Sorry, Bernie: Walmart Says Higher Wages Are Motivating Workers

March 16, 2016, 2:49 PM UTC
Courtesy of Walmart

Walmart’s (WMT) decision to offer higher wages last year is paying off, according to the retailer’s finance chief.

Last year, the retail giant said it would spend about $2.7 billion on higher wages for hundreds of thousands of workers at its U.S. stores in 2015 and 2016. The move was part of an effort to improve customer service and keep good workers in a tightening job market at a time when working in stores is getting more involved.

Walmart has now reported six straight quarters of comparable sales growth, and five straight quarters of shopper traffic increases.

But Walmart still has a lot of work to do: its growth over the holiday quarter lagged that of chains like Target (TGT) and online retailer (AMZN).

The raises have been designed to motivate workers at a time when they are asked to spend more time helping customers and while the integration of e-commerce and tech with Walmart stores has added to the tasks they perform.

“I can feel the difference, I can see the difference,” Wal-Mart Stores Chief Financial Officer Brett Biggs told analysts at an investor conference in New York this week. “It pays off in a number of areas: clean, fast, friendly store scores go up.” He added: “The stores are cleaner.” Biggs also praised the quicker checkout.

Indeed, Walmart U.S. CEO Greg Foran recently said that some 76% of the stores now get a passing grade. Still, the higher wages are among the primary reasons Walmart has forecast lower profit per share this year.

The head of McDonald’s (MCD) U.S. business last week also noted that pay raises have helped the restaurant chain.

At a time when shoppers can just as easily make purchases online, Walmart stores have to offer a more inviting environment but also take advantage of an asset it has over Amazon: its thousands of stores offer it many pick up locations. That is particularly important as Walmart expands its in-store pickup of online grocery orders to more markets. (The service is now available in about 25 markets.)

Walmart’s two-step pay hike continued in 2016, with its minimum wage rising to $10 an hour, its second hike in two years. Many labor advocates say that is still way too low (as the push for a $15 threshold continues). Democratic presidential candidate Bernie Sanders has repeatedly slammed Walmart for not paying workers a living wage, most recently at a campaign stop in Missouri this weekend.

Still, Biggs said workers feel they have a career track at the retailer now that Walmart has ramped up training, among other measures. That has manifested itself in the form of a “higher quality associate” applying for jobs internally.

“Associates feel better about what they are doing,” Biggs said. “They feel obligated to the company to return that investment.”