Reports from the Wall Street Journal on Thursday indicated that Walmart (NYSE:WMT) is paying some new workers a lower starting wage than it was just three months ago. This, according to analysts at Jefferies, suggests the labor market is showing signs of easing.
In the revised Walmart pay framework, the majority of newly recruited employees will receive the store's minimum hourly wage, according to documents reviewed by the Journal. Previously, certain new hires, like those responsible for assembling items for online orders, would earn a slightly higher wage compared to other recent hires, such as cashiers.
The pay change, according to the Walmart documents, enables employees to switch between various work groups, including roles in food service, registers, stocking, or digital fulfillment, without any adverse effects on their wages. Walmart said the adjustment aims to enhance overall staffing within the store. Additionally, over 50,000 Walmart workers have received salary increases as their previous pay rates fell below the newly established minimum of $14 per hour.
"This move helps flatten the labor structure within the store and allow for greater staffing flexibility (i.e. cashier, online pickup, etc.)," Jefferies analysts said, while adding that the news suggests that labor market tightness is showing signs of easing on a broader scale.
The analysts added that they don't see a financial impact from the move near-term. "From conversations with mgmt, we don't believe this change will have a material impact on payrolls," they commented. "The lower starting wages for some new associates should be offset by the wage increases for the affected 50,000 existing associates."
"As the largest private employer in U.S., we view this update as an indicator that the labor market is becoming more favorable for employers," the analysts conclude. "We believe that WMT is seeing better availability for labor which gives it the confidence to make this change."
The analysts have a Buy rating and $190 price target on Walmart, suggesting 18% upside from current levels.