Within the United States, labor and its corresponding rates have become both a divisive and contentious issue. COVID-19 has only exacerbated an already combative labor environment. For example, COVID-19 resulted in massive layoff and furloughs for millions of Americans. The tourism, retail, entertainment, airline and energy sectors have all declined precipitously as consumer demand declined throughout the year. As consumer demand declined, corporations were forced to make the difficult chance to eliminate or cut their labor force. Adding more pressure to the prevailing labor rates, were consumer driven initiatives such as the “The Fight for $15”. The unforeseen and precipitous decline in consumer demand and the popularity of raising the minimum rage have created unique variables as it relates to the labor rate. As retail was one of the hardest hit industries, I believe a study of Wal-Mart is warranted due to the amount of people it employs and its relentless focus on costs.
The labor workforce is particularly important to both Wal-Mart and retail industry. During a normal economic year, the retail sector employs over 10 million people with sales of over $5.94 trillion. Wal-Mart itself employs over 2 million people around the world in areas such as finance, marketing, sales, logistics, technology, and more. Due to the sheer number of employees the company hires, the importance of the over labor workforce is critical to economic success (Charles, 2006).

As it relates to labor rates, Wal-Mart has been at the forefront of pioneering new initiates. The company was one of the first to raise its minimum wage rate for employees throughout the organization. The raise in wages ultimately would have a material impact on the overall financial performance of the business. Walmart’s competitive advantage is its pricing strategy. The company attempts to lower costs throughout the organization to help lower costs for consumers. Consumers, particularly those who are not brand lower, tend to be attracted to lower prices for everyday use goods. Items such as clothing, certain grocery items, home furnishings and electronics compete...…overall success. From one, the company is the third largest employer in the world at over 2 million people. Second, political and societal pressures have caused the company to raise its wages for a vast majority of its workers. As a low-cost producer this directly impacted corporate overhead through larger salary expense, general and administrative expense, bonuses, retirement, and severance pay. The increase to labor costs and its corresponding impact on overhead is not unique to Walmart, however. Many of its competitors were forced to raise their wages as well. The rise in labor rates, contributed to the demise of many of the America’s most iconic brands as the grappled with changing consumer preferences, rising debt levels, and a bloated cost structure. Ultimately Walmart was able to offset its higher labor costs through increase in product volume as consumers flocked to stores in response to COVID-19. Even with the elevated labor rates, the company has still been a success throughout the world.

References

Barry, J. and Jancome, M., 2007.…