Does Walmart’s Wage Increase Mean We Won’t Enter a Recession?

A retail store employee walking down an aisle and checking prices on a tablet.

Image source: Getty Images

What happened

Walmart says it will raise minimum wages for its store workers starting March 2. According to a staff memo, the retail giant will increase its average hourly wage to more than $17.50. The company, which is one of the biggest employers in America, is also introducing several other staff benefits.

So what

The move, which means Walmart’s starting hourly wages will increase from $12-$18 to $14-$19, comes at a time when many people are worried about their jobs. In recent months, there have been dramatic layoffs in the tech and banking sectors and some analysts fear other industries could follow suit.

In part, however, Walmart’s decision to introduce substantial wage increases could be viewed as a positive economic signal. “It suggests that Walmart doesn’t think the economy will suffer a recession anytime soon, or that if it does, it will be a short-lived and modest downturn,” Mark Zandi, the chief economist at Moody’s Analytics told the New York Times.

It is also a reflection of the challenges of retaining employees, particularly as Walmart’s hourly rates are still slightly behind competitors like Costco. 

Now what

The jury’s still out on whether or not the U.S. will enter a recession this year. Some senior figures in banking have been warning of impending economic doom for some time. Others still think it is avoidable. Either way, there’s no harm in padding your emergency fund and paying down debt just in case. 

That said, it isn’t easy to save and build financial security if you’re earning $17.50 an hour, particularly given the amount living costs have increased. Assuming a 40 hour work week and 52 weeks per year, it translates to a yearly salary of $36,400 and around $3,000 a month before tax. 

Depending on where you live, a large chunk of that will go on housing. Median monthly rents crossed the $2,000 threshold for the first time last year, though they are starting to fall again. The more you can reduce your housing costs — say, by sharing living space or even moving to a lower cost area — the more money you’ll have in your bank account for other essentials.

Here are some other ways you can stretch a $36,400 paycheck:

  • See if you’re eligible for government assistance: Depending on the size of your household, you may qualify for federal help with both housing and food benefits. Go to Benefits.gov to find out what help may be available.
  • Make a budget: Break down what you spend each month in different areas and use that to plan out how much you’ll need to pay for your essential costs. If you spend more than you earn, use your budget to identify areas where you might cut back.
  • Try to save, even if it’s only a small amount: If you can save a small percentage of your monthly budget, over time you’ll be able to build up a small cushion. Having some cash in a savings account can help cover unexpected expenses, such as car repairs or a job loss.

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