Walmart Inc said on Thursday that it plans to raise wages for more than 565,000 U.S. store workers by at least $1 an hour, as the all-important holiday shopping season is set to kick off in the middle of a desperate labor crunch across the country.

The US holiday shopping season - worth nearly $800 billion last year - marks the busiest time of the year for stores, making up a majority of their annual sales as people shop on and around Black Friday, Cyber Monday and Christmas.

Retailers hire tens of thousands of temporary workers across the country to keep up with crowds of people in stores and online, paying competitive wages and offering benefits. Last year, for instance, big-box rival Target provided a coronavirus health plan and paid workers $15 an hour, versus $13 an hour in 2019.

But a nationwide worker shortage due to the COVID-19 pandemic has retailers concerned they will not have enough workers in stores and warehouses to handle to extra sales online and in stores.

“The biggest challenge for retailers going into the holiday season is going to be how do they get the sales associates and the warehouse workers in position to fulfill demand,” Greg Portell, lead partner in the global consumer practice of consultancy Kearney, said.

With its third wage hike over the past year, Walmart’s U.S. average hourly wage is now $16.40, Walmart US Chief Executive John Furner said in a memo to staff. The mean hourly wage for retail salespeople is $14.87, according to the U.S. Bureau of Labor Statistics.

Workers in Walmart’s frontend, food and consumable and general merchandise departments will receive the higher wages, effective Sept. 25, Furner said.

‘BACK INTO THE HARNESS’

The news comes days before the national end of federal unemployment benefits, which has been anticipated by employers who hope a lot of people once scared by COVID will return to the workforce.

“This is significant. I mean, if you look at it in percentage terms it’s not much, but this is Walmart - they don’t really do this,” said Kenneth Dau-Schmidt, professor of labor and employment law at Indiana University Bloomington. “Companies are having trouble getting people back into the harness after being out for so long and this is another sign that the labor market is readjusting.”

Smaller retailers aren’t immune to the issue either. Chicago’s Abt Electronics, a household name in Illinois, said it has raised its minimum wage by just over 10 percent.

Worker wages and benefits are the most expensive operational cost for many retailers, whose workers have long fought for higher wages through unions and organisations including Fight for $15.

Unions have shone a spotlight this year on pay in the industry, a issue that received tremendous attention after an attempt by Amazon.com Inc workers to organise at a warehouse in Alabama. A Reuters analysis of two decades of wage data showed earlier this year that workers in unions reap higher wages.

Walmart, which is not unionized, raised pay for more than 425,000 stocking and digital associates earlier this year. It said on Wednesday it plans to hire 20,000 workers at its supply chain division. In July, the company said it would pay 100 percent of college tuition and book costs for its associates.

Dollar General said this week it is looking to hire more workers and truck drivers to whom it is offering a $5,000 sign-on bonus. Target, Best Buy and other major retailers have yet to announce any holiday wage increases or benefits.

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