Was the Walmart Pay Raise Real Leadership?

Walmart made waves last week announcing pay increases for their workers. The Wall Street Journal cast this as a pure labor market move — prompted by an increasingly competitive environment for retail workers. Walmart, of course, promoted this as a double-bottom line move that reflects the needs of their workers as well as something they need to do to remain competitive.

So, which was it?.

This shift provides an interesting lens through which to explore what leadership really is, and what meets the test for different types of leadership.

What is effective business leadership when you run one of the largest employers of low wage workers in the world and serve primary segments that are low and moderate income?

What is moral leadership in this context?

Can the two intersect when groups of large shareholders might believe a wage hike to be a violation of managers being fiduciaries? (It’s notable that WMT’s share price took a hit right after this was announced).

I actually believe it was an authentic expression of both effective business leadership and moral leadership. Walmart has taken a beating from the left for years because of the way it treats workers — and rightly so. They have traditionally paid very poorly, and have had a business model with incredibly high attrition rates for workers — signalling that they have a view of their workforce as heavily commodified, perhaps at the expense of being as humane as needed.

To me, the pay increase is a signal of an authentic shift. I believe this for three primary reasons:

1. This move is not just about pay. Walmart is also starting to address scheduling issues, which are an incredible pain point for workers. This is a signal that worker well-being is being considered in a different way.

2. This is not Walmart’s first move to help low income workers. For years, Walmart has tried to innovate to use market based solutions to help low income Americans. Their proposals to form a bank were a lightning rod for criticism and died as a result of backlash from advocates who were unhappy with Walmart business practices. But they did something powerful in the financial services, nonetheless, working with Amex to develop and introduce the Bluebird prepaid card. This was a genuine game-changer in the prepaid industry that undercut the pricing of a bevy of exploitative products that were terrible for low income consumers.

3. Walmart is smart enough to know that this is the beginning of a series of changes that they will negotiate with workers and advocates. The announced changes for workers are a starting point for other benefits for workers — and this also signals an intention to change it’s orientation toward its workforce as a commodity.

Many will disagree with my assertion — and I acknowledge that it is reasonable to question the long term impacts of these changes. There is an argument to be made for this move as window dressing, and not constituting enough change, given the incredible pressure on low income workers.

But even if you dismiss Walmart’s move as slick, PR, there’s still a strong argument to be made for how the wage hike represents effective leadership.

My colleague here at Berkeley-Haas, Robert Strand, is a global expert on responsible business. Robert is the Executive Director of the Center for Responsible Business here at Haas, and when he and I talk about these issues, he often calls out the importance of asking questions as a critical form of leadership. He writes eloquently about this sort of inquiry in a piece you can read here.

Given their market power, Walmart’s pay raise represents one particularly loud, clear question put on the table for other businesses — if we’re making these changes, why aren’t you?

And companies are already responding. Less than a week after Walmart’s move T.J. Maxx also lifted wages for workers. Was T.J. Maxx trying to prevent their workers from fleeing to work at Walmart? Maybe. But they may have seen the opportunity to share in leading toward new standards for workers. In either case, they were spurred to act by leadership.