees. Moreover, it tries to come toe-to-toe with its rival Target Corp. in terms of wages to employees. Capitalizing on the U.S. tax overhaul, Wal-Mart geared up to spend extra $300 million on wages and $400 million in bonuses. The firm also expanded maternity and paternity leave period and decided to offer benefits for adoption.

Though it raised hourly wages, which will be effective from next month, Wal-Mart shifted its focus on cost cutting. It also took decision to close more than 60 Sam’s Club stores, according to Business Insider. Hours after announcing hourly wage rise, it decided to shut down stores following a portfolio review. According to Bloomberg, the retailer planned to remove nearly 3,500 store co-managers and add 1,700 assistant store managers, which is a lower-paying job that involves responsibilities of overseeing online orders. These steps have been taken to make Wal-Mart more efficient and sustain in the competitive scenario.

“Retail is changing rapidly, and we are transforming to meet the needs of our customers,” said a Wal-Mart spokesman, in an emailed statement to Bloomberg.

The Wal-Mart’s recent steps have been appreciated as well as ridiculed by industry experts. However, some of them opine that people need to focus on good news for now. There has been varying opinion on the timing of the decision.

“The timing is ridiculous,” told branding analyst Dean Crutchfield of Dean Crutchfield Associates in an interview with CNBC. He sees no strategy in this decision and opined that the move is mean for a cover up and nothing else.

On the other hand, Treasury Secretary Steven Mnuchin appreciated the decision to increase hourly wage. He also expected that nearly 90 percent of workers would experience a raise in wages following the tax reforms. Different companies react to tax reforms in different ways. Some of them invest in businesses, while, some of them give back to workers.

Wal-Mart said the decision is concerned about the people, not the media or publicity it would create. In the wake of competitive labor market and state-level rise in wages, the world’s largest retailer needed to necessary steps. Though investors do not have any strong reaction to the decision of pay hike, it seems the recent tax cut by government helped Wal-Mart invest the savings into employee wages. Tax reform has given the firm an opportunity to take strong decisions on its future.

Wal-Mart spokesman highlighted, “To help compete and win in this environment, we must make changes across our company to enable further investments in our strategic business priorities and growth.”