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Walmart’s wage hike would be smart even without tax cuts

Raising wages is something you could argue Walmart needed to do even in a less-favorable tax environment.

A Walmart employee.

A Walmart employee. Photo Credit: AP / Julio Cortez

Wal-Mart Stores Inc. is using the windfall the GOP just gave Corporate America to score a public-relations coup, with a strategic move that would have been smart even without a tax cut.

The big-box giant said Thursday it will raise its minimum wage in February to $11 per hour and pledged to give one-time bonuses to eligible employees of between $200 and $1,000. Walmart expects its largesse will cost $700 million, but framed it as a way for employees to “share in tax savings” from the tax overhaul that was signed into law in December.

With this move, the world’s largest private employer has scored big points with Republican politicians, who now have a talking point for the campaign trail, and maybe also from shoppers who see its wage increase as socially responsible.

But raising wages is something you could argue Walmart needed to do even in a less-favorable tax environment.

For one, a key competitor, Target Corp., in October raised its minimum wage to $11 per hour, with plans to step it up to $15 by 2020. With the labor market tight, it’s crucial for Walmart to stay competitive on this measure.

Plus, Walmart knows from experience what raising wages can do to help boost business. It made a similarly splashy announcement back in 2015 about raising its minimum hourly pay amid improving economic conditions. That helped spur the long stretch of steady comparable sales growth it has enjoyed recently: When it invested in better pay and more training for workers, that translated into better-stocked shelves and friendlier customer service.

Other policy changes Walmart announced - particularly an expanded parental and maternity leave policy - could further help the retailer attract and retain better workers.

Lately, much of the talk about Walmart’s showdown with Amazon.com Inc. has centered on the old-school retailer building stronger e-commerce muscles. But stores remain a critically important pillar of its ability to thrive in the retailing world of the future. Paying workers more will help ensure those stores are pleasant shopping environments - a necessity for Walmart if it is to keep growing its sales.

Sarah Halzack is a Bloomberg Gadfly columnist covering the consumer and retail industries. She was previously a national retail reporter for the Washington Post.

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