Why is Walmart cutting off

Retailer raises wages : Why Barack Obama praises Walmart

If the US president is commenting on an individual company's decisions, it has to be important. "Walmart is raising salaries - not only because it is right to do that - but also because it is good for business," Barack Obama said last.

The largest American employer pays more wages - a trend-setting signal for the world's largest economy? "Since 1979, the vast majority of Americans have seen their hourly wages stagnate or fall, although economic output has risen by 149 percent and productivity has increased by 64 in this period," says a new study by expert Elise Gould of the Washington think tank Economic Policy Institute.

Gradually increase to ten dollars

Walmart has so far been seen as a negative example of low pay. Starting in April, hourly wages for nearly 40 percent of the workforce in the United States will be raised to at least nine dollars. As of February 2016, employees in the US should receive at least ten dollars an hour. The legal minimum wage in the US is $ 7.25 an hour. For comparison: in this country it is 8.50 euros.

Why is America's largest retailer raising wages now? "This demonstrates our commitment to you, our partners," writes Walmart boss Doug McMillon in his letter to the employees. But Walmart, often criticized for its working conditions, only beats the statutory minimum wage in many branches.

Walmart - a burden on taxpayers

Image cultivation is also very welcome. Corporations like Walmart strain the tolerance of taxpayers: They often pay employees so little that they have to be subsidized by the public purse in order not to fall below the subsistence level. Nevertheless: The decision is more than a PR campaign and anticipation of increases in state minimum wages that have already been decided.

Walmart has hit a dead end with its low salaries. “The business model is broken,” comments the well-known financial blogger Barry Ritholtz. The management simply miscalculated. Walmart has to replace around 44 percent of its workforce every year. However, this is expensive: with 2.2 million employees, finding personnel costs a lot of time and money. In addition, the mini-wages depress motivation, which affects business.

Even McDonald's is more popular

Walmart's dilemma is well expressed in a few figures: the company has a poor rating of 2.8 stars on the Glassdoor.com career portal. Only 44 percent of users would recommend a friend to work there. At competitor Costco, it is 3.9 and 80 percent. McDonald's, for example, does better with a rating of 3.0 and 50 percent recommendations.

Against the backdrop of the improved economy - US unemployment is 5.7 percent, its lowest level in more than six years - Walmart may simply have seen the signs of the times. In January, hourly wages in America rose by 0.5 percent, as fast as they were last in November 2008.
Corporations like Walmart may simply need to rethink their thinking to compete for labor.

Consumption drives the US economy

Economists hope so. In contrast to the export-dependent German economy, more than two thirds of the US economy is driven by private consumption. Rising wages in the lower income bracket create a lot of purchasing power and are therefore one of the most effective means of stimulating demand. Therefore, there could be a strong growth spurt if other large retailers like Target, or the fast-food industry, which on average is even worse paying, followed Walmart's lead.

So it's understandable that President Obama should applaud. But there is no place for euphoria. Walmart plans to raise the average pay for part-time workers to ten and full-time workers to $ 13 an hour. The starting salary should rise to nine dollars. Due to the large number of jobs, this is very expensive for the group. Even so, the increase in salaries for most employees is rather modest. (dpa)

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