Walmart, the largest private employer in the United States, recently announced it is cutting starting wages for new hires working in its online grocery pickup and stocking shelves. The pay cut, approximately $1 per hour less than current wages, comes as the big-box retailer looks to remain competitive in a tight labor market.
The wage reduction will bring starting pay down to $11 per hour for many new hires around the country. Current employees already earning $11 per hour or more will not see a change in pay.
In a statement, Walmart said the wage cuts align “wages with the skills and experience” required for the positions. However, labor advocates argue the cuts will make it harder for Walmart to attract and retain workers, especially when unemployment rates remain low.
Impact on Walmart’s Workforce
Walmart employs nearly 1.6 million associates in its stores nationwide. Entry-level positions like cashiers and stockers make up a significant portion of its hourly workforce.
While the pay cuts will only impact wages for new hires in certain roles, it could negatively affect applicant pools going forward. With major retailers like Amazon and Target offering $15 per hour minimum wages, Walmart risks losing prospective candidates to these competitors.
Labor Shortages and Inflation
Walmart’s decision comes amid nationwide labor shortages across multiple industries. According to the Bureau of Labor Statistics, there were 10.7 million job openings in June 2022. Retail trade alone accounted for over 1 million vacant positions.
At the same time, inflation reached 9.1% in June, the largest 12-month increase since 1981. Higher prices on essentials like food and gas are putting a strain on household budgets.
Lower wages for new hires could make it challenging for Walmart to retain employees, especially those seeking adequate compensation to keep pace with the rising cost of living.
Investing in Walmart Workers
Along with lower starting wages, Walmart stated it is investing in new training programs and increasing the number of potential bonuses employees can earn.
Walmart remains steadfast that the wage changes will create “a more competitive total compensation package” to attract and retain talent. In 2021, the company increased wages for over 565,000 store employees to at least $13 per hour.
However, some labor critics argue Walmart should focus less on bonuses and more on permanent hourly wage increases, enabling employees to reliably meet basic needs.
Outlook for Walmart
As the nation’s largest private employer, Walmart’s compensation and benefits decisions have far-reaching impacts on the broader labor force. While the wage cuts for new hires will save on labor costs, it risks alienating both potential and current staff.
In today’s competitive hiring landscape, companies must find the right balance between controlling payroll spend and offering attractive wages. For Walmart, its success depends on recruiting and retaining hundreds of thousands of store associates across the US.
