By Eric Morath

Walmart Inc.'s pledge to lift its average hourly pay above $15 comes in the middle of a Washington debate on whether to more than double the federal minimum wage.

The big-box retailer's goal is politically significant because it aligns with President Biden's proposal to raise the federal minimum wage to $15 an hour from the $7.25 an hour that has been in place for 11 years. It also comes from the nation's largest private employer, with stores located in different labor markets across the country.

But Walmart's announcement Thursday isn't an endorsement of Mr. Biden's plan, which is part of a $1.9 trillion Covid-19 relief proposal by Democrats in Congress expected to pass the House later this month. The company supports a higher federal minimum wage, but not $15 an hour. While it plans to raise pay for 425,000 hourly workers from an average above $14 in January 2020, its minimum starting wage would remain at $11 an hour.

Still, the company's move could play into both sides of the federal minimum-wage debate.

Democrats who support Mr. Biden's wage plan can argue Walmart's pay raises are proof employers can afford wage increases despite the pandemic's economic disruptions, economists and analysts say. Republicans who oppose doubling the federal pay floor will likely see it as an example of effective free-market forces, arguing the government doesn't need to intervene.

"We can rely heavily on the private sector to reward workers," said Douglas Holtz-Eakin, president of the American Action Forum think tank and former economic adviser to President George W. Bush. "A federal mandate of $15 an hour is dangerous in many parts of the country with lower costs of living."

AFL-CIO Chief Economist William Spriggs, who served in the Obama administration, said Walmart's pay increase shows businesses can afford to lift wages on the heels of a pandemic.

"If we're going to have a strong recovery we're going to need much stronger wage growth," he said. "This pandemic has shown us that when you only pay people $8 or $9 an hour, they don't have the financial wherewithal to be resilient in an unexpected downturn."

The nonpartisan Congressional Budget Office said earlier this month that raising the federal minimum wage to $15 an hour by 2025 would cost 1.4 million Americans their jobs. But it also could deliver raises for up to 27 million workers and lift 900,000 Americans above the poverty threshold.

The minimum-wage increase faces multiple hurdles in the Senate, where at least two centrist Democrats have said they oppose including it in the aid package. Democrats can't afford to lose a single vote among their own ranks as they prepare to advance the package under reconciliation, a special process tied to the budget which would allow them to pass it with just a simple majority, rather than the 60 votes most bills need.

No Senate Republicans have publicly signaled support for a $15 minimum wage.

Whatever the outcome is in Congress, Walmart adds to evidence that wages are moving higher in the private sector.

"Walmart is an extremely large employer. So if they're raising wages, that's going to have a ripple effect up," said Diane Swonk, chief economist at professional-services firm Grant Thornton LLP. "The private sector is already embracing wage increases," she added.

Amazon.com Inc., Target Corp. and Costco Wholesale Corp. have minimum starting wages of at least $15 an hour.

The National Federation of Independent Business, a lobbyist for small businesses, said last month the Democrats' proposal to increase the minimum wage to $15 an hour would mostly occur at businesses with less than 500 employees, resulting in 900,000 fewer jobs at those firms. The NFIB said nearly 700,000 of those jobs would be lost at businesses with fewer than 100 employees.

The Labor Department doesn't break out minimum-wage employers by size. In 2019, 37.3% of minimum-wage earners worked in the hospitality industry, including restaurants. Nearly 23% worked at retailers. That likely includes many small retailers as larger employers including Hobby Lobby, Gap Inc. and Home Depot Inc. start workers above the federal minimum.

Walmart employs about 1.5 million hourly workers, or about 1% of the U.S. workforce. Even at $15 an hour, the retailer would pay below-average wages for rank-and-file workers in the retail industry. Average hourly earnings for nonsupervisory retail workers in the U.S. was $18.17 an hour in January, according to the Labor Department.

Walmart, which also on Thursday said U.S. comparable sales rose 8.6% in the quarter ended Jan. 29 amid increased online demand, said its planned pay structure helps provide entry-level jobs. "We do want to be thoughtful about where the beginning of that ladder is for employment and ensuring that you can get people into the workforce," said Brett Biggs, Walmart chief financial officer, in a Thursday interview.

--Kristina Peterson and Sarah Nassauer contributed to this article.

Write to Eric Morath at eric.morath@wsj.com

(END) Dow Jones Newswires

02-18-21 1514ET