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Wal-Mart raises its U.S. minimum wage to $11 an hour in wake of tax law

In this June 5, 2017, file photo, a worker stacks merchandise outside a Walmart in Salem, N.H.

The Associated Press

Walmart Stores Inc will raise entry-level wages for U.S. hourly employees to $11 an hour in February as it benefits from last month's major overhaul of the U.S. tax code and competes for low wage workers in a tight labor market.

Walmart, the world's largest retailer and private employer, announced the hike on Thursday, saying it would also offer a one-time cash bonus, based on length of service, of up to $1,000, and expand maternity and parental leave benefits.

The pay increase, Walmart's third minimum wage increase since 2015, and bonus will benefit more than 1 million U.S. hourly workers, it said.

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The move, taking minimum pay up from the current $10 an hour after in-house training, is designed to help the retailer attract workers at a time when the U.S. unemployment rate is at 4.1 per cent, a 17-year low, making it harder to attract and retain minimum wage employees.

Walmart is likely to save billions of dollars from the new tax law, which slashed the corporate tax rate to 21 per cent from 35 per cent, and the wage hikes will cost the retailer only a fraction of those gains, analysts said.

"Given how low unemployment is, they would have had to hike wages anyway, the tax bill just made that move easier," said Edward Jones analyst Brian Yarborough.

Rival retailer Target Corp raised its minimum wage to $11 in September, and said it would raise its minimum wage to $15 by 2020.

Walmart's announcement follows companies like AT&T Inc , Wells Fargo & Co and Boeing Co, which have all promised more pay for workers since the Republican-controlled U.S. Congress passed the biggest overhaul to the U.S. tax code in 30 years.

Democrats have slammed the legislation, which also temporarily reduced tax rates for most individuals, as a giveaway to the wealthy that will widen the rich-poor income gap. President Donald Trump and his fellow Republicans have argued that the corporate tax cut will benefit workers and lead to more investment by U.S. companies.

Retailers, in general, have one of the highest average effective tax rates because a majority of their operations are in the United States.

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Walmart said the new tax law will create "some financial benefit for the company" and that is it is in the early process of assessing additional investments.

"We are in the early stages of assessing the opportunities tax reform creates for us," President and Chief Executive Officer Doug McMillon said in a statement. The tax law gives the retailer an opportunity to be more competitive globally and to accelerate investment plans for the United States, he said.

Walmart employs about 2.2 million people globally, with more than 1.5 million in the United States, and had total global revenue of nearly $500-billion last year. Ninety per cent of Americans live within 10 miles of Walmart's 4,700 U.S. stores, which sell everything from food and clothes to electronics and sports gear.

ONE-TIME BONUS

The increase in wages will cost approximately $300-million on top of wage hike plans that had been included in next fiscal year's plans, the company said.

Labor groups have said that past rises in wages at the retailer have led to a cut in work hours for employees as the company sought to offset the impact on profits. Walmart has denied that.

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Walmart raised its minimum wage to $9 an hour in 2015. In 2016, it said employees who finished an in-house training program would be eligible for $10 an hour. The retailer has spent about $2.7-billion to increase wages over the past few years.

The hike announced on Thursday will also increase the average hourly pay for full-time employees to $14.50 from a current $13.85. The payscale for hourly workers will be from $11 to $24.70 per hour, the company said.

The company is offering a one-time bonus to full and part-time employees based on their length of service, rising to $1000 for employees with 20 years of service. The one-time bonus will amount to $400-million in the current fiscal year and the company will take a one-time charge in the fourth-quarter of the current fiscal year to account for the charge.

Shares of the company were down 0.02 per cent at $99.65 in morning trade.

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