Wal-Mart raises its lowest wage to $11 an hour, crediting tax cuts and facing competition for workers

Wal-Mart Stores Inc. is raising its lowest U.S. wage to $11 an hour and will provide workers with a one-time cash bonus, saying the new tax law allowed the company to “accelerate” investment plans.

The nation’s largest retailer, with about 1.5 million U.S. employees and nearly $500 billion in global revenue, also said Thursday it would expand workers’ maternity and parental leave benefits.

The wage increase, from $10, takes effect next month and comes amid a tightening labor market, new state wage requirements and the tax law, which slashed corporate rates. All changes also apply to Wal-Mart’s Sam’s Club, Home Office, e-commerce and logistics subsidiaries.

Several large companies have announced one-time bonuses that they credited to the new corporate tax cuts.

Chief Executive Doug McMillon said Wal-Mart — which for years has been criticized for low pay — is in the early stages of assessing how it will use savings from the tax law.

“However, some guiding themes are clear and consistent with how we’ve been investing — lower prices for customers, better wages and training for associates and investments in the future of our company, including in technology,” he said in a statement. “Tax reform gives us the opportunity to be more competitive globally and to accelerate plans for the U.S.”

The bonuses will be based on seniority, ranging up to $1,000 for Wal-Mart employees with at least 20 years of service.

Full-time hourly workers will now be eligible for 10 weeks of maternity leave at 100% pay, an increase from six to eight weeks at 50% pay. Fathers and non-birthing mothers will also get six weeks of parental leave at 100% pay — something Wal-Mart previously did not offer full-time hourly workers.

The retailer also said it is offering adoption assistance for the first time, of $5,000 per child.

The announcement came on the same day Wal-Mart confirmed it will close 63 Sam’s Club stores nationwide, including four in California: in San Fernando, Stanton, City of Industry and Sacramento. Wal-Mart had 304 total retail units in the state as of September 2017.

Economists generally expect the tax law to provide at least a short-term boost to the economy, but also note there are larger economic forces at work behind the recent pay announcements.

Unemployment has been at 4.1% for three straight months, the lowest since the end of 2000. Wal-Mart faces competition from Target, which last fall raised its minimum wage to $11 and announced plans for it to rise to $15 by the end of 2020.

Dean Baker, co-director of the liberal-leaning Center for Economic and Policy Research, said wage gains have been relatively strong for lower-paid workers in the last two to three years.

Such workers tend to be hit harder by layoffs during a recession, meaning once companies start hiring there’s a surplus of low-skilled workers who have little bargaining power, Baker said. That has changed as unemployment has plummeted.

“You have Target and Wal-Mart bidding and actually competing for workers. It’s not something that happens when you have 8%, 9% unemployment,” he said.

Baker predicted that given Wal-Mart’s size other retailers will now face pressure to raise wages as well. “This is a really positive part of the picture,” he said.

Though overall wage growth as reported in the monthly job report has been muted, there are signs that’s changing, said Jed Kolko, chief economist with employment website Indeed.com.

“Already some data sources have shown wage acceleration in 2017, and as the labor market continues to tighten we will probably see more wage acceleration in 2018,” he said.

Eighteen states raised their minimum wage this year, though only three states and Washington, D.C., have minimums of at least $11, according to the National Conference of State Legislatures.

In California, the minimum wage for companies with more than 25 employees rose to $11 an hour from $10.50 on Jan. 1, as part of a state minimum-wage law approved in 2016. The minimum wage in California will reach $15 an hour by 2022.

Minimum-wage workers in certain Southern California cities — including Los Angeles, Santa Monica and Pasadena — already are being paid more than $11 an hour because of local wage ordinances.

If companies anticipate more mandated increases in the future, it may affect decisions, according to Kolko.

“Sometimes companies might choose to get ahead of it and take the initiative sooner, because they can create good P.R., goodwill or [they have] a general sense that it’s the right thing to do.”

andrew.khouri@latimes.com

Twitter: @khouriandrew

james.peltz@latimes.com

Twitter: @PeltzLATimes


UPDATES:

4:00 p.m.: This article was updated throughout with additional analysis and comment from economists.

This article was originally published at 9:55 a.m.

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