Yesterday an impressive thing happened. Walmart (WMT),
widely known for its competitive prices, and widely attacked by advocates for
low wage workers amongst which Walmart’s million plus headcounts has the widest
gap, changed its policy on those wages. This was suggested in the announcement
that 500,000 full and part time workers
would receive increases in their base salaries by over 24% on April 1st,
including the promise of an additional 10% for all “existing associates” on the
following February 1st.
You might be asking why I think this act is impressive.
Well notwithstanding the accusations prevailed that Walmart rolled over from
staunch and relentless political pressure. But I think such negative
perspective undermines the fact that this has happened. And it follows hot on
the heels of Whole Foods (WFM) and Aetna (AET)*, two companies we are currently
invested in, the latter a healthcare company who recently announced an average
11% increase for employees and for some as high as 33% to $16/hour. So why all
the cynicism, and what can be gained from 2 companies out of over 8,000?
One thing worth considering is the benefits of putting
more money into the pockets of hourly workers can only have a positive effect
on the economy. Much like the recent declines in oil and the effect on the
price of gasoline, the increase in spending for the retail sectors of the
economy are already evident in the behavior of that sector of the stock market.
There are also the broad implications of what I hope will be a reverse
politicization of the issue of wages away from the idealized concept of a
living wage and into the encouraging and affirming implications of “navigating
a raise” (think, hard work). And is it such a stretch to suggest that there
looms some human nature to think we’re underpaid or such that no raise has ever
been enough? Or if it is possible that one outcome of increased wages could be
simply influenced by such attitudes and assumptions.
Also worth noting is that 8,000 companies might have no
such complementary plans in the pipeline is illogical. Disney (DIS), and Costco
(COST), and the well-publicized Wells Fargo shift under employee pressures are
three other firms that have announced changes in their wage scales and as more
companies see the value in such moves, regardless of the motivation, the result
could just be the first signs of inflation pressures that have been hiding from
a Federal Reserve Board eager to normalize (as in raise) interest rates, which
would be especially good for all income dependent investors.
Lastly, in all the years that I’ve been managing equities
I admit to balking at the notion that wage increases, and other company
expenditures take money away from the bottom line leaving the stock prices of
said companies reeling from shareholder revolt. Yesterday, it happened with
Walmart, but employees are people, not expenses on the balance sheet, and the
cynicism that follows the leader in politics and capitalism is showing hopeful
signs of fading (call it disruption if you must) into the future. And with
history on the side of domestic corporations doing the right thing by their
workers, their communities and their shareholders, I hope we continue to see
the changes gain momentum. Just don’t count on me going out to buy a hoodie.
