Wal-Mart has recently annouced its decision to offer wage hike to the lowest paid workers which could cost the company $ 1 billion additional in employee costs. Wal-Mart's decision will impact over 500,000 workers in the United States as they will get $ 9 an hour minimum wage starting April 2015. Wal-Mart's decision will also push other retail gaints and big corporations to increase the minimum wages for employees.
Wal-Mart was suffering from the worst employee turnover among the bigger US companies. Wal-Mart employees have been asking for a wage hike for quite some time as they find it difficult to meet at the ends at the current salary level. Wal-Mart's hike will be $ 1.75 more than the federal minimum, at $ 9 an hour.
Before Wal-Mart, Gap announced a wage hike for the employees to $ 9. Gap also promised another wage hike to $ 10 an hour in 2016. The biggest private company in the world has been suffering from employee turnovers and it leads to additional costs on training and induction of the new employees.
Annoucing the wage hike, Wal-Mart's chief executive Doug McMillon said, "These are strategic investments in our people to reignite the sense of ownership they have in our stores. As a result, we firmly believe customers will benefit from a better store experience which can drive higher sales and returns for shareholders over time." McMillion was paid $ 26m last year by the retail giant.
Wal-Mart's step could bring in more revenue in terms of higher same store sales as it will be better store experience for consumers. Wal-Mart is aiming at increaing productivity and reduce the cost of acquiring new talent.
Another major retailer Target, which runs more than 1,800 stores across United States, has not announced any wage hikes. However, the company said that it is under pressure to increase the wages for the lowest paid workers. Target chief financial officer John Mulligan said, "We feel confident that we'll be paying the teams appropriately." Budget chains Marshalls and TJ Maxx and also announced to increase the minimum wages to $ 9 an hour.
President Barack Obama has also urged the congress to increase the minimum wages to $ 10.1 an hour. The minimum hourly wages have stayed at $ 7.29 since 2009. With the improvement in the labor market, industry analysts are expecting higher wage annoucements from other companies as well. Wal-Mart has taken the first major step towards a higher wage for American employees. It will have a ripple effect on other companies over time.
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