Home improvement company Lowe’s will provide $55 million in bonuses bonus to its hourly frontline workers to help with the burden of high inflation, the retailer said in an earnings call Wednesday.
“In recognition of some of the cost pressures they are facing due to high inflation, we are providing an incremental $55 million in bonuses to our hourly frontline associates this quarter,” Lowe’s CEO Martin R. Ellison announced. “These associates have the most important job in our company and we deeply appreciate everything they do to serve our customers to deliver a best-in-class experience.”
Though there has been a slight decrease in gas prices and travel costs recently, the impacts of inflation, which hit a 40-year-high this summer, are still affecting Americans, making it tougher for families to afford groceries and other essential goods. Microsoft, ExxonMobil, Walmart, USAA and others have also offered bonuses, pay raises and even gift cards to their employees to help offset rising costs. But according to a study from the Brookings Institution earlier this year, many of the nation’s leading employers are still not paying their workers a living wage.
Lowe’s employs approximately 300,000 associates, according to the company’s website, but it has not specified how much money each worker would receive and over what time period.
According to Larry Harris, a chaired professor of finance at USC Marshall School of Business, corporate initiatives to boost wages and implement bonuses like this one are usually done in an effort to retain employees.
“The labor movement is very tight and they’re afraid of losing their workforce,” Harris told CBS News. “So they’re providing bonuses, additional benefits, they may increase wages — all this is designed to make it more attractive to remain a worker at Lowe’s.”
“Because of the countrywide labor shortage we have been seeing, companies are looking for ways to hold onto the workers they have,” he said.
There are several causes of this scarcity of labor, Harris explained.
“The baby boomers are retiring in droves and birth rates started declining 33 years ago. And so the kids who are 18 to 25 entering the workforce are a fraction of the people leaving,” Harris said. “Now, COVID didn’t help this. Many people saw that their life is a lot more transient than they realized and they started asking themselves, ‘Do I really want to be working or should I retire earlier?'”
While the bonus money will offer temporary help to Lowe’s workers, it is not as useful as a salary raise, Harris said.
“Workers of course prefer a wage raise to a bonus because an increase in wage is permanent, whereas a bonus is transitory,” Harris said. “I imagine that Lowe’s and other companies who are doing bonuses are not quite ready to raise wages. They’d rather not have to, but they will be forced to if they start losing employees.”
However, these extra incentives are not without consequences. When companies move to increase wages or add bonuses, it can lead to higher sticker prices at the store, intensifying the effects of inflation, he said.
“As their expenses rise, they have to raise their product prices. Otherwise, they will be losing money,” Harris said. “There’s a vicious cycle here that higher product prices cause greater inflation, which decreases the value of the wage. And so they have to raise wages, but raising wages leads to higher product prices. And it goes round and round.”