Kroger, Walmart in no hurry to match Amazon's $15 starting pay

Kroger CEO: 'Look at the total package'
Posted at 9:33 AM, Nov 26, 2018
and last updated 2018-11-26 11:34:12-05

CINCINNATI -- Two months after Amazon Inc. threw down the gauntlet on a $15 minimum wage, grocery rivals Kroger and Walmart are showing no signs of picking it up.

In fact, both companies defended their existing salary structures at recent investor conferences.

“Our starting wages are higher than $15 when you look at warehouse locations,” Kroger CEO Rodney McMullen told WCPO in an exclusive interview at the company’s annual investor meeting Oct. 30. “When you look at our stores, our average hourly rate is just shy of $14 plus we have pension benefits and health care benefits and all those things.”

When asked about wages at Walmart’s investment community meeting Oct. 16, Gregory Foran, CEO of the company’s U.S. operations, said starting pay has increased from $7.63 an hour four years ago to $11 today. Foran said Walmart studies labor-market hot spots every two weeks to consider whether to increase starting pay in select locations.

“We have quite a large number of our stores where we already pay well above $11,” Foran said. “We have other parts of the country where $11 is the right amount to pay.”

The pressure is rising on retailers to boost their starting pay, thanks to a tight labor market and newly proposed legislation by Senator Bernie Sanders that would prevent companies from buying back their own shares unless their starting pay is at least $15.

MIT Professor Amy Glasmeier estimated the average living wage in the U.S. was $16.07 in 2017. That’s the amount it would take two adults working full time to make ends meet for a typical family of four.

Kroger signed a new Cincinnati/Dayton labor contract in March that establishes starting pay at $10 with the ability to increase to $11 within a year. Walmart announced in January that it would boost its minimum pay to $11, same as Target, which vowed in November to boost starting pay to $15 by 2020.

Kroger ranked third in Ohio to Walmart and McDonalds in the number of its employees enrolled for federal food subsidies, according to The New Food Economy, a New York-based nonprofit that publishes journalism on the grocery, fast food and farming industries. It asked five states to tell them which employers show up the most in the list of recipients for the Supplemental Nutrition Assistance Program, formerly known as food stamps. Walmart, McDonald’s and Kroger were one, two and three in Arizona, Ohio and Kansas.

But Kroger can point to some tangible signs of progress in wages, Tim Massa, group vice president of human resources, told Wall Street analysts Oct. 30. Kroger’s average hourly wage increased 3.2 percent to $14.47 in the last year. Its employee turnover rate declined in the same period, and now stands at 9.4 percent.

Kroger announced in April a $130 million annual increase in spending on benefits, boosting its 401 (k) match to 5 percent and enhancing its tuition-reimbursement policy to enable part-time workers to receive up to $3,500 per year.

“It’s important to remember what are the benefits that somebody gets from a health care standpoint, what kind of educational support, what type of career opportunities do you have? We find our associates look at the total package and not just one element,” McMullen told WCPO.

Walmart CEO Doug McMillon suggested that a $4 boost in starting pay could be harmful to existing Walmart employees, who are eligible for performance bonuses of up to $550 a year and training opportunities that can lead to higher pay through job advancement.

“There's a pipeline here that you get pulled through,” McMillon said. “So as we talk to our associates, we're thinking about that whole relationship. If they were here, as we've talked to them in stores the last few weeks, they would say, ‘Don't remove the My Share bonus. Don’t remove what you do for stock purchase. Thanks for what you did on the benefits. And those of us that have been here for a while just want to be rewarded for the work we're doing, taking advantage of the training, don't … get too hung up on where the starting wage rate is.’”

It’s a fair point, based on the national reaction to Amazon’s increase in starting pay to $15. Within hours of the Oct. 2 announcement, employees began pointing out to media outlets that Amazon was also cutting performance bonuses and stock options. Amazon said all employees would see an increase in total compensation and that pay would be more “immeditate and predictable” under the new salary structure.