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What will Wal-Mart’s wage hike mean for workers and the economy?

Wal-Mart made news this week by announcing that it is raising the wages for its employees above the federal minimum wage of $7.23 an hour to $9 an hour and to $10 an hour next February. To discuss the broader implications, Shelly Banjo, a reporter for Quartz, joins Hari Sreenivasan.

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  • HARI SREENIVASAN:

    Wal-Mart made news this week by announcing that it is raising the wages for its employees above the federal minimum of $7.25 an hour. Starting pay at the company, the world’s largest private employer, is going up to $9 an hour, and $10 an hour by next February.

    To discuss the broader implications, we are joined now by Shelly Banjo. She has reported the story for Quartz, a business site published by the Atlantic Media Company.

    So, how significant is it? We’re talking about one in a hundred people employed in the United States are employed by Wal-Mart.

  • SHELLY BANJO, Quartz:

    Pretty significant.

    Wal-Mart — as you mentioned, Wal-Mart is the biggest private employer. And so what Wal-Mart does, other people tend to follow.

  • HARI SREENIVASAN:

    So, is that something that Target and other sort of competitors might do as well?

  • SHELLY BANJO:

    A lot of competitors are already paying more, something like Costco or some of the other retailers, but there are definitely competitors like Target, Best Buy, those kinds of companies, that are likely to follow suit, as they fight for workers.

  • HARI SREENIVASAN:

    So, why did Wal-Mart do this at this moment? One of the things you pointed out in your story is that now 29 states around the country already have minimum wages above the federal base.

  • SHELLY BANJO:

    Right.

    And my argument was, what took them so long? Because, basically they had to — they had to do this anyway. The time was coming. As you mentioned, 29 states already had higher state wages than the federal minimum. And there’s a lot of political pressure from workers, from the government, from the states themselves and the economy.

    Wages are raising, especially for unemployed workers, not as fast as other parts of the economy, but jobs are getting — the unemployment rate has been going down and jobs are getting more competitive.

  • HARI SREENIVASAN:

    You know, wage stagnation has been one of those things that economists have been struggling with, because basic economics says, if unemployment decreases, meaning there’s less people without jobs, so the demand for them increases, and they should be getting paid more or they should be able to command more, right?

    But that hasn’t happened in the past years. Why not?

  • SHELLY BANJO:

    I think that is what is confounding economists. They are seeing the unemployment rate going down. They are seeing competition going up.

    But if you talk to any businesses, they are saying, we are having a hard time finding good people. Yet, at the same time, they are keeping their wages low. So, maybe this is now an experiment, saying, maybe if we bring up the wages, maybe we will get better qualified workers.

  • HARI SREENIVASAN:

    Well, places like the Chamber of Commerce or other business groups are using this as an opportunity to say, you know what, this is an example of the market at work, that the government shouldn’t be creating a federal mandate to try to ask everybody to say $10.10 is the minimum. Look, Wal-Mart did this on their very own.

  • SHELLY BANJO:

    And I think that is the political gains that you get out of this, because all those business groups are the ones that were coming out against raising the minimum wage.

    The National Retail Federation was saying, no, we shouldn’t raise wages. And then the second Wal-Mart says, we’re going to raise wages, then all those business groups rallied around Wal-Mart and said, you know, good job with your decision.

    So, I guess, if Wal-Mart can head them off before it gets to $10.10 by offering $9 this year, then they set the — they set the conversation. They decide what they want for their business.

  • HARI SREENIVASAN:

    And how many people does this actually impact inside Wal-Mart? I mean, is — even if they get $9 this year or $10, are they — does this increase their ability to spend money, comparatively speaking?

  • SHELLY BANJO:

    You have hit on an interesting point, because one of the biggest proponents, say — Wal-Mart employees employs 1.3 million, 1.4 million, depending if you include Sam’s Club in the — in the U.S. So you put extra dollars in their pockets, and a lot of those people are going to spend that money back at Wal-Mart.

  • HARI SREENIVASAN:

    All right, Shelly Banjo from Quartz, thanks so much.

  • SHELLY BANJO:

    Thank you.

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