|Dow||-44.08 to 17,985.77|
|S&P 500||-2.23 to 2,097.45|
|Nasdaq||+18.34 to 4,924.70|
|10-YR Yield||+.047 to 2.113%|
|Gold||+$7.10 to $1,207.30|
|Crude Oil||-$0.87 to $51.27|
Will Other Companies Follow?
The economic recovery’s missing link is wages. Now, Wal-Mart Stores (WMT, Weiss Ratings: B+) is doing something about it.
The nation’s largest private employer shocked Wall Street by announcing a $1 billion plan to boost pay. Some 500,000 workers — or around 40 percent of its 1.3 million-strong workforce — will get raises in the next few months.
Entry level wages will climb to $9 an hour this April, and $10 an hour by February 2016. Department manager wages will climb to $13 an hour this summer, and $15 an hour early next year. The minimum and maximum wages offered to other workers, such as cashiers, will also rise.
|Wal-Mart just gave employees something to cheer about.|
The company is also revamping its training, scheduling, and promotion programs. The stated goal? Increase job satisfaction and make it easier for entry-level workers to climb the corporate ladder.
Now it’s not like Wal-Mart is doing this out of the goodness of its own corporate heart. The firm has come under increasing fire for its pay practices, as have other large U.S. employers like McDonald’s (MCD, Weiss Ratings: C+).
Labor activists want them to pay at least $15 an hour, arguing that’s the kind of “living wage” American workers need. For his part, President Obama has pushed for a federal minimum wage of $10.10, up substantially from the current $7.25. But that move hasn’t made any progress in Congress, even as some states have moved forward with their own hikes.
Higher wages would undoubtedly be good news for the American economy, a point I’ve argued for some time. But what does Wal-Mart’s push mean for investors? Will they give companies leeway to pay more, or will they react by pressing the “sell” button?
I think it comes down to degree and timing: How much they hike pay and against what business backdrop they do so.
|“Higher wages would undoubtedly be good news for the American economy.”|
Along with its wage news, Wal-Mart also said same-store sales rose 1.7 percent in the quarter ended Jan. 31. That was more than twice the 0.7 percent increase expected by analysts. Adjusted earnings per share also topped forecasts.
At the same time, the company issued lackluster forward guidance, in part because of costs related to higher pay. That dinged the stock on the day. But it didn’t crush it entirely. That tells me investors will give companies some leeway on wages as long as the bottom-line impact isn’t huge — an encouraging sign for Main Street and Wall Street.
So what are your thoughts? Is Wal-Mart doing the right thing here, for workers, investors, and America as a whole? Or is this more of a PR stunt forced by negative publicity and activist pressure?
Will it inspire other companies to step up and do the same, or is this a one-off move? And what do you think of the wage levels we’re talking about? Is a starting wage of $10 enough? Should it be closer to $15? This is a hugely important topic, and I encourage you to share your answers to these questions at the Money and Markets website!
|Our Readers Speak|
Does Ukraine have the ability to stand up to Russia? Are unions to blame for the port shutdown — or is management the problem? And what should we make of alternative energy sources? Those are some of the issues you weighed in on overnight.
Reader Jim said he’s skeptical about Ukraine’s fighting ability, and believes Russia’s rebels will just keep rolling on without much resistance. His comments:
“It doesn’t look like the Ukrainians are in the same league as ‘the rebels.’ Putin will supply them with whatever weapons they need to win while the West sends old blankets. The rebels will use the cease fire to resupply and infiltrate into the next city. Putin is playing chess while the West plays checkers.”
Moving on to the port shutdown, Reader Donald G. notes that everyone keeps talking about union workers getting paid too much — while failing to note that it’s the bigwigs who bring home the real bacon. His view:
“I always find it interesting that when it comes to anything related to unions, the blame for the problems rests on the union member being too greedy. But then they hardly ever mention what the salaries of the executives are! If a union worker is paid $25 to $75 per hour, it’s too much, but when executives make millions, not a peep.”
But Reader Bob H. countered that we’re all suffering because of the greed of a relatively small group of people. He said:
“It is unfortunate when any union or company can do so much damage to all of America for their own personal good, especially when they already are some of the highest paid blue collar workers in the country and represent such a small number of members.
“I wish we had a President like Reagan who would do like he did with the air traffic controllers. But that will not happen with this administration. Instead, many will suffer for the benefit of a few.”
Finally, Reader Charles M.L. offered the following take on power generated from hydroelectric, solar, and wind: “Most hydro power has been developed in North America. The few that are planned (Peace River in British Columbia, for example) are being attacked by environmentalists.
“In Ontario, Canada, they found that solar and wind power was 4 to 5 times more expensive than other electricity. They also had to build gas-fired plants as backup for wind and solar. Wind and solar may be competitive in the future but right now they are not productive (can’t pay for themselves without subsidies) infrastructure.”
Thanks for sharing your thoughts. Jim, I think you’re right on with your assessment of the situation in Eastern Europe. Putin can keep on supporting the rebels and helping them push further into Ukraine because he knows neither Europe nor the U.S. will put up much of a fight.
As for the whole labor vs. management issue, we definitely need to see more wealth “trickle down” to the average American worker’s paycheck if we’re going to see the economy grow over the long term. But unions have been losing power for decades, and the track record of minimum wage increases on influencing corporate behavior is mixed.
Maybe we need more of Corporate America to take the Wal-Mart/Henry Ford approach — and raise wages because it’s good for their workers and their own bottom lines!
Want to add your voice to the mix? Then here’s the website link to help you do so.
|Other Developments of the Day|
After getting pushed out of a key eastern Ukrainian city called Debaltseve, the country’s government called for help from U.N. peacekeepers. But Russia rejected that gambit as a violation of the terms of the recent Minsk cease fire. Or in other words, the slow-motion takeover of the pro-Russian eastern part of the country will likely continue unabated!
Sub-freezing and even sub-zero temperatures are being felt across a wide swath of the eastern U.S. today. The National Weather Service said parts of the Southeast and Mid-Atlantic will see the coldest temperatures in two decades, with freeze warnings hoisted as far south as my part of South Florida!
Don’t look now, but the Nikkei Stock Average in Japan just hit its highest level since May 2000. Select European stock averages are also having their best start to a year in a long time, despite the ongoing Greek drama.
Maybe it’s the beautiful scenery, or the lack of stress that comes from not having to deal with New York City traffic and noise? I don’t know. But according to the Gallup-Healthways Well-Being Index, Alaskans live the happiest, most well-rounded lives in the U.S.
If you live in Hawaii or South Dakota, you’re in good shape too. West Virginians though? Sorry — you’re in last place for the sixth straight year!
Any thoughts on these stories — or others I haven’t covered? Then don’t hold back. Let me know at the website.
Until next time,