The truth about Walmart’s new bonuses

Family shopping at a Wal-Mart store. (Photo by Ralf-Finn Hestoft/Corbis via Getty Images)

Walmart is the latest company to make a flashy announcement: It will raise wages and provide bonuses of up to $1,000 to its employees as a result of the recent corporate tax cut.

“Tax reform gives us the opportunity to be more competitive globally and to accelerate plans for the U.S.,” Walmart CEO Doug McMillon said.

But upon closer examination, Walmart’s announcement is significantly less than meets the eye.

First, Walmart employees are eligible for the $1,000 bonus only if they’ve worked at the company for 20 years. Most Walmart employees, of course, haven’t worked there that long. Those employees will receive a smaller bonus based on seniority. Walmart didn’t explain exactly how the sliding scale will work, but said the total value of the bonuses will be $400 million. Walmart has about 2.1 million employees, which works out to be an average bonus of about $190.

The one-time bonus Walmart announced this morning amounts to just over 2 percent of the total value of the tax cut to the company.

In fiscal year 2017, Walmart had pre-tax profits of about $20.5 billion and paid an effective federal tax rate of around 30 percent. With a new corporate tax rate of 21 percent, the corporate tax cut is worth at least $1.85 billion to Walmart every year. Since this cut is permanent, the true benefits to Walmart will grow much larger over time. But it’s safe to say that, over 10 years, this corporate tax cut will be worth over $18 billion to Walmart.

Walmart also announced it will increase its minimum wage from $10 to $11. While Walmart claimed this announcement was linked to the tax cut, the wage hike was likely necessary for the company to remain competitive — and, in some states, legally compliant.

Target announced it was raising its minimum wage to $11 last September and pledged to establish a $15 minimum wage by 2020. Costco has had a minimum wage of $13.50 since 2016. Walmart itself announced similar $1 minimum wage increases in 2015 and 2016. Additionally, many states have increased their minimum wage above $10. California, for example, now has an $11 minimum wage.

More broadly, according to a list compiled by Americans for Tax Reform, about 55 companies have announced one-time bonuses for employees following the tax overhaul. Prior to Walmart’s announcement, the total amount of bonuses pledged amounted to 0.09 percent of the value of the tax cuts to corporate America over 10 years. After Walmart’s announcement, the bonuses now amount to 0.13 percent of the value of the tax cuts to corporate America over 10 years.

Fundamentally, 99.9 percent of the tax cut is not being passed onto workers in the form of bonuses. Corporate America is generating good press for themselves and President Trump for what is effectively a rounding error.

CREDIT: Adam Peck