Watch CBSN Live

​Why Walmart's pay raise is backfiring

When Walmart (WMT) CEO Doug McMillon told his employees that they'd be receiving a pay hike this year, it was seen as a victory for thousands of the giant retailer's low-paid workers.

Five months later, that victory is turning into a double-edged one for the company, given that the raise isn't reaching every Walmart store employee equally. Some workers are complaining that new employees are receiving relatively big step-ups in pay, bringing the recent hires' pay close to their own. Others aren't seeing any raise at all, according to Bloomberg News.

"It took me four four years to get to $10.80. When minimum wage goes up we don't receive a pay increase unless we are under the minimum," one worker wrote in a comment on Walmart's corporate blog. "Now our 2 newest associates are making $10.75 and my annual raise is going from 40 cents down to 26 cents. Apparently experience does't get rewarded."

Walmart is giving its lowest-paid workers a r... 00:38

Under Walmart's pay hike, all current workers are slated to earn at least $9 an hour, or $1.75 higher than the federal minimum wage of $7.25. Next February, wages will rise to at least $10 an hour. New hires are also now starting at $9 an hour and moving to $10 an hour in 2016, which is one reason why more senior employees are feeling burned.

"You work someplace for five or 10 years, and you get these raises that are cents per hour -- then the company does this thing they get praised for, but you aren't seeing a benefit from that," Mackenzie Barris, a field organizer for Jobs With Justice, a worker rights nonprofit whose campaigns include Change Walmart, told CBS MoneyWatch. "Of course you'll feel that's not fair."

11 things about Walmart that may surprise you
11 things about Walmart that may surprise you

One employee wrote on Walmart's blog that she does "not appreciate" receiving the same pay as a new worker. "What incentive do I get for my experience and knowledge?" she wrote.

Some employees told Bloomberg News they believe their hours have been cut and annual raises lowered in order to pay for the higher wages for new workers. The company told the news organization that it's making sure all workers have the chance to step into higher-paying positions.

Whether Walmart executives should have foreseen the hard feelings caused by its uneven pay raises is debatable. On the one hand, the company had been under pressure from labor activists and policy makers to boost its pay, given that many of its workers are forced to rely on public assistance to make ends meet.

As America's largest private employer, more than 1.3 million people work at its stores, meaning that any pay increase will likely have a positive impact on thousands of families and communities.

"We had more than 500,000 associates who received two raises this year. Every associate at Walmart at least once a year receives an annual increase -- the 500,000 were people who received an increase on top of that," a Walmart spokesman wrote in an email.

Cities and states across America have raised ... 02:15

Walmart U.S. human resources chief Kristin Oliver told Bloomberg that it understood some employees would feel left out by its wage increase. She added, "We weren't prepared to go forward with any additional increases but have continued to look at it to see if there is something else we should do for those in the middle."

Workers are sensitive not only to what they bring home in their paycheck, but also what their co-workers are earning. That's a lesson that was learned by Gravity Payments founder Dan Price, who earlier this year was lauded for his decision to boost pay for all workers -- regardless of experience or skill -- to $70,000. At the time, he told CBS MoneyWatch that one employee had expressed concern that lower-ranking workers would see pay increases, while others would not.

While Price was seen as a fighter for income equality, his pay raises didn't turn out to be as successful as he had imagined they would be, according to The New York Times. Two of his highly valued employees quit, partly because they felt the pay hikes were unfair when more senior staff had received little or no raises.

Like Gravity Payments, Walmart appears to be hampered by the unintended consequences of its pay move. Still, Jobs With Justice's Barris said that many Walmart employees have felt the company's management doesn't listen or respect them, with the latest snafu just another example of that behavior.

"Raising that bottom wage is symbolic, but doesn't respond to the men and women who work that their stores for years and years, feeling they aren't fully respected," she said.

View CBS News In
CBS News App Open
Chrome Safari Continue
Be the first to know
Get browser notifications for breaking news, live events, and exclusive reporting.