The Politics of Poverty

Ideas and analysis from Oxfam America's policy experts

If Walmart is ready to raise their minimum wage, why isn’t Congress?

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Interior of Walmart department store in Mohegan Lake, NY. Photo: vvoe/Shutterstock.com

Yesterday, Walmart, the largest private employer in the US, delivered a clear message: it is time to give a raise to low-wage working Americans.

Walmart CEO Doug McMilon laid out a new pay and training program for its hourly associates: entry pay is going up to $9 an hour this year, $10 in 2016. Interestingly they made equally clear that increasing their minimum wage was not just altruism, but that raising wages was good for their business and the larger economy.

Which raises the question: if Walmart understands the benefits of raising the wage, why doesn’t Congress? It’s been eight years since Congress last raised the federal minimum wage; the current wage of $7.25 puts a full-time worker with a family squarely below the poverty line.

Walmart, which employs more US low wage workers than any other company, has faced increasing public scrutiny in recent years for its wage practices. During the holiday season we all heard about Walmart stores holding food drives not for homeless families or the unemployed–but for their own hungry and hurting employees.  Groups like Our Walmart have been leading a series of one day strikes to spotlight the hardships workers face.

Despite strong corporate profits (in 2014 the company returned $12.8B to shareholders) many of Walmart’s hourly associates earn at or near the minimum wage. The raise to $10 is a move in the right direction– though certainly more still needs to be done for employees to have a living wage.

Many other employers in the retail business have been paying well above the minimum for years: Costco starts its employees at $11.50 an hour – and returns strong profits every year. Walmart called its decision a business investment.  McMillon said, “Overall, these are strategic investments in our people to reignite the sense of ownership they have in our stores. As a result, we firmly believe that our customers will benefit from a better store experience, which can drive higher sales and returns for our shareholders over time.”

Many low-wage employers agree that increasing the minimum wage is essential for business and economic growth, and will not kill or even injure the job market:

  • In 2014, GAP announced it was raising its minimum wage for its 90,000 employees to $10, stating that its “decision to invest in frontline employees will directly support our business, and is one that we expect to deliver a return many times over.”
  • In 2014, Ikea announced plans to adopt a “living wage,” raising the average starting wage in its 38 US stores to at least $10.76 an hour. “We are of course investing in our co-workers. We believe they will invest in our customers, and they will invest in Ikea’s stores,” said IKEA CFO Rob Olsen.
  • In 2015 Aetna CEO Mark Bertolini raised its wage floor to $16 an hour, benefiting 5,800 employees, They cited concern about stagnant wages thwarting economic recovery. “As the American economy recovers, Aetna is leaning into that recovery and making these improvements so our colleagues who are vital to our success can benefit from it.”

With so many companies acting, could Congress follow the trend?

Congress has failed to pass an increase in the federal minimum wage since 2007. Nationwide, over 25 million Americans work hard every day for less than $11.50 an hour.  Despite overwhelming support by voters of all political stripes for an increase, Congress has yet to take action.

Many critics cite potential job loss as a reason not to move forward. However, survey after survey has found support for a federal minimum wage increase from a majority of business leaders and small business owners. These business owners see the benefits of a more productive, better paid workforce, and believe a higher minimum wage will help boost consumer spending and the wider economy. In fact, many of the nation’s top retailers cite falling wages and income as a major risk to their bottom line.

We should be encouraged by this news. Walmart helped shift the minimum wage debate once before;  in 2006, then-Walmart CEO Lee Scott’s support for increasing the wage helped to build momentum for bipartisan cooperation on Capitol Hill. That led to a 40% increase in the wage.

As businesses decide to increase their wages, they should consider joining other in the Business for Fair Minimum Wage coalition.

At the very least, Congress should take away an important lesson from these moves: increasing the minimum wage creates a win for everyone: workers, businesses, the economy, and the entire nation.

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  1. makerttula@comcast.net'Mary Ann Kerttula

    The problem with raising the minimum wage is that it leads to an increase in prices that defeats the purpose of an increase in wages. For some small businesses, the immediate effect of a mandatory increase in wages is a reduction in manpower because the business cannot stay solvent without doing so. I hate the reality of economics! If only the large employers who will only take a small hit in profits if wages go up, would do what WalMart is doing – recognize the benefit of raising wages and providing more training for their employees. Who would have thought WalMart would be out in front of the pack on this issue? In the name of all those who have suffered from WalMarts wage policies, I applaud the change.

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