Economy First Look

Wal-Mart increases minimum wage to $11 an hour in wake of lower US tax bill

Following the lower United States tax bill, Wal-Mart will increase its starting salary to $11 an hour, expand family benefits, and offer a $1,000 cash bonus to eligible employees.

A worker stacks merchandise outside of a Walmart on June 5, 2017. In wake of the lower United States tax bill, Wal-Mart is boosting its starting salary for US workers offering a $1,000 cash bonus to eligible employees, and expanding its family benefits.
Alise Amendola/AP
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Caption
  • Nandita Bose
    Reuters

Wal-Mart Stores Inc. will raise entry-level wages for United States hourly employees to $11 an hour in February as it benefits from last month's major overhaul of the US tax code, the company said on Thursday.

Wal-Mart, the world's largest retailer and private employer, said it would also offer a one-time cash bonus, based on length of service, of up to $1,000, and expand maternity and parental leave benefits.

The pay increase, Wal-Mart's third minimum wage increase since 2015, and bonus will benefit more than 1 million US hourly workers, it said.

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.

President Trump and his fellow Republicans have argued that the corporate tax cut, part of the biggest overhaul to the US tax code in 30 years, will benefit workers and lead to more investment by US companies.

Wal-Mart is likely to save billions of dollars from the new tax bill. Retailers, in general, have one of the highest average effective tax rates because a majority of their operations are in the US.

It will also help the retailer attract workers at a time when the US unemployment rate is low – currently 4.1 percent – and so competition for low wage workers is rising.

Wal-Mart said the new tax law will create "some financial benefit for the company" and that is it is in the early process of assessing additional investments.

"We are in the early stages of assessing the opportunities tax reform creates for us," President and Chief Executive Officer Doug McMillon said in a statement. The tax law gives the retailer an opportunity to be more competitive globally and to accelerate investment plans for the US, he said.

Wal-Mart employs about 2.2 million people globally, with more than 1.5 million in the US and had total global revenue of nearly $500 billion last year.

The increase in wages will cost approximately $300 million on top of wage hike plans that had been included in next fiscal year's plans, the company said.

The hike will also increase the average hourly pay at Wal-Mart for full-time employees to $14.50 from a current $13.85. The payscale for hourly workers will be from $11 to $24.70 per hour, the company said.

The company raised its minimum wage to $9 an hour in 2015. In 2016, it said employees who finished an internal training program would be eligible for $10 an hour. The retailer has spent about $2.7 billion to increase wages over the past few years.

The company is offering a one-time bonus to full and part-time employees based on their length of service, rising to $1,000 for employees with 20 years of service. The one-time bonus will amount to $400 million in the current fiscal year and the company will take a one-time charge in the fourth-quarter of the current fiscal year to account for the charge.

Shares of the company were down 0.52 percent at $99.15 in early trade.

This story was reported by The Associated Press.

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