This certainly sounds good at first:
Wal-Mart announced today that it has raised the starting rate in more than 1,200 Wal-Mart stores and SAMâ€™S CLUBS throughout the country.
But wait, won’t this mean that Wal-Mart have to raise prices? After all, isn’t that what Wal-Mart defenders have been arguing for years? Well, it turns out there’s one great, big huge catch:
The company is also implementing new pay ranges, which are wider than many other retailers, with the maximum being near the top of the market in many regions. Pay ranges are used by many other retailers, and are already used for management and hourly positions at Wal-Mart and SAMâ€™S CLUB home offices.
A new pay range means that the company is implementing wage ceilings at the same time it’s raising the floor. As the AP report on this press release explains, Wal-Mart is:
introducing wage caps for the first time on each type of job in all stores
That’s how, to quote Wal-Mart spokesman John Simley, the cost of these changes can be “”not material” to earnings.” They’re robbing Peter to pay Paul.
Here’s how the company spins the caps:
Associates wanting to move beyond their pay maximum may apply for a number of career opportunities in the company. No associateâ€™s salary will be reduced as long as the associate remains in his or her current job.
Of course they can apply for other opportunities withe company, but that doesn’t mean they’re going to get them. Besides, many Wal-Mart workers don’t have the time to be managers. They count on pay raises to cover the cost of inflation. Wal-Mart just gave them all the middle finger. So much for job opportunities at Wal-Mart. There are only so many management positions any company has.
Perhaps what’s most frustrating about this story is that you can already see the Wal-Mart spin machine working on the zombified media. Kudos to Marcus Kabel of the AP for at least mentioning the pay caps, but the headline in the Houston Chronicle (where I read the story linked above) is, “Wal-Mart raises starting pay.” Reuters doesn’t mention the caps at all. Neither does Bloomberg.
In the Bloomberg story, a retail analyst named Burt Flickinger says, “The changes should help with staffing on nights and weekends and reduce turnover.” The whole point of this exercise is to promote turnover! Remember the infamous secret Wal-Mart health care memo? VP Susan Chambers said then (in so many words) that the company wanted to get rid of its longtime, unhealthy workers in order to cut benefit costs. Well, it looks like Phase One has begun.
But is the media going to miss the real story here?
The memo, written by Susan Chambers, the executive vice president for benefits, outlines ways Wal-Mart can reduce employee benefits expenses, which cost the company $4.2 billion between 2002 and 2005 and are growing at 15 percent a year.
The problem, it seems, is that the employees are sticking around too long. Tenure drives costs. The more years workers have with the company, the more paid time off, the bigger the 401(k) contributions and profit-sharing.
Shifting employees to part-time was their first strategy to do this. Capping wages is obviously their second.