Walmart boosts starting pay, closing dozens of Sam’s Clubs
NEW YORK/January 11, 2018(AP)(STL.News) — Walmart confirmed Thursday that it is closing dozens of Sam’s Club warehouse stores across the country — a move that seems sure to cost jobs — on the same day it announced that it was boosting its starting salary for U.S. workers and handing out one-time bonuses to others.
The world’s largest private employer said it was closing 63 Sam’s Clubs over the next week, with some shut already. A company official who spoke on condition of anonymity because he was not authorized to discuss details of the decision publicly said about 10 are being repurposed into e-commerce distribution centers. He said it was too early to say how many people would lose their jobs since some will be placed at other Walmart locations or be rehired to the e-commerce sites.
On Twitter, Sam’s Club responded to people’s queries by saying, “After a thorough review of our existing portfolio, we’ve decided to close a series of clubs and better align our locations with our strategy.”
Walmart had earlier cited tax legislation that will save it money in announcing the higher hourly wages, one-time bonuses and expanded parental benefits that will affect more than a million hourly workers in the U.S.
Rising wages reflect a generally tight labor market. The conversion of stores to e-commerce sites also illustrates how companies are trying to leverage their store locations to better compete against Amazon as shopping moves online.
Online retailers typically pay warehouse employees who pack and ship orders more than store jobs pay. Job postings at an Amazon warehouse in Ohio, for example, offer a starting pay of $14.50 an hour.
“This is about the evolution of retail,” said Michael Mandel, chief economic strategist at the Progressive Policy Institute. “The rise of e-commerce is leading to higher wages.”
Large employers also have been under pressure to boost benefits for workers because unemployment rates are at historic lows, allowing job seekers to be pickier.
But low unemployment has meant that retailers have had trouble attracting and keeping talented workers, experts said. Walmart employees previously started at $9 an hour, with a bump up to $10 after completing a training program. Target had raised its minimum hourly wage to $11 in October, and said it would raise wages to $15 by the end of 2020.
“They raised the minimum wage because they have to,” Mark Zandi, chief economist at Moody’s Analytics, said. “The labor market is tight and getting tighter.”
Many small and independent retailers struggle to find workers even when they try to pay well and offer benefits.
Laurie Rose, owners of Olde Naples Chocolate usually has six workers during the winter months, the busy season in the resort city of Naples, Florida. But right now, she has just three. The store pays $12 an hour and offers a 401(k) account after a staffer has worked for a year, but Rose realizes that may not be enough for many potential workers. Rose would like to pay more, but she’d have to raise her prices and fears that would turn away customers.
While many department store chains such as Macy’s and Sears are struggling, retailers as a whole are still trying to hire. The retail industry is seeking to fill 711,000 open jobs, the highest on records dating back to 2001, according to government data. The longer those jobs go unfilled, the greater pressure on employers to offer higher wages.
Walmart, which reported annual revenue of nearly $486 billion in the previous fiscal year, said the wage increases will cost it an additional $300 million in the next fiscal year. The bonuses will cost it about $400 million in this fiscal year, which ends on Jan. 31.
“The wage increases will make a big difference to Walmart’s lowest-paid associates, but do not yet match Target’s commitment to raise pay to $15 an hour,” said the Organization United for Respect at Walmart.
It joins dozens of other companies including American Airlines, AT&T and Bank of America that have announced $1,000 worker payouts following the passage of the Republican tax plan that slashed the corporate tax rate from 35 percent to 21 percent. The companies say the bonuses they’ve announced are a way to share some of their bounty with their workers, though in some cases it’s a very small percentage of their gains, and are less valuable to employees than permanent pay raises.
“Tax reform gives us the opportunity to be more competitive globally and to accelerate plans for the U.S.,” Walmart CEO Doug McMillon said Thursday. President Donald Trump cheered the announcement with a tweet, saying, “Great news, as a result of our TAX CUTS & JOBS ACT!”
Walmart has invested $2.7 billion in higher wages and training for workers to lower turnover and make the shopping experience more appealing. It has done well and strengthened its hand in online retail as many other retailers have struggled.
The company said the wage increase benefits all hourly U.S. workers at its stores, including Sam’s Club. Hourly employees at its websites, distribution centers and its Bentonville, Arkansas, headquarters, will benefit from the wage increase. The one-time bonus between $200 and $1,000 will be given to Walmart employees who won’t receive a pay raise. The bonus is based on length of service, with workers with at least 20 years qualifying for $1,000. In all, Walmart employs 2.3 million people around the world, 1.5 million of which are in the U.S.
Parental leave has been another area in which retailers including Target and Ikea have been trying to offer better benefits. Walmart on Thursday promised full-time hourly U.S. employees 10 weeks of paid maternity leave and six weeks of paid parental leave. Before, full-time hourly workers received 50 percent of their pay for leave. Salaried employees, who already had 10 weeks paid maternity leave, will receive more paid parental leave.
Maternal and paternal benefits can keep younger workers at the company longer, said Craig Rowley, a senior client partner at Korn Ferry Hay Group, a human resources consulting firm.
For the first time, Walmart also promised to help with adoptions, offering full-time hourly and salaried workers $5,000 per child that can be used for expenses such as adoption agency fees, translation fees and legal or court costs.