“Walmart workers” used to be a handy synonym for “low-paid.” But over the past few years, the company has steadily raised the wage it offers its lowest-paid employees, and it has now announced that base pay will go up again, to $11 an hour.
If you are one of the majority of people who do not work at Walmart, why should you care about this? Other than the possibility that this will slightly raise the outrageously low prices you pay for goods there?
Actually, there are a lot of reasons to care. The first is that this tells us interesting things about what’s going on in the labor market. While CEO Doug McMillon credited the new Republican tax bill with freeing up cash the company could use to pay its workers more, I (like other observers) tend to take these pronouncements with a huge grain of salt.
The Trump administration obviously enjoys hearing companies announce that they’re giving employees more money because of the tax cut, and large companies, which benefit immensely from a friendly relationship with Washington, are eager to give the administration what it wants. If you can manage to get credit for something you needed to do anyway, so much the better. (There is a lively dispute, for example, over whether unions or Republicans should get credit for many of the bonuses that have been rolled out to much fanfare.)
In this case, there’s good reason to think that Walmart needed to raise wages anyway: Labor markets are tight, and in a number of areas, the company is now contending with locally imposed minimum wages that are already forcing Walmart to raise wages to $11 an hour, or even higher. Establishing a higher floor across the company ensures parity between regions, and allows Walmart stores to compete for good workers in local markets.
What’s especially interesting is that we are seeing tight labor markets even though labor force participation (the percentage of the population that is either working, or looking for work), remains well below where it was in 2007. Normally, you would expect the people who have left the labor force to come back in as job prospects improved, functioning as Karl Marx’s “reserve army of the unemployed” to keep wage growth moderate. But labor-force participation in December 2017 was the same as it had been in 2016 and 2015 — yet employers complain of tight labor markets, and wage growth has been robust. The fact that Walmart, which employs a substantial fraction of Americans all by itself, sees good business sense in an hourly wage increase is good evidence that that labor-force-participation number is sticky.
We don’t know what it is those folks are doing with their time. Intuition suggests that this phenomenon is partly driven by the demographic bulge of the baby boom entering retirement, but that doesn’t seem to be all, or even most, of the story. What we do seem to be learning is that whatever those not-working folks are doing, it will take higher wages to coax them away from it and back into the workforce — or to persuade employers to give up and hire folks they’ve previously regarded as unemployable for one reason or another.