Walmart Alters New Hire Wages: A Move to Cut Labor Costs?

Walmart Inc WMT has adjusted its pay structure for new store workers, potentially resulting in lower wages than a few months ago. 

This development reflects a trend among employers looking to trim labor costs amid a cooling job market for hourly staff.

Walmart, the country's largest private employer, implemented this change to its wage structure in mid-July. Under the new system, most new hires will earn the lowest possible hourly wage for their specific store, the Wall Street Journal reports.

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Previously, some new hires, such as those responsible for online order fulfillment, received slightly higher wages compared to positions like cashiers. 

The company's minimum hourly wage of $14 remains in place, varying by region, with some stores starting at $17 per hour. Existing employees will not experience pay reductions.

Walmart's rationale behind this adjustment is to allow workers to transition between different job roles within the store, including food, registers, stocking, and digital fulfillment, without adversely affecting their pay. 

Over 50,000 employees have received raises due to their income being below the new minimum.

This shift comes after Walmart raised pay for its hourly staff, including increasing its minimum wage, in response to heightened competition for workers during the pandemic, particularly in grocery stores and healthcare. 

The company had also provided pay hikes and bonuses for positions like truck drivers, where labor demand surged.

However, the broader U.S. job market is showing signs of cooling off, with hiring slowing down over the summer and the national unemployment rate climbing to 3.8% in August from 3.5% in July. 

Despite this, average hourly earnings for workers rose 4.3% in August compared to the previous year, surpassing pre-pandemic growth rates.

Businesses have adopted a more cautious approach to hiring, resulting in lower compensation for new hires than earlier this year.

With approximately 1.6 million employees in the U.S., primarily in stores and warehouses, Walmart's new wage structure doesn't impact current staff. Still, it allows the company to hire new personnel at lower rates, effectively reducing labor costs. 

The retail giant has also pursued cost-saving measures in recent years, including expanding store self-checkout options and automating or semi-automating its warehouses.

The pay adjustments may affect some new Walmart store workers.

In August, WMT reported second-quarter FY24 sales growth of 5.7% year-on-year to $161.10 billion, beating the consensus of $160.27 billion. Adjusted EPS was $1.84, beating the consensus of $1.70.

Price Action: WMT shares are trading higher by 0.68% at $162.56 on the last check Thursday.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.