Are wage caps good or bad for a retailer’s business?
Wal-Mart’s recent announcement that the company would increase its starting wage for all employees was greeted with almost universal praise (albeit grudgingly from the company’s critics). Less well received was Wal-Mart’s decision to place wage caps on certain jobs regardless of an employee’s tenure with the company.
A number of Wal-Mart associates, interviewed by The Associated Press, expressed concern about what the wage caps would mean for them.
Ramiro Gonzalez, has worked six years in the produce department of a Wal-Mart Supercenter in El Paso, Texas.
Mr. Gonzalez who makes $11.18 an hour said, “Everybody’s angry. Everybody. Especially the people who’ve been there 15, 20, 25 years. They’re almost certainly above the pay caps.”
Amy Harr, a personnel manager at a Supercenter in Columbus, Ohio, said there are other things she looks at besides hourly wages.
“There’s scheduling, I can take time off when I want. There is the 401(k), stock options, profit sharing. I like what I have,” she said.
Ms. Harr has been capped out at $19.84 an hour (her present rate) versus Wal-Mart’s new limit of $19.25 for the position.
To advance to a higher pay scale, Wal-Mart workers such as Mr. Gonzalez and Ms. Harr will have to move on to new better-paying positions.
Peter Cappelli, a professor of management at the University of Pennsylvania’s Wharton School, said many other retailers employ pay caps in their compensation programs.
“Firms adjust their compensation packages all the time. The big reason that they might decide to lower the top of the range is that they decide that they’re not actually adding
much value once you’ve been there for a long time,” he said.
Discussion Question: Are wage caps, on balance, good or bad for a retailer’s business?
Some have suggested that perhaps Wal-Mart is using the caps as a way to rid itself of more costly longer term employees.
John Simley, a Wal-Mart spokesperson, told The Associated Press, “To think we would get rid of long-term associates is ridiculous. Their value to
us is very high. They add experience, they help develop new associates and they reinforce the culture.”