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Walmart pay raise making waves

Walmart’s Doug McMillon, a home-grown CEO who got his start as a store employee, has made his most radical change yet at the world’s biggest retailer.

He’s raising wages for 500,000 employees – both full-time and part-time. They’ll get at least $9 an hour starting this April, and at least $10 an hour starting next February. Walmart also is responding to labor critics by telling employees they’ll have their schedules at least 2½ weeks in advance, and give some workers fixed shifts.

Walmart has long been viewed as the “Evil Empire” of retail, and that image has only deepened in the past several years. There have been reports of stores in disarray and crummy customer service. A fledgling employee union, Our Walmart, has held strikes and demonstrations, and kept up a drumbeat of sad tales of workers who fell victim to low pay, irregular hours and an uncaring bureaucracy.

This has all has taken a toll on the company’s numbers. Prior to a rebound the past two quarters, Walmart’s U.S. comparable sales were flat or down for six straight quarters.

“This is evidence of a tightening labor market,” said David Cooper, senior analyst with the Economic Policy Institute in Washington.

Walmart’s move comes as the nation’s jobless rate has dropped a full percentage point in the past year, to 5.7 percent in January, close to the level that Federal Reserve policymakers consider full employment.

Job openings increased to more than 5 million in December from less than 4 million at the beginning of 2014. More employment choices and fewer people out of work means employers are under pressure to improve wages and benefits or face higher turnover as people look elsewhere for better jobs.

The move to raise wages could be a masterstroke by McMillon. Better-paid employees are better-performing employees, at least in theory. And a big, dramatic announcement like this works towards repairing Walmart’s public image.

“These changes will give our U.S. associates the opportunity to earn higher pay and advance in their careers,” McMillon said in the statement. “We’re pursuing a comprehensive approach that is sustainable over the long term.”

The pay of $9 an hour is $1.75 higher than the federal minimum wage. Walmart employs about 1.3 million workers in the U.S., where it has about 4,400 locations. The impact of the move will be less in New York, where the minimum wage is $8.75 per hour and is set to rise to $9 an hour at the end of this year.

Still, labor advocates likely won’t be satisfied. Our Walmart had called for the company to raise hourly pay to $15.

Walmart said that after the hike, the average full-time hourly wage will be $13 an hour, up from $12.85 an hour, while the average part-time hourly wage will be $10 an hour from $9.48.

While the retailer’s announcement Thursday generated considerable positive publicity, only about 6,000 of its workers make the federal minimum wage.

With the pay increase, Walmart is looking to reduce its workforce’s turnover, cut training costs and improve stores, while also fending off negative publicity about its wages, said Brian Yarbrough, an analyst at Edward Jones & Co. in St. Louis.

While he didn’t think the move likely wasn’t a response to pressure from the improving job market, it may ripple throughout the industry, including at rivals such as Target Corp.

“This forces all retailers to take a look at their pay levels, but definitely Target,” he said. “They have to be competitive.”

Christine L. Owens, executive, director of the National Employment Law Project, credited the persistence of workers and supporters for influencing the outcome.

“The announcement is clearly the result of years of organizing by Walmart employees,” she said. “Few could have envisioned a group of workers forcing Walmart, ruthlessly committed to cost-cutting, to unilaterally raise wages. But, standing together, Walmart employees have done just that, providing inspiration to worker movements everywhere.”

McMillon joined Walmart in the 1980s as a stockboy, rising through the ranks to become CEO in February 2014. He has shuffled management, increased investments in e-commerce, and emphasized Walmart’s small-format store strategy. McMillon, who took over as CEO a year ago, also has added more fresh produce to U.S. stores, an effort that’s proving popular with shoppers.

He explained the latest changes to employees in an open letter, striking a down-home, man-of-the-people tone:

“When I’m out in stores today, one thing I hear from associates at all levels is that you want to be freed up and empowered to serve your customers better. You also want to know that there’s opportunity here and that your hard work will be recognized and rewarded. Our business is pretty simple when we boil it all down; sometimes we make it too complicated.”