Another Cold Sign in the US Labor Market: Walmart's Indirect Salary Reduction

Recently, there have been signs of a gradual cooling in the US labor market.

The latest evidence is that, according to media reports on Thursday, September 7th, due to the cooling of the once hot hourly labor market, Walmart, the largest private employer in the United States, changed its wage structure for hourly workers in mid-July, paying lower wages to some new employees compared to three months ago. By reducing wages for new employees in this way, it indicates that employers are seeking to cut labor costs.

Under the new wage structure, most new employees will receive the lowest possible hourly wage paid by Walmart. In the past, some new employees (such as those who collect items for online orders) earned slightly higher incomes than other new employees (such as cashiers). However, Walmart now states that changes in the compensation structure allow employees to move between workgroups such as food, cashiers, inventory, or online services, effectively reducing the compensation of some new employees.

For example, the wages of some Walmart store employees in the northeastern United States are usually higher than the national average. Earlier this year, they began working as online order collectors in the store, earning approximately $16 per hour. Now, under the new wage structure, these new employees, as well as most other new employees, start at $15 per hour.

Walmart's minimum hourly wage of $14 remains unchanged, but it still varies by region, with some store locations having a minimum wage of $17.

Walmart employs approximately 1.6 million workers across the United States, with the majority working in stores and warehouses. In recent years, the company has taken other measures to reduce labor costs, including expanding the use of self-checkout in stores and warehouse automation or partial automation.

Walmart stated:

This will improve the allocation of personnel in stores.

A Walmart spokesperson said on Thursday that changes in the compensation structure allow employees to engage in different jobs within the store, learn new skills, and advance within the company.

In the past few years, due to the COVID-19 pandemic, competition for employees in labor-intensive offline retail industries has become fierce, and Walmart has increased wages for hourly workers, including raising the minimum wage. The company has also provided salary increases and bonuses in areas such as truck drivers that require more workers.

After a year and a half of interest rate hikes, the overall employment market in the United States is cooling down. Summer hiring in the United States has slowed down this year, with the national unemployment rate rising from 3.5% in July to 3.8% in August, indicating that more Americans are looking for new jobs. Average hourly wages in August increased by 4.3% compared to the same period last year, far exceeding pre-pandemic levels.

The number of new non-farm jobs in the United States has been below 200,000 for three consecutive months. In August, there were 187,000 new non-farm jobs, and the figures for June and July were revised down to 105,000 and 157,000, respectively, returning to the average of 180,000 jobs from 2016 to 2019.

However, market analysis believes that the resilience of the US labor market may not have been eliminated, as job growth in the service sector still exceeds expectations. Education and healthcare remain the largest drivers of job growth this month, and the leisure, hospitality, professional, and business services sectors continue to show strength, with job growth higher than pre-pandemic trends. At the same time, construction and manufacturing employment are rebounding due to investment related to the reshoring of manufacturing, while employment in information and transportation and warehousing has declined significantly. On Thursday, other data showed that the number of initial jobless claims in the United States fell to the lowest level since February, highlighting companies' reluctance to lay off employees. The data showed that in the week ending September 2, the number of initial jobless claims in the United States dropped to 216,000, lower than the expected 234,000. The previous value was revised from 228,000 to 229,000. In the week ending August 26, the number of continued jobless claims in the United States fell to 1.679 million, the lowest since July. The labor market has proven to be an important support for the economy. Robust hiring and limited layoffs have provided consumers with enough funds to continue spending, thereby fueling optimism about the United States' ability to avoid an economic recession. In addition, the final value of non-farm unit labor costs in the United States in the second quarter was 2.2%, higher than the market's expected 1.9% and the initial value of 1.6%.