What Will a $1 Raise Cost Wal-Mart?
Wal-Mart said it has committed a total of $2.7 billion over the two years to wage hikes, more training and better benefits for its hourly workers.
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Beginning February 20, about 1.2 million hourly workers at Wal-Mart Stores Inc. (NYSE: WMT) will begin earning a minimum of $10 an hour. Last April, Wal-Mart raised its minimum wage to $9 an hour with the promise of a second raise this year.
The company said it has committed a total of $2.7 billion over the two years to wage hikes, more training and better benefits for its hourly workers. In its annual report for 2015, Wal-Mart estimated the cost of the total package would be about $1 billion in fiscal year 2016.
When CEO Doug McMillon announced the wage increases last year, he said the company expected that the total package would cost about $0.20 per share in earnings for the 2016 fiscal year ending later this month. At the end of October, Wal-Mart reported 3.2 billion shares outstanding, which pencils out to an investment of $640 million in its hourly workers.
Wal-Mart said the average pay for a full-time employee will be $13.38 per hour and the average for a part-time employee will be $10.58 per hour once the February pay hike takes effect. About half of the 1.2 million hourly workers are part time, so by averaging the two averages we get a combined average of $11.98 per hour.
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Following Wal-Mart’s April 2015 pay increase, the average hourly wage for a full-time worker was rose to about $13. Part-time worker pay rose to about $10, according to a report at CNNMoney. That averages to $11.50 for all workers, so being generous, Wal-Mart’s labor cost will rise by about 50 cents an hour next month.
Assuming that an average employee puts in 2,000 hours a year, that’s $1,000 per year times 1.2 million workers, or a total cost of around $1.2 billion. That’s about $0.38 a share based on the October total.
Wal-Mart stock traded up about 2.2% Thursday morning, at $62.07 in a 52-week range of $56.30 to $89.26.
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Paul Ausick has been writing for 247Wallst.com for more than a decade. He has written extensively on investing in the energy, defense, and technology sectors. In a previous life, he wrote technical documentation and managed a marketing communications group in Silicon Valley.
He has a bachelor's degree in English from the University of Chicago and now lives in Montana, where he fishes for trout in the summer and stays inside during the winter.
