Wal-Mart hiking minimum pay to $10 an hour: harbinger of better year for wages?

The largest private employer in the US announced Thursday it was raising the pay of 500,000 workers. Wal-Mart's move also raises a broader question: Is momentum building for 2015 to be a better year for US wage growth?

Jonathan Alcorn/Reuters/File
Adriana Henriquez empties a shopping cart at a checkout area at Wal-Mart as the store prepares for Black Friday in Los Angeles in November. Wal-Mart Stores Inc. said Thursday it would raise entry-level wages to $9 an hour, a 24 percent increase from the federal minimum wage that some employees now earn.

Slow wage growth has been a feature of the US economy since the recession that began in 2007 – and actually it’s been a feature of the economy since long before that.

So it’s a big deal when the nation’s largest private employer, Wal-Mart, announces that it plans to pay its associates at least $9 an hour starting in April, and $10 an hour starting next February. Some 500,000 workers will get a raise, the company said Thursday.

Those still aren’t high wages, but this will move the pay of a Wal-Mart associate at least $1.75 above the federal minimum wage of $7.25 per hour.

And the news raises a broader question: Is momentum building for 2015 to be a better year for US wage growth?

Many economists think it will be, while cautioning that the gains may be modest. The Wal-Mart pay boost may be one early confirmation of a pickup.

“We expect only a moderate, rather than rapid, increase in the pace of wage gains,” concluded a report last month by economists at the investment firm Goldman Sachs. “The rate at which the wage trend can improve has historically tended to have a ‘speed limit.’ ”

Still, the moderate wage increases could be on the order of 2.75 to 3 percent on average, the report said. Subtract out modest inflation (currently running at about a 1 percent annualized rate thanks to falling energy prices), and that’s a meaningful increase.

Could pay gains prove stronger still? Perhaps, but economists generally say the job market won’t get back to “full employment,” the kind of climate where wage pressures would get stronger, until after another year or more of solid job growth.

Workers enjoy strong demand in some occupations, but overall, the economy has lots of people who are working part-time and would rather be full time. Some 2.8 million people have been unemployed for more than 6 months and are still looking. Large numbers have also dropped out of the work force, and may be lured back in as the job market strengthens.

As big as Wal-Mart is, it isn’t a stand-in for whole economy. It's in the special category of employers, such as fast-food franchises, who have been under intense pressure from labor unions and other critics for years for relatively low worker pay.

Yet the move also carries symbolism beyond this one high-profile firm. It may be no mere coincidence that its wage hike comes now rather than, say, a year ago. As the labor market tightens, the firm may be feeling the need to attract and retain good workers.

Moves by other retailers, such as the Gap, to raise pay, and by many states to raise their minimum wages above the federal level, may also have added pressure.

Wal-Mart framed its announcement as part of broader realignment of its work force strategy.

 “We're pursuing a comprehensive approach that is sustainable over the long term,” including new paths for career advancement and more flexible schedules, said CEO Doug McMillon in making the announcement.

The pay changes will add $1 billion in costs for the company this year.

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