Forget First Quarter Earnings, Wal-Mart Just Made a Long-Term, Business-Sustaining Move

NEW YORK (TheStreet) -- Ignore the ding to first quarter earnings: Wal-Mart's (WMT) decision to raise employee wages, while raising ire among some investors and observers, is a smart long-term investment in its own business. In the most obvious way, this investment enables Wal-Mart to attract and keep better workers, which translates to productive, happier, better-paid workers and better store experiences for customers.

In some areas, Wal-Mart stores function as a de facto town square, a center for the community economically and socially. They are a main driver for employment and the growth of many of the regions in which they operate, and employ a significant proportion of the country's working population for any one firm. Raising its wages improves employees' quality of life in its more than 4,100 stores -- and better quality of life for others in the communities in which these stores are located. Increased quality of life in turn will drive Wal-Mart's business in the long-term as happier people with more money in their pockets shop and buy more.

Wal-Mart raising wages also helps the broader American economy. Recent studies have shown that workers who don't make a living wage often turn to government assistance. The UC Berkeley Labor Center found public services offered to low wage workers cost U.S. taxpayers approximately $152.8 billion a year. The problem is no longer what used to be derisively called "welfare queens" (those assistance recipients who don't work) but welfare workers: that is employed workers who don't make enough from their employers to make ends meet.

After news that Wal-Mart's short-term earnings in the first quarter took a hit, its stock lost 3% of its value after their earnings announcement, so it would be safe to say investors didn't approve. But were those investors who were investing in the long-term health and prospects of a major corporation -- or were they short-term bettors who were focused on making transactional profits?

There has been a change in the way investors are looking at companies. No longer is the financial bottom line, while still a vital marker, the sole deciding factor for support. 

Regardless of the cost and potential short-term earnings affect, Wal-Mart isn't alone in increasing wages. Companies as diverse as McDonalds (MCD), Ikea and Aetna (AET) have all raised wages for their lowest-paid employees in an effort to recruit and retain better talent and focus on longer-term benefits to the company.

As Wal-Mart CEO Doug McMillon said: "Overall, these are strategic investments in our people to reignite the sense of ownership they have in our stores...As a result, we firmly believe that our customers will benefit from a better store experience, which can drive higher sales and returns for our shareholders over time."

Other CEOs could take a page from McMillon on this front. Many service-oriented companies like Darden Restaurants (DRI), Applebee's and RiteAid (RAD) have all been outspoken critics of -- and lobbyists against -- raising the minimum wage. In a marketplace where income inequality is a hot topic and millennials drive the market, companies doing the right thing for the long-term will win.

In this area, Wal-Mart is showcasing a kind of leadership that other corporations should be emulating. It's an important reminder that corporations play a vital role not just in our economy, but also in our society: They make the things we buy and sell, they employ us and provide economic stability to our communities, and they power our economies and our lives.

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This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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