Citing New Tax Law, Walmart To Raise Starting Wages, Expand Parental Leave

Citing New Tax Law, Walmart To Raise Starting Wages, Expand Parental Leave

Citing New Tax Law, Walmart To Raise Starting Wages, Expand Parental Leave

The changes will benefit their more than 1 million hourly employees as soon as February.

Hourly-paid employees will get the higher rate from next month.

"Tax reform gives us the opportunity to be more competitive globally and to accelerate plans for the U.S.", Walmart CEO Doug McMillon said. "It's our people who make the difference and we appreciate how they work hard to make every day easier for busy families".

"We think this is a prudent use of tax reform proceeds, as it reinforces the company's commitment to improving in-store service levels and will pressure other retailers to invest more heavily into wages and prices", Ben Bienvenu, an analyst at Stephens, said in a note.

The move follows last month's United States tax code overhaul that cut the corporate rate from 35% to a flat 21%.

Economists have argued that one-time bonuses, while significant for workers living paycheck-to-paycheck, are not as meaningful as permanent wage increases.

Wal-Mart's announcement follows companies like AT&T Inc, Wells Fargo & Co. and Boeing Co., which have all promised more pay for workers after the Republican-controlled US Congress passed a tax bill that slashed the corporate tax rate to 21 percent from 35 percent.

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"Wal-Mart would have had to go to at least $11 in many markets in order to retain reliable employees", said University of MI business professor Erik Gordon. But it's safe to say that, over 10 years, this corporate tax cut will be worth over $18 billion to Walmart. The one-time bonus represents an additional payment to associates of approximately $400 million in the current fiscal year, which ends January 31, 2018. Salaried associates will also receive six weeks of paid parental leave. As of December, the average pay for full-time workers was $13 an hour.

Parental leave has been another area in which retailers including Target and Ikea have been trying to offer better benefits.

The changes in parental leave put salaried and hourly workers on the same footing. Walmart on Thursday promised full-time hourly USA employees 10 weeks of paid maternity leave and six weeks of paid parental leave.

NPR reports that the "wage hike comes after several years of Walmart raising the floor on its hourly pay".

With this move, the world's largest private employer has scored big points with Republican politicians, who now have a talking point for the campaign trail, and maybe also from shoppers who see its wage increase as socially responsible.

Lately, much of the talk about Walmart's showdown with Amazon.com has centered on the old-school retailer building stronger e-commerce muscles. Walmart's online business is surging.

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