Walmart wage hike may show wage pressures

Walmart’s tit-for-tat minimum wage battle with Target, ratcheting to $11 an hour for the least experienced workers with likely pressure to move higher, may signal broader gains to come for workers in a tightening US labour market — a moment politicians and policymakers have been hoping for. There are still problems, labour economists note, with overall wage gains weaker than would be expected with a 4.1 per cent unemployment rate, comparatively large numbers of people in part time jobs, and millions of prime age adults between 25 and 54 years old not even looking for work.
But the Walmart Stores Inc announcement, its third boost in entry level wages in as many years, is a possible sign wage pressure is building in general, as gains filter down to the lowest-paid jobs and the least-educated workers.
“This may be evidence that we are starting to see the wage acceleration,” that officials at organisations like the Federal Reserve have been anticipating as unemployment dropped to a 17-year low, said Jed Kolko, chief economist at the jobs website Indeed.
That, in turn, could boost US economic growth overall and strengthen a US inflation rate whose weakness has bedeviled the Fed for the last five years.
Kolko noted that while overall wage increases were modest last year at around 2.5 per cent, data through November showed that workers with only a high school degree got average raises of 3.6 per cent, while hourly rates for less well-paid positions rose 3.1 per cent.
Wage increases at the lower end of the scale are typically a sign that labour markets are tight, said Elise Gould, a senior economist at the Economic Policy Institute.
“When you get low unemployment rates, that affects lower-wage workers the most,” Gould said. “Slack is diminishing.”
Whether slack is fully gone, however, is another question, and one which policymakers at the Federal Reserve and elsewhere are struggling to understand.
Along with the headline unemployment rate, a broader measure of joblessness that includes discouraged workers who have largely stopped job-hunting, as well as those only able to find part-time jobs, stood at 8.1 per cent at the end of 2017. That is comparable to the hot economy years before the 2007 to 2009 economic crisis.
The Fed’s Beige Book research report in recent months has been filled with anecdotal stories, gathered by policymakers from the central bank’s 12 regional branches, of entrepreneurs struggling to fill positions and of wage pressures building. — Reuters