The world’s largest private employer is giving its American employees a raise. On Thursday, Walmart said it would invest more than $1 billion in boosting its employees’ wages over the next year, a move that analysts believe may be an attempt to reduce declining sales and change public perception of the struggling retailer.
Beginning in April, the base wage for all Walmart employees will be $9 per hour. Current employees will receive additional training and have their wages boosted to $10 per hour by next February. Walmart said in a statement that the change in policy would increase compensation for roughly 500,000 employees.
Some of those workers may have been about to receive a pay hike regardless. Twenty states raised their minimum wages on Jan. 1, 2015, affecting more than 1,400 Walmart locations across the country. Walmart said in December 2014 that it would adjust employee compensation to ensure that it was in compliance with the new wage laws.
OUR Walmart, the labor group behind the recent Black Friday protests against Walmart’s labor practices, was quick to claim credit for the wage-hike announcement.
"Big day for OUR Walmart!” the group said in a post on its official Facebook page. "Today Walmart responded to our call for higher pay and more consistent schedules."
In the same Facebook post, the group vowed to continue the fight to raise the base wage further to $15 per hour for full-time workers. The demand for a minimum wage of $15 per hour is a popular one among various low-wage worker campaigns, particularly in the fast food industry.
When asked if OUR Walmart’s activism was behind the announcement of a wage increase, Walmart spokesman Kory Lundberg said: “We listen to everybody, including our critics. But this really came about from listening to the associates who are working in the stores everyday."
Although Walmart is still profitable, the retailer has had a rough couple of years. After several quarters of disappointing sales growth, the company revised its projected sales growth for the fiscal year downward in October 2014 to between 2 percent and 3 percent, from between 3 percent and 5 percent.
Some stock analysts say that understaffing and poor customer service are partially to blame for the company’s woes. Wolfe Research recently downgraded the company’s stock, in part because its “relentless focus on costs does seem to have taken some toll on in-store conditions and stock levels.” Lake Research has suggested that negative public perception of the company’s labor practices has also hurt sales.
When asked whether the wage increase announcement was meant to address those problems, Lundberg said the company was focused on “how we recruit, build and maintain the best possible workforce."
“What we’re doing to serve our associates will help better serve our customers and create an even better shopping experience in our stores,” he said.
Zeynep Ton, a professor at MIT’s Sloan School of Management, has argued that paying higher wages can benefit companies because it reduces employee turnover and often boosts their productivity. Large, low-wage employers such as Walmart have been victims of their own success in driving down wages, she said.
“Keeping labor costs as low as possible contributes to operational and customer service problems,” Ton said in an email to Al Jazeera. “When the focus is on minimizing labor costs, the result often is employees who are not motivated or well-trained to do their job right and understaffed stores — too few people to get all the work done."
McDonald’s, another major corporation that has faced protests over its labor practices in recent years, has also struggled with declining sales and an increasingly negative public image. But instead of increasing wages across the board, that company has mostly focused on rejiggering its branding. Last month, the fast food colossus replaced its outgoing CEO with its former chief brand officer, Steve Easterbrook.