Introduction

Walmart, the largest private employer in the United States, has recently made headlines for reducing its starting pay for new hires in specific roles. This move has sparked discussions among economists, industry leaders, and compensation professionals about whether this is an isolated incident or a sign of broader changes in the labor market. This article explores Walmart’s decision and its potential implications, drawing insights from reputable sources such as SHRM, WorldatWork, and CNBC.

The Decision to Lower Starting Pay

According to the Wall Street Journal, Walmart has reduced the starting pay for new hires who prepare online orders for curbside pickup or delivery to customers’ homes and workers who restock store shelves. This change began in July, with new employees making about $1 an hour less than those who joined the company a few months earlier. Walmart’s minimum hourly wage of $14 remains intact, as reported by WorldatWork.

Economic Context of Walmart Starting Pay

WorldatWork’s “2023-24 Salary Budget Survey” found that employers are projecting salary increase budgets to average 4.1% in 2024. However, the broader U.S. job market is cooling, with the national unemployment rate rising to 3.8% in August, up from 3.5% in July. This context suggests that Walmart’s decision may be influenced by shifting economic winds rather than being an isolated event, but as we explore how the Compensation function supports the business to recruit, retain, and engaging employees, we must also remember that Compensation must serve as a financial steward of the Company and its Shareholders.

Why Walmart Lowers Starting Pay Now?

Companies are constantly monitoring and evaluating pay and while the move to decrease wages may come as a surprise, we must remember that pay is a function of supply and demand. As the supply of workers increases, demand may decrease. As such, it should come as no surprise to see wages react in line with demand, whether it be up or down.

And in fact, many jobs did go up. Although the starting pay for some was reduced, the company also adjusted pay bands upward for more experienced employees, leading to a wage raise for approximately 50,000 store employees, according to CNBC. This move allows employees to transition between different work groups without affecting their pay, facilitating better store staffing.

Given the size of Walmart, the volatility of the labor market, the proliferation of pay transparency, and the demand for fair pay – decreasing wages may provide the most cost-effective approach to satisfy all of these points.

Implications for Other Employers

The big question is whether Walmart’s decision will set a precedent for other employers, especially those in the retail sector. As SHRM points out, Walmart’s size and influence make it a closely watched company, and its actions could potentially impact wage strategies across various industries. That being said, large companies will continue to make data-driven decisions to ensure they can recruit, retain, and engage employees.

At CompTool, we found these recent headlines to be an exceptional opportunity to use Squirrel to evaluate how Walmart’s wage growth compares to the market.

Here’s what we found:

Stocker Starting Pay by Job Postings: Walmart vs US

Cashier Starting Pay by Job Postings: Walmart vs US

With the greater context allowed by analyzing data found in Squirrel, we can see that the starting rates of Walmart’s roles and those across the US are well aligned to competitive market rates. Walmart’s starting rates for both Cashiers and Stockers are greater than those we see across the US.

Conclusion

Although Walmart’s decision to cut starting pay for certain roles is a significant move that has caught the attention of industry experts and economists alike, it is important to consider the full context, and most Compensation Analysts may recognize this change as business as usual.

What is yet to be seen is whether this is an isolated incident or a harbinger of broader economic shifts remains to be seen, but it undoubtedly adds a new layer to the ongoing discussions about compensation strategies in a changing economic landscape that we must be prepared to speak about.