By Amanda Yarger
Following Wal-Mart’s decision to raise its starting wage from $7.25 to $9, Baylor economist Dr. Charles North, associate professor of economics, said the company may have acted to improve customer perceptions of the company, in addition to benefitting associates.
Executives of Wal-Mart Stores Inc. announced last month the company’s plans to implement a $9 minimum wage and allow flexibility in scheduling to promote a higher quality of life for associates, according to Doug McMillon, the company’s president and CEO.
North said Wal-Mart’s wage increase can also improve the company’s reputation with customers.
“Economists assume when we model firm behavior they are profit maximizers — wages that does a pretty good job of assuming what firms will do. It’s not perfect, but it does a pretty good job,” North said. “My suspicion is, Wal-Mart is doing this because it will help their business.”
Wal-Mart has faced scrutiny over the past years from economists and labor activists who believed the wage rate was too minimal for the requirements of the job.
“It might actually help on the customer side,” North said. “If customers think ‘Oh, Wal-Mart is being nice to their workers, I’ll go shop there,’ it might actually be a little mild stimulant on demand.”
In McMillon’s letter, he addresses the necessity of investing more in their associates this year — a benefit Rockdale senior Patrick Mitchell said would be a welcome addition.
Mitchell has worked for Wal-Mart since he was 16, continuing his job into his freshman and sophomore years at Baylor. Beginning as an hourly associate, Mitchell has secured a management position at the company’s headquarters in Bentonville, Ark., post-graduation.
“I’ll be becoming a replenishment manager for them,” he said. “My job is to work with the suppliers and get the merchandise to the stores, all the stores in the U.S. — that’s over 4,000.”
After his sophomore year of college, Mitchell did not return to Wal-Mart as an associate to pursue a higher-paying job. Instead, he chose a job as a waiter and worked on his double major in distribution management and technology and management information systems.
“On my reports when I didn’t do something as great, they always found some reason to not give you that extra cent raise,” he said. “But I always got 50-cent raises every year… I was working an average of 25-30 hours a week at that point. Thinking about the schedule I had at school, plus that — it’s crazy, and I wasn’t making enough money.”
Prior to the start of his senior year, he accepted an internship with Wal-Mart.
“I did an internship with them over the summer for replenishment,” he said. “I pretty much just had fun.”
During his internship, Mitchell said the interns met weekly with upper management. During one session, a female associate expressed that her current pay was not enough to support her grandchildren to whom she was guardian, even with federal benefits like food stamps.
McMillon released the news of the wage increase in a letter to store associates with the promise of proving the company’s dedication to their employees.
“Our statistics show that about 75% of our U.S. management teams began in an hourly role,” McMillon wrote in the letter. “Every one of us is writing our own career story, and there are some powerful stories coming to life right before our eyes.”
In 2014, Americans for Tax Fairness reported Wal-Mart received, on average, $6.2 billion in mostly federal taxpayer subsidies because “Wal-Mart pays its employees so little that many of them rely on food stamps, health care and other taxpayer-funded programs.”
As the economy picks up after the recession of the early 2000s, stores like Wal-Mart that capitalize on cheap products may decline in sales.
“With the economy improving, Wal-Mart may not be as popular a place to shop for people who have more income,” North said. “If that’s the case, then maybe we get them back like the same way Costco does, ‘We treat our employees so well,’ and Wal-Mart might say, ‘Look, we’re treating our employees well, too.’”
In addition to the new $9 an hour minimum wage for employees, McMillon also shared that by 2016, the wage would increase again to $10 an hour. This figure has both impressed and surprised many critics who hope Wal-Mart may start a nationwide trend to increase the starting wage.
“I think it would increase productivity,” Mitchell said. “You get a raise to $9 working 30 to 40 hours per week? That’s a do-able job. It could improve company morale.”
McMillon said although only an estimated 6,000 associates were on minimum wage, most associates made more than that.
“Wal-Mart is so big. There are 2.2 million associates within the company, let alone within the store,” Mitchell said. “Hours are always a problem. Like, I always got my hours cut just because they always had new associates, or they had some kind of week where they didn’t have a projected sales amount where we couldn’t have so many people on the sales floor working — it’s complicated.”