Wal-Mart Stores Inc. said it would raise starting pay to $11 per hour for all its U.S. employees and hand out one-time bonuses as competition for low-wage workers intensifies and new tax legislation will add billions to the retailer's profits.
Wal-Mart is the largest private employer in the world with 2.2 million employees, including more than 1.5 million in the U.S. Its current starting salary in the U.S. is $10 an hour after workers take a training course. The new wage increase will take effect in February.
This is the third U.S.-wide minimum wage increase at the company since 2015 as it works to improve its 4,700 U.S. stores while investing heavily to compete with Amazon.com Inc. online.
The company said the salary change would add $300 million to its annual expenses and it expects to take a $400 million charge in the current quarter for the one-time bonus. The amount of the bonus will vary based on length of service, reaching up to $1,000 for an individual with 20 years of service.
The retailer, which had nearly $500 billion in global revenue last year, is expected to get billions in savings from the tax overhaul, which lowers the U.S. corporate rate to 21% from 35%. Retailers have had one of the highest average effective tax rates because much of their operations are U.S.-based. Also, their industry has done little manufacturing or research and development so don't benefit from deductions on those activities.
"We are early in the stages of assessing the opportunities tax reform creates for us to invest in our customers and associates and to further strengthen our business," said Wal-Mart Chief Executive Doug McMillon in a release.
Wal-Mart is considering investments in "lower prices for customers, better wages and training for associates and investments in the future of our company, including in technology," he said.
The wage increase comes at a time when competition for low-wage workers is rising among retailers, ecommerce warehouse and other industries that require a large, unskilled employee base. The monthly U.S. unemployment rate has held at a 17-year low since October. Retail trade workers in the U.S. earned an average hourly wage of $15.51 in December, an increase of about 11% versus five years ago, according to the Bureau of Labor Statics.
When Wal-Mart increased wages and added training through 2015 and 2016 the moves cost the retailer $2.7 billion, an expense that put pressure on the company's stock price.
This increase will cost less because Wal-Mart already has a "sizeable" group of stores paying employees at least $11 an hour and already had plans to increase wages in some stores during the coming fiscal year, which starts Feb. 1, said spokesman Kory Lundberg.
Still, the "vast majority" of store employees will see an increase with the change, Mr. Lundberg said.
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(END) Dow Jones Newswires
January 11, 2018 08:49 ET (13:49 GMT)