Walmart’s Minimum Wage Raise is Because of Labor Economics, Not The Tax Law | Sanuber on WordPress.com

Before the tax law was even passed, companies began announcing pay bumps for employees. AT&T and Comcast reported a $1,000 bonus to most of their U.S. workers, while Wells Fargo, PNC, BB&T, and Fifth Third Bancorp have also planned for a minimum wage hike to $15 an hour. Most notably, Walmart has said it would raise entry-level wages to $11 and give out a one-time bonus to all its U.S. employees. Chief Executive Doug McMillon credited the pay increase to the tax overhaul, which the Trump administration has touted as a success.

While the tax change has indeed given retail giants more free cash to work with, market forces have as much to do with these developments and should not be ignored. The monthly unemployment rate has held at a 17-year low since October. Walmart has been slowing increasing its base pay since it announced that it would spend $2.7 billion on wages and training in 2015, presumably to compete with other retailers in a tightening labor market.

The recent wage increase is putting pressure on companies that compete with Walmart for low-wage positions. Last year, Target set its minimum wage to $11 an hour and made plans to reach $15 an hour by 2020. Costco and Nordstrom have long offered more generous wages for their entry-level positions. According to the Bureau of Labor Statistics, retail workers now earn an average wage $15.51 per hour, a growth of 11% over five years.

Market forces are also impacting retail stores negatively. A few days after it announced its raise in minimum wage, Walmart also announced plans to layoff 10,000 personnel by closing 63 of 660 Sam’s Club stores located in the U.S.

Some of these stores will be repurposed as e-commerce fulfillment centers.

Originally published at sanuber.com on January 13, 2018.