At the height of the late ’90s tech boom, the economy was so hot that burger giant McDonald’s offered signing bonuses to get workers to take jobs.
The news from today’s economic recovery is that Walmart is pledging to raise wages for its lowest-paid workers to $9 an hour, $1.25 above the national minimum wage.
Does the retail behemoth’s move signal a tightenting labor market that could pull wages out of years of stagnation?
Economists and TV pundits are debating the impact of Walmart’s mid-February hourly pay increase announcement. The company plans a boost to $10 in 2016 for some 500,000 part-time and full-time employees at Walmart and sister company Sam’s Club).
Metro Atlanta and national retail economists say it’s too early to conclude whether workers are moving back into the driver’s seat.
The number of people working or actively looking for employment — known as the participation rate — is still lower than normal in this recovery compared to past economic upswings, they say, and that suggests companies may still feel there is a pool of workers on the lower-pay scale to be tapped.
“It’s still a wait-and-see scenario,” Mercer University economist Roger Tutterow said of the impact of Walmart’s wage hike. “There may still be some workers at the margins.”
Making ends meet
They also note that Walmart’s pay hike, while welcome, still translates to about $19,000 a year, leaving many of its employees still struggling to make ends meet.
Nor are they convinced that Walmart’s move is more than an attempt to stave off unions or to garner good publicity after being a whipping boy for supporters of a higher minimum wage, who argue that too many of the company’s employees receive government aid to make ends meet.
“By increasing wages today, the company also stands to benefit from positive press at a time when its core low-income customer is starting to feel more confident,” Joseph Agnese, equity analyst at S&P Capital IQ, said, reflecting on the impact falling gas prices have had on consumers across the board.
But it does suggest that a shift may be coming, the economists said.
The number of people leaving their jobs without another one already in place - the quit rate - is climbing close to pre-recession levels, suggesting Americans are more confident in finding a new job.
As the labor market tightens workers will be in the best position in years to seek higher salaries, which have been slow to increase as the economy has recovered.
Georgia’s unemployment rate fell to 6.4 percent in January, its lowest level since July 2008, the state department of labor said on Thursday. The drop follows a revised 6.6 percent unemployment rate in December and 7.3 in January 2014.
“The balance of power is more equal now than it has been anytime since the Great Recession,” said Jeff Humphries, an economist at the University of Georgia.
The Affordable Care Act has allowed some lower-income Americans to buy insurance through federal and state exchanges, giving them the option to take a job they may otherwise have passed on with a private employer that doesn’t provide health coverage.
Spending boost
Higher wages among the working poor is especially important because, unlike the middle class or the rich, lower-wage workers are more likely to immediately spend their extra cash and help boost the economy, said Chris Christopher, an economist with IHS Global Insight. The wealthy save pay increases while the middle class tends to pay down debt, he said.
Higher wages at the low end also have a bigger impact in places like metro Atlanta and Georgia, whose economies rely heavily on real estate construction and retail business, the economists said.
How influential Walmart’s move will be may unfold slowly.
Retailer TJ Maxx announced it too will raise wages for its lowest-paid workers shortly after Walmart unveiled its plans. But a variety of other companies, fielding questions about their intentions from news organizations and analysts — including Dollar Tree, Kohl’s and JCPenney — have no plans to raise pay or are studying the situation.
Others, such as Atlanta-based Home Depot, said wages are already above the federal minimum wage.
“We have prided ourselves on paying above the market as a company for a number of years. That’s our intent going forward. We continually look at the market on a market by market basis and make adjustments where appropriate” Home Depot CEO Craig Menear told analysts during a February earnings call.
RaceTrac, which surveys its workers annually on compensation, said the company’s 2014 query found that about 70 percent “often or almost always find the company compensates them fairly, provides special and unique benefits, supports their work-life balance and shows genuine appreciation for their contributions,” according to vice president of human resources Whitney Woodward.
Woodward said the company also compares its pay against convenience stores, quick-service restaurants and big-and-small-box retailers to keep wages competitive.
Emory University labor economist Tom Smith said research has shown higher wages boost morale, which can lead to improved customer service and profits despite the added cost.
“There is what is called the ‘efficiency wage,’ which says that you pay people at the productivity level you want to move them toward,” he said. “Success breeds success and if you show people that you care about them they will respond in kind.”
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