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Big retailers’ wage boost may set trend

ALBUQUERQUE, N.M. — Wages have become the focus in retail’s gradual recovery of jobs lost during the economic bust, underscoring the employment sector’s reputation as a stepping stone or fallback for many of its workers.

Wal-Mart employees Michael Suazo and Chris Cordova stock cheese at the Wal-Mart Supercenter on Carlisle NE.

Wal-Mart employees Michael Suazo and Chris Cordova stock cheese at the Wal-Mart Supercenter on Carlisle NE.

Long known for modest pay, retail has seen major employers such as Wal-Mart and Target announce sweeping wage increases that will affect thousands of workers in New Mexico.

Retail employs a little over 11 percent of New Mexico’s total workforce, about on par with the nation as a whole. The sector contributes on average about 5.8 percent of the state gross product in its role as a final step in the distribution of merchandise to consumers.

Average monthly employment numbers show retail employment was 92,500 last year, the highest it’s been since 96,400 in 2008, said Joy Forehand of the state Department of Workforce Solutions. The gradual return of jobs to retail is good news for young job seekers.

“The skills gained from retail experience are highly transferable, not only to advancement opportunities within retail trade, but also to a variety of industries,” Forehand said.

“Customer service, communication and interpersonal skills are just some of the invaluable soft skills acquired from retail-related jobs that are sought after by employers across many industries.”

The Wal-Mart effect

In February, the Bentonville, Ark.-based Wal-Mart announced a sweeping initiative to raise baseline wages for some 500,000 employees across the country.

MAP MASTERWidely recognized as the biggest private-sector employer in New Mexico, Wal-Mart says it has 14,022 employees working at 48 retail outlets, ranging from its big-box supercenters to neighborhood markets and a 750,000-square-foot distribution center in Los Lunas.

Based on numbers provided by Wal-Mart, the wage initiative could pump upwards of $20 million into the state economy from its employees having more money to spend.

“Higher wages to Wal-Mart employees likely means an increase in household spending in New Mexico. Insofar as those earning less tend to spend a greater percentage of new income, that increase may be substantial,” noted Jeffrey Mitchell, director of the Bureau of Business & Economic Research at the University of New Mexico.

Last week, Target revealed a plan to raise its entry-level pay to $9 an hour by April. The Minneapolis-based company had 10 stores and 1,341 employees in New Mexico as of August.

Wages relatively low

The average wage for a retail salesperson in New Mexico was $11.69 an hour in the second quarter of 2014, according to state wage data. The hourly rate is 56 percent higher than the state’s minimum wage of $7.50 an hour but 41 percent lower than the average of $19.94 an hour for all occupations in the state.

In the Albuquerque metro area, the average hourly rate is marginally higher than the statewide average, at $11.73 an hour, which is 34 percent higher than the city of Albuquerque’s minimum wage of $8.75 an hour. If an employer provides certain fringe benefits, Albuquerque’s minimum wage drops to $7.75 an hour.

The metro’s average annual wage of $24,408 for a retail salesperson meets the HUD threshold for “low income” for any size household. The annual wage meets the threshold for “very low income” for a household with three or more family members.

Wal-Mart says its average hourly wage for full-time employees in New Mexico is currently $12.95. Wal-Mart declined to provide a breakdown of full- and part-time workers in the state, but spokeswoman Delia Garcia said “a majority of Wal-Mart associates (or employees) are full-time.”

Addressing the company’s average hourly wage for full-timers, Our Wal-Mart, a national labor advocacy organization for Wal-Mart workers, says on its website, “In truth most of us work for less than $10 per hour and are only scheduled for part-time hours, making it difficult to support our families.”

Part-time jobs are common in retail, particularly over the holiday shopping season. On average nationwide, one in three retail salespersons is part time, according to the federal Bureau of Labor Statistics.

A company fact sheet on Wal-Mart’s wage initiative says that, by next month, the full-time wage will increase to an average of $13 an hour and the part-time wage will increase to an average of $10 an hour. In addition, the company’s minimum starting wage in all markets will be $9 an hour.

In addition to Wal-Mart and Target, Framingham, Mass.-based TJX Cos. announced a plan to increase its entry-level pay to $9 an hour by June. TJX operates three T.J.Maxx stores, three Marshalls stores and one HomeGoods store in New Mexico.

One of the first national retailers to increase its entry-level wage was Gap Inc., which in early 2014 announced a plan to raise it to $9 an hour by June 2014 and $10 an hour by June of this year, effective after a probation period. The company operates one Gap, one Banana Republic and three Old Navy stores in New Mexico.

Potential ripple effect

Wal-Mart employee Fred Yazzie stacks bags of mulch in the parking lot of the Wal-Mart Supercenter on Carlisle NE. Some major retailers have announced sweeping wage hikes.

Wal-Mart employee Fred Yazzie stacks bags of mulch in the parking lot of the Wal-Mart Supercenter on Carlisle NE. Some major retailers have announced sweeping wage hikes.

Wal-Mart is the elephant in the room when it comes to retail employment in New Mexico – by a conservative estimate representing 10 percent of the sector’s total employment – thus raising the question of whether its wage initiative will have a ripple effect of wage increases across the sector.

“If a large retailer raises wages for all workers, this could potentially have some effects on retail wages,” said Alison Felix, assistant vice president and Denver Branch executive at the Federal Reserve Bank of Kansas City, in an email.

“In geographic areas where that retailer is a large employer and where labor markets are tight, you could see some spillover in higher wages to other retail jobs,” she said. “However, if unemployment remains high in the area, it may be that other employers will not need to increase their wages.”

In general, wages are driven by demand for labor and supply of labor, she explained. When employers have trouble finding workers for open positions, wages tend to go up. Sometimes, she noted, an increase in product demand will enable an increase in the price of the product, in turn leading to an increase in employee pay.

Stepping stone

Employee retention is clearly behind Wal-Mart’s wage initiative, which addresses other employee concerns by providing for consistent work schedules and strengthening training programs. A theme in the initiative’s promotional material is providing employees with opportunities for career advancement.

“If you work hard, develop new skills and care for others, there should be no limit to what you can do here,” Wal-Mart President and CEO Doug McMillon told employees in a Feb. 19 memo.

Retail is an employment sector that is often seen as a stepping stone. Since many retail workers move on to better-paying jobs in other employment sectors, turnover creates a constant supply of retail job openings.

The state’s retail workforce is comparatively youthful, with nearly half of all workers aged 33 and younger, according to a 2013 Industry Spotlight report on retail trade by the Department of Workforce Solutions. In addition, the workforce is evenly split between men and women.

The youthfulness of the retail sector points to one of its most singular characteristics: low education requirements. Various government reports say formal education is not needed and, in fact, teenagers can find jobs in retail while they’re still in high school.

“Post recession when the labor force became so highly competitive, I think the dynamic changed for a while,” Forehand said. “It became harder for younger, less experienced workers to find jobs.”

The retail workforce is projected to grow by 12 percent, or 10,930 new jobs, between 2012 and 2022, according to the state’s Growth Trends of New Mexico’s Industries and Occupations report. If the projection holds true, the retail sector will have nearly 102,000 workers in 2022.