With Wal-Mart raising the entry-level wage for workers to $9 an hour, the pressure is mounting for other private employers to follow.
Given the size and influence of the nation’s largest private employer, it’s a given that smaller businesses including franchises will feel more pressure to hike pay, says Jack Mozloom, a spokesman for the conservative advocacy group the National Federation of Independent Business.
While Wal-Mart can absorb higher wages, it can be a different scenario for some smaller employers. “Wal-Mart is a giant, multinational corporation that operates very differently than the small retailer down the street,” Mozloom said. “For business owners that can’t afford this … it forces them to make decisions elsewhere, and winds up hurting others that minimum-wage activists think they are helping,” he said.
Higher pay is a contentious issue, and others hope Wal-Mart’s move will encourage other businesses to follow suit.
The retailer’s decision revives the stalled effort to hike the federal minimum wage, says Holly Sklar, chief executive of Business for a Fair Minimum Wage, a national advocacy group. The federal minimum wage is $7.25 an hour.
“This adds to the growing momentum for raising the federal minimum wage,” said Sklar in an email to CNBC. “The business case for raising starting pay is strong, and Wal-Mart has now acted on that.”
Wal-Mart on Thursday announced it would raise the minimum pay beginning in April.
Wal-Mart Chief Executive Doug McMillon told CNBC the move will “result in a stronger business.” The wage increase will then climb to $10 an hour in 2016.
“We listened to our associates in lots of ways, and we are in the stores, we know what reality looks like and we are making an investment to improve that,” McMillon said. “We want happy customers that come back, and more customers. This is about running a good business.”
The International Franchise Association, the largest industry trade group, also weighed in on the wage news.
An “overwhelming majority of franchisees pay well above minimum wage,” said association spokesman Matt Haller in an email to CNBC. “IFA encourages market forces to dictate wage increases, not government mandates or policies that would impose wage hikes on two separate business entities,” he said.