When Walmart announced that it was giving all employees raises, bonuses—or both—thanks to the new tax cut, it didn’t take long for the political spinning to start around the news. For Republicans and supporters of President Donald Trump, it added up: This was the trickle-down effect that proponents of the law promised. Many conservative websites headlined Walmart’s explanation—“Walmart Sharing Tax Cut Savings Via Pay Boost, $1,000 Bonuses,” the Fox News story read; others went a step further, offering it as proof that the “Trump tax cut is working.” Some, though, were more skeptical. Tweeters were quick to jump on the fact that Walmart sibling Sam’s Club had also shuttered 63 stores that same day as evidence that these might not exactly be boom times for the retail giant. For these people, Walmart’s announcement was political spin from a famously stingy company eager to prove that only after Walmart got the tax law it wanted would it finally be able to give its employees a little more—and do Republicans a political favor in the process.
So which is it: a real bonus for the company or political gamesmanship? Walmart’s employees are getting real benefits; most directly, they can thank the GOP tax bill. But it’s also clear that Walmart is feeling very good about the economy overall, along with the other companies that gave their employees raises and bonuses in the wake of the tax law’s passage. As much as the immediate Walmart news might have been inspired by fresh cash the tax law is freeing up—at least $1 billion in Walmart’s case—the company’s moves are a sign that America’s largest retailer and largest employer thinks unemployment will remain low and economic growth steady—and that revival has been ramping up since well before the 2016 election.
The math of the raises, bonuses and benefits expansions certainly makes sense given Walmart’s tax cut explanation: raising starting pay nationwide, giving employees a year-end bonus, adding significant benefits for staff who are parents, or want to be. The new tax law, reducing Walmart’s rate to 21 percent, will save the company between $1 billion and $2 billion a year. (Walmart pays between $6 billion and $7 billion a year in taxes now.) Walmart put the costs of yesterday’s new pay and benefits at less than $1 billion companywide.
But there are reasons to be skeptical the decision stemmed only from the tax cut. In its official announcement, and in a letter to employees, Walmart CEO Doug McMillon said the corporate tax cuts passed by Congress and signed by Trump inspired Walmart “to accelerate a few pieces of our investment plan” in the United States, as if these moves might have been in the planning stages. Rolling out paid maternity leave across 4,752 stores is hardly something you can do in 20 days.
Walmart’s burst of generosity is clearly a competitive gambit—in a job market that’s getting tougher for employers, the company wants to keep its employees from moving elsewhere.
First, Walmart raised starting pay to $11 an hour for front-line employees. Today, 600,000 hourly Walmart employees—60 percent—work in states where the minimum wage is less than $8 an hour. That’s Walmart setting base pay almost 40 percet above the minimum in places like Texas, Pennsylvania, Virginia, North Carolina and Missouri. (Walmart raised its own base to $10 an hour in 2016.) Walmart also announced it was giving out $400 million in one-time bonuses to its hourly staff—a first in its 56-year history.
The company also rolled out three big new benefits—fully paid maternity leave of 10 weeks for full-time employees; fully paid parental leave for spouses of newborns, of six weeks; and up to $5,000 to employees who want to adopt a child. Those are “sticky” benefits—the kind that might keep you from leaving Walmart just to earn 50 cents or $1 an hour more, or might woo you to Walmart in the first place. Walmart might not have needed to worry about that in a weak economy with plenty of people looking for work, but they clearly understand they’ll have to fight for employees going forward—and that’s a sign of a strong economy that’s been long in the works. The changes were even greeted with enthusiasm Friday by a long-time group of self-organized Walmart employees called “Our Walmart.”
But, for a company that keeps such thin profit margins, that $1 billion in tax breaks is a lot, and it seems that the timing came together. Korey Lundberg, a spokesman for Walmart, pointed out that the company just finished open enrollment for its benefits programs at the end of 2017, and wouldn’t have imagined rolling out new benefits until the end of 2018. The new benefits will begin, Lundberg said, “as quickly as we can.”
And the point about the Sam’s Club closures undermining the cheerful tone of its news release doesn’t quite hold up, either. Closing 10 percent of the U.S. Sam’s Club stores the very same day and laying off 10,000 employees looks terrible, but doesn’t say anything about the company’s improved pay or its optimism about the U.S. economy. The Sam’s Club news was not actually announced; it started to leak out on Twitter and Facebook as store staff and customers showed up on Thursday morning at Sam’s Clubs that had closed, even though they had been open on Wednesday. The optics were terrible: Even as Walmart was celebrating its own generosity, it was firing10,000 employees. (They will all be allowed to apply for other Walmart jobs.) Only late in the day did the company confirm the nationwide wave of closings, and even then, in contrast to Walmart’s previous practice, it didn’t provide a list of stores and locations.
But the Sam’s Club closings have more to do with a changing strategy under CEO McMillon. The culture of Walmart under founder Sam Walton and until very recently had been to pick smart store locations and then make those stores work, however long it took. But McMillon has abandoned the idea that any particular Walmart …read more
Read more here: The Real Reason for Walmart’s Wage Hike