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Walmart Is Boosting Its Starting Hourly Wage to $11. It Says It’s Because of Tax Reform

January 11, 2018, 1:21 PM UTC

Wal-Mart Stores is boosting its starting hourly wage to $11 and delivering bonuses to employees, capitalizing on the U.S. tax overhaul to stay competitive in a tightening labor market.

The increase takes effect next month and will cost $300 million on top of wage hikes that were already planned, the Bentonville, Ark.-based retailer said Thursday. The one-time bonus of up to $1,000 is based on seniority and will amount to an additional $400 million. The company is also expanding its maternity and parental leave policy and adding an adoption benefit.

“Tax reform gives us the opportunity to be more competitive globally and to accelerate plans for the U.S.,” Chief Executive Officer Doug McMillon said in the statement.

Read: Walmart Is Testing Personal Shopping and Cashier-Free Stores

The move comes three years after Wal-Mart last announced it was raising wages, spending $1 billion in 2015 to lift starting hourly pay to $9 and then to $10 for most workers the following year. The increase cut into profit and was criticized by some longer-tenured employees as unfair to them. Since then, many states have enacted minimum wage laws, meaning that a “sizable group” of its 4,700 U.S. stores already pay $11 an hour, according to spokesman Kory Lundberg.

Wal-Mart (WMT), the nation’s largest private employer, has fought in recent years to improve its image in the U.S., as it weathered criticism over its treatment of employees. With the wage increase and bonus payment, the world’s biggest retailer seeks to even its pay gap with resurgent rival Target (TGT), while simultaneously sending a high-profile thank you to the U.S. government for slashing the corporate tax rate.

Lower Unemployment

The nation’s unemployment rate has also plummeted from 5.7% to 4.1% over that time, creating a battle to recruit and retain cashiers and shelf stockers.

The wage hike follows Target’s October decision to boost its minimum hourly wage to $11, which it will further boost to $15 by the end of 2020. Costco Wholesale (COST) and other retail chains like TJX (TJX) have also raised wages in recent years.

Wal-Mart’s decision makes it the latest corporate titan to plow expected tax savings into employee payouts. Boeing, AT&T and Wells Fargo & Co. have all made similar announcements in recent weeks. Wal-Mart said it’s “early in the process of assessing potential additional investments” it could make.