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Wal-Mart raises worker pay. Good PR, better business. (+video)

Wal-Mart announced big changes in its treatment of workers Thursday, including pay raises for 40 percent of employees and a $10 per hour company minimum wage by 2016. Wal-Mart has faced protests for better worker treatment for years, but it has plenty of economic incentive for the reforms as well. 

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    Walmart posted a strong profit and raised wages for its employees. The world's largest retailer topped earnings estimates in the key holiday quarter.
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For years now, Wal-Mart has been the prime target of a protest movement fighting for better treatment of America’s low-wage workers. Today, the world’s largest retailer responded, laying out a detailed plan for its biggest investment ever in its employees.

Wal-Mart, Inc. plans to spend over $1 billion to offer higher wages for workers and a more clearly defined path of promotion through the company and even higher pay. To start, the Bettonville, Ark.-based retailer will give a pay raise to about 500,000 staffers (or about 40 percent of its workforce) over the next six months.  Entry-level wages at Wal-Mart will increase to $9.00 an hour by April, the company says, increasing to $10 an hour by February 2016. Managers will get a pay raise to a $13 and then $15 hourly wage over the same timeline.

The federal minimum wage is currently $7.25 per hour. 

Recommended: 10 companies that pay higher than minimum wage

Additionally, Wal-Mart will invest heavily in a worker training program, giving employees more clear-cut options for promotions and further education. Specifically, new hires will start at a $9 per hour “training wage,” and receive a raise to $10 per hour after completing a six-month program. From there, workers can choose to pursue different paths, like continuing on as a supervisor or getting training for a specialized job, like working at a bakery or deli.

The company will also re-vamp its scheduling of workers, the unpredictability and inconsistency of which has come under heavy criticism from labor advocates and experts. Under the new system, more workers would be able to rely on fixed schedules by choosing to work the same hours each week.

"We are trying to create a meritocracy where you can start somewhere and end up just as high as your hard work and your capacity will enable you to go," Wal-Mart CEO Doug McMillon told the Associated Press Thursday.

As the largest private employer in the US, Wal-Mart has long been the focal point of calls for higher wages and fairer treatment of workers in low wage industries, chiefly retail and fast food. For the past three years, such workers, with the help of organizers and the financial backing of unions, have been staging store walkouts and protests across the country calling for a $15 an hour minimum wage and benefits like healthcare and predictable schedules.

The issue has become a political one as well, and it’s gained a lot of traction. President Obama supports a proposal to raise the federal minimum wage to $10.00 per hour. Ten states have meanwhile moved to raise their minimum wages to $10.10 or higher in 2014, including Connecticut, Maryland, Hawaii, Massachusetts and Vermont. Seattle voted in June to raise its city minimum wage to $15 an hour by 2018.

It’s unclear whether the protests compelled Wal-Mart to make its reforms, but the movement is claiming victory. “We are so proud that by standing together we won raises for workers, whose families desperately need better pay and regular hours from the company we make billions for,” Emily Wells, a Wal-Mart employee and a leader for the protest group OUR Wal-Mart, said in an e-mailed statement to the Monitor. “We know that this wouldn't have happen without our work to stand together with hundreds of thousands of supporters to change the country's largest employer…the company is addressing the very issues that we have been raising.”

Still, in addition to putting on a better public face, Wal-Mart has plenty of economic incentive for its reforms. The retailer has faced several consecutive quarters of falling profit growth; it cut its fourth-quarter profit outlook once again on Thursday, driving down its stock price. In addition to increased competition in the retail space from online vendors like Amazon, Wal-Mart has had operational problems stemming from heavy reduction of worker hours.

As the economy improves and jobs become more abundant, the company also faces stiffer competition to attract quality workers from rivals who are far ahead of Wal-Mart in improving worker conditions. Clothing retailer Gap raised its minimum wage to $10 an hour this year. Last year, furniture outlet IKEA introduced a pay system for employees at its US stores that based minimum pay rates on the cost of living in the city where they worked. Keeping up with those companies is essential for Wal-Mart to retain good talent and avoid costly turnover of workers.

"We want associates that care about the company and are highly engaged in our business and are leaning in," Mr. McMillon said in a call with reporters. "Those feelings generate a customer experience that drives growth."

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