How companies can compete for top talent even as wage growth slows

Walmart lowered starting wages for some positions at the company, the Wall Street Journal reported on Sept. 7.

In January, the largest private employer in the US raised minimum hourly wages in its stores and warehouses from $12 to $14 an hour in order to better compete with other retailers in a tight labor market. Starting wages varied by location, with workers making between $14 and $19 an hour.

Some new hires had been paid about $1 more than those in other entry-level roles, but will now make the lowest possible hourly wage, the Journal reported. Online order collectors in the Northeast who were hired at $16 an hour earlier this year, for example, are now being offered $15 an hour.

Anne Hatfield, a spokesperson for Walmart, told Retail Brew in a statement via email that existing employees won’t see their pay docked, and that the new structure will allow for “consistent staffing and better customer service.”

Even as the labor market is softening, some other large employers are continuing to boost starting wages. On Sept. 19, Amazon announced plans to hire 250,000 seasonal employees for the holiday season, and raise average starting pay to $20.50 an hour from $19. Bank of America will raise its minimum hourly wage in October to $23, up from $22.

Still, research suggests that pay for new US hires is declining overall. Anne Maltese, director of people insights at Quantum Workplace, said HR pros should emphasize aspects of their culture, as well as benefits like flexibility and career development, if they can’t offer candidates higher wages.

Cooling labor market → cooler wages. In August, small and medium-sized businesses paid new hires 4.2% less than the previous year, on average, according to research from Gusto, which tracks data from over 300,000 businesses.

The decline in starting wages has been largely driven by a slowdown in hiring, as businesses’ “appetite to expand has significantly cooled,” Luke Pardue, an economist with Gusto, told HR Brew. There were 8.8 million available jobs in the US in July, according to the Bureau of Labor Statistics, down from an all-time high of 12 million in March 2022.

Broader macroeconomic conditions may be contributing to the decline as well, Pardue said. The Federal Reserve has raised interest rates 11 times since March 2022 in an effort to tame inflation, making it harder—and more costly—for businesses to get loans.

“They’re going to be keenly aware of what the market can bear in terms of wages,” Pardue said. As input costs rise or remain high, “businesses are going to try and adjust wages to the extent that they can find something to reduce on the expense side of the ledger.”

Competing for talent. Given the wider availability of salary data due to pay transparency laws, companies’ decisions on wages are now more visible to current and prospective employees.

HR should be up-front with employees should their organization make the decision to dock wages, providing data and details about what went into the decision, said Anne Maltese, director of people insights at Quantum Workplace.

Emphasizing other benefits the company offers beyond wages may help make up for a decision to lower starting pay, she added. Though employees are most attracted to new jobs for more pay, this isn’t the only consideration that plays into their decision-making, according to Quantum Workplace research. Promotion or career development opportunities, better benefits, and more flexibility also rank as top factors.

“If we’re all trying to compete on pay, nothing makes us unique,” Maltese said. “So, how are we differentiating ourselves with the other things on that list?” This might mean playing up the core values and mission of the organization, highlighting employee performance and recognition, and explaining the company’s approach to flexibility, whether that means allowing employees to swap shifts or work remotely.