Walmart just announced that it is raising hourly pay for its workers. Part-time employees will start at $9/hour in April 2015, and the starting rate will increase to $10/hour in February 2016. Full-time hourly rates will rise from $12 to $13/hour. The goal is to pay at least $1.75 above the federal minimum wage of $7.25/hour.
The initiative will cost Walmart $1B in this fiscal year. The company has also stated that it plans to give employees more control over their schedules, but hasn't elaborated on an exact plan.
Are these signs that Walmart is responding to the changing wage and labor market? Or have they simply answered the call for higher wages that employees and union organizers have championed? Let's explore the issues.
The Union Organization Threat
In the United States, union membership is at an all-time low since 1936. Only 6.7% of total private sector employees belonged to a union in 2013. Unions generate revenue off of dues, and dues are declining.
Walmart has faced down efforts to organize workers for years. Unions, especially SEIU, have capitalized on the growing wage inequality in America. They created the Fight for 15, which is an effort to raise pay and unionize workers (primarily in the restaurant industry). This group was also very active at Walmart locations. By raising wages, Walmart proactively took the pay issue off the table for unions (at least in the short term).
The Unemployment Impact
Wages stagnated during the Great Recession and subsequent weak recovery. At last month's TDn2k Best Practices Conference, economist Joel Naroff explained that wage pressure on employers is like a dam. He predicts that the dam could break very quickly in 2015 as unemployment rates fall below 5%. As of January 2015, unemployment was at 5.7%. Some economists believe that we area already at full employment.
Check out this chart from the US Bureau of Labor Statistics. Does it bring back memories? Do you remember what it was like to recruit in 2004 – 2007? You were probably paying top dollar for talent and a sign-on bonus to boot. As the chart illustrates, we’re already back to 2004 unemployment rates.
The Minimum Wage Impact
In the November 2014 election cycle, voters in Arkansas, Nebraska, Alaska, and South Dakota approved ballot initiatives to raise their state minimum wages. These initiatives won by wide margins in these traditionally red states. According to a CBS News poll, 70% of respondents back the idea of raising the minimum wage, and support for this idea tends to cross party lines.
While the federal government is hopelessly gridlocked, there are grassroots campaigns across the country to raise minimum wages. Here's a map, courtesy of the US Department of Labor, that shows the current landscape.
Several states on the map just passed new minimum wage laws during the November 2014 election cycle. Many of these laws phase in a higher minimum wage over 2015 or through 2018. This doesn't account for Walmart's response to wage pressure. So what gives?
We may get a clue from the trucking industry. In 2014, several carriers increased their sign-on bonuses and driver wages went up by 7% – 13% at some major over-the-road transport companies. The reason for the pay increases? The US driver shortage and pent up wage pressure.
The War for Talent
It's estimated that 10,000 baby boomers retire every day in the US. That's a lot of talent leaving the workforce. Walmart, along with other retailers, and the restaurant, hospitality, call center, and other industries, are already feeling the shortage of qualified workers — just like the trucking industry.
So what's an employer to do? Consider taking a holistic approach and update your recruiting strategy.
Keep tabs on municipal and state initiatives to raise the minimum wage. As we’ve seen, these tend to pass quickly and easily. Don’t get caught off guard.
- Check local employment advertisements and see if anyone is advertising higher wages or sign on bonuses. This is a sure sign that the dam is breaking and that wages are increasing.
- Consider creating an account in PayScale or another similar compensation aggregator to see where your pay falls in the market. PayScale aggregates data from job seekers and then applies an algorithm to eliminate questionable data. Since it’s crowdsourced, PayScale data tends to be more current than annual compensation surveys.
- Check your industry associations for specialized wage data information. If you're in the restaurant industry you need to participate in the People Reports Consortium of human capital data intelligence.
Value Your Employees
If you start to experience a lot of turnover, start doing exit interviews, even if they are informal conversations. Simply ask the employee the reason he or she is leaving. You may discover that the issue isn’t wages, and instead that it’s about schedules or a management issue. Fix underlying management issues quickly to reduce the risk of future turnover.
Are there ways that you can reward employees without increasing their base pay? Consider spot bonuses and team contests. This will reward performance and also give millennials the sense of purpose and community that resonates with them.
Above all, listen to your employees. Walmart finally has, and their response will have a widespread impact on hourly hiring across the country.
Review Your Staffing Model
During the recession a lot of companies transitioned full-time hourly employees to part-time status to avoid layoffs. Part-time workers give companies flexibility. There are underlying issues, though, that perhaps Walmart has recognized:
- Many part-time workers really want full-time roles because they simply can't get enough hours working (sometimes several) part-time jobs to make ends meet.
- If wages increase, can you really afford part-time workers, or should you just hire full-time employees?
- Are you flexible with your part-time scheduling requests?
- Do you regularly promote part-time workers to full-time roles? This gives part-time employees a clear career path.
Update Your Recruiting Strategy
Walmart is clearly positioning itself in the job market. Their decision to raise wages will impact the talent pool that employers in the retail, restaurant, hospitality, and service industry are already fighting over. Are you ready to get in the game? Help yourself by:
- Implement an easy, mobile employment application process that takes less than 5 minutes for candidates to complete.
- Offer that system in multiple languages.
- Use high touch, local recruiting strategies
- Create a mobile-friendly career page. You probably already have one for customers. Now it's time to create the same branding and user experience for candidates.
- Get off paper. Your target candidates are probably working multiple jobs and don't have time to visit your location to fill out a paper application.
The war for talent has started, but you don't need to go into battle alone. HR Virtuoso has an army of experts available to help you update your recruiting strategy.
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