OnJanuary11,Walmart announcedthatitwasraisingitsstartingwagerateto$11anhour,givinga one-timebonusupto$1,000toemployees,expandingitsparental/maternalleavepolicyandproviding employeesadoptingachildupto$5,000perchildinfeesassociatedwiththeadoption.Inmakingthese announcements,DougMcMillon,WalmartpresidentandCEOsaid:“Weareearly inthestagesof assessingtheopportunitiestaxreformcreatesforustoinvestinourcustomersandassociates …Tax reformgivesustheopportunitytobemorecompetitivegloballyandtoaccelerateplansfortheU.S.” Mr.McMillonissuggestingthatWalmart’semployeecompensationincreasesweremotivatedbythe TaxCutsandJobsActof2017(TCJA).IhaveanalternativeexplanationforWalmart’srecentbeneficence – agrowingshortageofqualifiedemployees.
Walmart,alongwithallothercorporations, hasafiduciaryresponsibilitytomaximizethereturnon equityforitsstockholders.Allelsethesame,TCJAincreasesWalmart’safter-taxprofits.Byincreasing employeecompensationbysomeportionofitsreducedtaxliabilityemanatingfromTCJA,Walmart wouldbereducingitsafter-taxprofits(revenuesminusexpenses)fromwhattheyotherwisewouldhave been.ThiswouldbebreakingwithitsfiduciaryresponsibilitytoWalmartstockholders.
MyalternativeexplanationforWalmart’sJanuary11announcementofemployeecompensation increasesisthatitwascompelled toraisecompensationinordertoretainandattractnewqualified employees.AndthereasonWalmartneedstoraisecompensationtoretainandattractnewqualified employeesisbecausethereisnowashortage ofqualifiedemployeesintheretailsectorattheexisting levelofcompensation.Thiscanbeseeninthechartbelow. Plottedinthechart areobservationsofthe numberofjobopeningsinagivenmonthasapercentofthenumberofemployeeshiredinthatmonth intheretailsector.ThedataarefromtheJobOpeningsandLaborTurnoverSurvey(JOLTS)publishedby theBureauofLaborStatistics.TheseriesbeginsinDecember2000andrunsthroughNovember2017.In November2017,jobopeningsintheretailsectorwere105.0%ofthenumberofhires.Thatis,there were5percentagepointsmorejobopeningsintheretailsectorthantherewerenewhires.Thisisthe highestpercentageofopenings-to-hiresinthehistoryoftheseries.
Thedemandforretailemployeesexceedsthesupplyofemployeesatcurrentcompensationlevels. Whenthedemandforsomethingexceedsitssupply,thepriceofthatsomethinggoesup.Ibelievethat Walmart’sJanuary11announcementofanincreaseinemploymentcompensationwasmotivatedbya needtoretainandattractnewqualifiedemployees,not bytherecently-passedcutincorporatetax rates.
