Walmart Pay Hike Not Enough to Get, Keep Right Workers

Walmart's Black Friday Starts Strong in Bentonville
Gunnar Rathbun/Invision for Walmart/AP

By Brian Sozzi

Walmartmade big news recently for increasing workers' wages above the federally mandated minimum, and Target is reportedly considering a similar move. But it may not make much of a difference in keeping and attracting higher-quality talent needed to oversee a growing list of responsibilities.

Walmart is transitioning to a $9-an-hour minimum wage in April, above the federal minimum of $7.25 an hour. Next year, employees with six months training will be paid a minimum of $10 an hour.

According to a report from Reuters, Target will soon hike its minimum wage for all its workers to $9 an hour. Target promptly denied the report, but Target CFO John Mulligan at a March 4 investment bank conference that "our goal has been and will be, we're going to be competitive on wages, whatever that means, wherever that means." At the time, he sidestepped being locked into a specific nationwide hourly wage for its retail workforce, citing differences in each state's minimum wage laws and prevalent local economic conditions.

What Employees Are Asked to Do

The maneuvers arrive at a time at which their store employees are being tasked with more by-the-minute responsibilities, such as finding items in the store to service mobile orders placed by consumers.

Another responsibility is more frequent shelf-stocking as each discount retailer tries to morph into a local grocery store by moving into fresh food and prepackaged organics. Starbucks is even trying to get its baristas to engage customers in talking about race. Nevertheless, the higher hourly wages may not do much to cure employee disenchantment. That's in large part to the allure of the new employment model for lower-wage workers championed by the likes of Chipotle, Shake Shack and Costco.

Chipotle and Shake Shack were built on the principle of paying employees more than minimum wage and teaching them leadership skills that are not being taught to workers at the low end of the pay scale at the likes of Target and Walmart.

The more these restaurant chains expand and the more that other chains pop up that copy their founding principles, other retailers will find it difficult to attract and retain talent.

It's Better at Chipotle, Shake Shack, Costco

"We provide hands on, shoulder-to-shoulder training to develop the full potential of our restaurant employees," Chipotle said in its most recent annual report. About 90 percent of salaried management at Chipotle and 98 percent of hourly management come from internal promotions.

The company's best general managers are promoted to a position called a restaurateur, a role that could pay north of $100,000 a year plus bonuses for developing team members. Restaurateurs who have shown over time that they can successfully run four restaurants by developing teams referred to as "top performers" can then be promoted to apprentice team leaders.

The opportunity to earn both skills, while also providing a clear pathway to a long-term career, continues to help Chipotle attract best-in-class talent. "I think the average quality of applicant that comes into a crew position today is vastly superior to what it was five, six, seven years ago," said Chipotle co-CEO Monty Moran in an Aug. 27 interview.

Moran added that people are migrating to Chipotle because they have "heard of us now, not just as a concept, but also as a people-oriented culture," one offering opportunities for advancement. "We have a lot more applicants than we used to, and we are able to be a lot pickier," he said.

Investing in Their Future

Shake Shack, founded by restaurateur and author Danny Meyer, is similar to Chipotle in its approach to employees in that it pays more than the hourly minimum wage and emphasizes the teaching of career-oriented skills.

"We invest in our team through extensive leadership development programs to ensure that Shake Shack remains a great place to work and an exciting career choice for team members at every level -- we have built a culture of active learning and we foster an environment of leadership development throughout the entire lifecycle of employment," Shake Shack writes in its prospectus. The company sweetens the deal with its employees by having a variety of incentive programs, including a monthly revenue-sharing program.

And if a worker would rather work the vast floors of a retail store, why not fill out an application in the hopes of getting hired at Costco? In spite of the looming wage increases at Walmart and Target, each will continue to offer hourly rates that are significantly less than Costco's.

The average employee at Costco earns a whopping $21 an hour and typically starts at $11.50 an hour. Costco's no-frills business model, where goods are shipped directly to large warehouses for sale to customers that pay annual membership dues, affords the discount retailer the luxury of paying its workers relatively high hourly wages.

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