American retailers, like Walmart, are witnessing tough times in finding, hiring and then retaining good employees at the entry-level.
In such a scenario, they are now resorting to a sure shot tactic of increasing the minimum wages in order to woo the employees. At a time when the wage hike is increasingly benefiting millions of workers countrywide, it’s also making the market more competitive.
The market analysts believe Wal-Mart`s recent wage hike decision can have an ripple effect on several retailers as well as other industries across the country.
Last week, Walmart decided to raise the wages of its 500,000 staff to at least USD 9an hour, which is USD 1.75 above the federal minimum, with effect from April.
Walmart’s chief executive Doug McMillon, who was paid USD 26 million last year, said, “These are strategic investments in our people to reignite the sense of ownership they have in our stores. As a result, we firmly believe customers will benefit from a better store experience which can drive higher sales and returns for shareholders over time.”
According to the analysts, Walmart had witnessed a staff exodus in 2014 after Gap hike its minimum wage to USD 9, while promising to lift it further to USD 10 this year. But the company has now one of the highest levels of staff turnovers of American firms.
“With higher turnover come higher costs of hiring, training and lower productivity per person,” Burt Flickinger, managing director of Strategic Resources Group, said.
TJX, which owns budget chains TJ Maxx and Marshalls, promised to raise its minimum wage to USD 9 per hour in June this year and further to USD 10 in 2016.
“This pay initiative is an important part of our strategies to continue attracting and retaining the best talent to deliver a great shopping experience for our customers, remain competitive on wages in our American markets and stay focused on our value mission,” said TJX chief executive Carol Meyrowitz.
According to the analysts, other companies and industry players are facing severe pressure of attracting enough talents.
“It’s not just the retail sector. It could be fast food, restaurant workers. When it’s a big player like Walmart, the ripples go forward,” said David Schilling, senior programme director for human rights at Interfaith Center on Corporate Responsibility.
Another retail giant Target said even though the company has not raised its minimum wage but it continues to remain under severe pressure to pay competitively.
The federal minimum hourly wage of the United States is USD 7.25 since 2009. President Barack Obama had proposed Congress to introduce a USD 10.10-an-hour minimum wage, but the call remained unheard. However, a higher minimum wage is paid to the employees in 29 states and the District of Columbia.