Teachable Instant: Walmart Pay Hike

News

On February 19, 2015, Walmart, the nation’s largest private employer, announced that it was raising wages for 500,000 of its 1.4 million workers. The new base rate will be $9 per hour. The average wage for part-time workers (including for those who have worked there for years) will go up from $9.48 to $10 per hour. The average wage for full-time employees will go from $12.85 per hour to $13. Walmart defines "full-time" as 34 hours or more per week.

Question

Here's a math question: If you work 34 hours per week at Walmart at their new starting salary, how much will you make in a year?

a) $34,000
b) $30,600
c) $15,912
d) less than $10,000

Fact

You would earn $15,912. While this increase is good news for many Walmart employees, even this higher salary will not put you over the poverty line if you are supporting at least one other person. For a family of two, you would need to make $15,930; a family of three, $20,090; a family of four, $24,250.

Every year Walmart workers need over $6 billion in government aid (including food stamps, Medicaid and subsidized housing) to get by.

Possible reasons for the wage increase

Walmart's CEO Doug McMillon explained that "We want associates who are so excited about taking care of customers, thanking them for shopping with us, things like that, that’s got to show up in sales. Won’t happen immediately, but it will happen."

There may be other reasons why Walmart decided to raise their workers' pay, including:

Walmart employees have been waging a high-profile campaign to force the company to raise wages to a "livable wage." The mini-strikes, boycotts, demonstrations and community support have resulted in bad PR for the company.
Increased public discussion of the "wealth gap" has publicized the fact that the Walton family (which owns Walmart) owns more wealth than the bottom 48.8 million U.S. families combined (about 41% of Americans).
Many states and cities have already raised the minimum wage above $9/hour.
Much of the increased wages is expected to return to Walmart in sales from those same employees.

Questions for discussion

1. Does Congress need to raise the federal minimum wage if some businesses are already raising their own minimum pay?

2. Should "fairness" enter into a company's decision to set wages?

3. Should consumers take a corporation's labor policies into account when deciding where to shop, or simply choose the cheapest stores?

4. Is it the government's business how a business treats its employees?

Optional assignments

Write a short paragraph on the importance of Walmart's decision. Is it newsworthy?
Write a paragraph in response to this question: Do you take a company’s labor policies into account when you are deciding where to shop? Why or why not?
Create a household budget for a family of four living in your area. Estimate costs for such basics as housing, food, healthcare, transportation and clothing. See how your budget compares to the federal poverty level. Compare your budget to that created by the Economic Policy Institute