You’ve heard by now that Walmart recently raised their minimum wage to at least $9/hr, and starting this time next year, that number will jump to $10/hr.

There are a lot of responses out there discussing this $1 raise. The discussion ranges from the fact that it’s still not enough to live on, to how great it is for Walmart to take this step in the right direction with other retailers following their lead.

Despite all of the PR, the real reasons behind Walmart’s move are still in question. According to the this article by Paul Krugman, the retail giant is banking on the idea that “paying workers better will lead to reduced turnover, better morale and higher productivity.”

This made us think: Can a dollar an hour buy employee engagement?

We asked our team to offer their thoughts on the matter. Here’s what they had to say:

Arthur Kim, Engagement Manager

While raising wages has an immediate increase in morale, it rarely has a lasting effect. To reduce turnover and discontent among the staff, it’s more important to create a strong corporate culture that improves everyday work life.

Chelsea Weber, OD Intern

The kind of financial stability that an extra dollar an hour might provide speaks to needs at the core of Maslow’s famous hierarchy: comfort and safety.  In other words, a wage hike speaks to a basic modern human need. Without stability, can you even think about asking employees to engage?

Yet while better pay may increase morale, simply raising wages will not produce a sustained workforce of engaged, motivated employees. Wal-Mart will have to look further.  Employees are liable to stick around if they feel motivated, satisfied, and effective at work, but those feelings rely on the development of intrinsic motivation to be sustainable.

Wal-Mart needs to ask itself: What’s going to make employees excited to come into work each day?  How will they help team members feel like they are contributing to the wider organization, like their voices are heard? How do employees see the results of their work? And how will Wal-Mart connect these answers to strategy and brand to create a feeling of authenticity for team members?

Mark Emerson, General Manager

I don’t think at the end of the day it will change things for Walmart. This is really a macro-economic move on their part. It’s employee retention, plain and simple.

As the largest retail employer in the country, they were forced by competitive pressures to follow other retailers (Gap, etc.) that recently announced wage increases.  The increase next year to $10/hr on average will simply keep them in line with wage pressures as the economy continues to improve.

I am willing to bet that their finance team got together, ran the numbers, and realized that $2/hour was less than the cost of current turnover and this (not any other feel-good reason) was behind the move.  The fact that they got good PR and the unions temporarily off their back is an added bonus.

There is an upside and a downside (isn’t there always?).  The upside is that Walmart, in many cases, is the largest employer in many parts of the country and their employees tend to be stuck, in that their options are extremely limited by geography and, in many cases, education. For those employees stuck at Walmart, a raise is a raise and 20% over the next two years is pretty significant.

In addition, Walmart’s raises will have an even more positive effect as this decision will force other retailers and fast food restaurants to raise their wages to stay above them. After all, people actually do say, “well, I could always work at Walmart!”

The downside is that, for many folks, they didn’t like working at Walmart before the raise, and chances are they won’t like working there after the raise.  I doubt I will visit my local Walmart and find the employees noticeably more engaged.  And with the wages rising outside of Walmart, I expect that the impact will be muted.

I can’t help always comparing them to Costco. While there are many differences that don’t allow for fair comparisons, the fact is that Costco employees feel a part of a team and are treated like team members and not parts in a machine.  It is the culture of Walmart that impedes them in being even more successful.

‘Always low prices’ is a great slogan for customers, but the dehumanizing effect it has on employees is something that Walmart is still not getting right.

Pamela Farago, OD Intern

“Always low prices. Always.” does not need to translate into, “Always low wages. Always.”

Wal-Mart supported this idea with its recent wage increase for a half million workers. Paying workers better has, indeed, been shown to lead to reduced turnover, better morale, and higher productivity in the workplace. The money that a company spends on a wage increase comes back to more than pay for itself in the long run.

Wage increases in the long run, however, can be both a friend and a potential adversary. What happens when the novelty of the wage increase wears off? At this point, despite being paid more, workers may revert back to their old morale and productivity levels.

This leaves not only Wal-Mart, but also all other businesses, to contend with answering the more difficult question of: how can workers be continually motivated when their wages become stagnant? While there is no answer as of yet, potential solutions may lie in a system of rewards and bonuses that workers can continually strive for, rather than a base pay increase.

Always high incentives. Always.

What Do You Think?

Have you been reading all the news about this $1 pay hike and the slew of other retailers following Walmart’s footsteps? How do you think $1 an hour really affects employee engagement levels? We’d love to hear your thoughts!