Last week, Wal-Mart announced it would begin paying entry-level workers $9 an hour beginning in April and $10 an hour in 2016. It’s a big departure for the big box retailer, which has gained a reputation for treating employees poorly to keep costs low. Wal-Mart says the increase would cost the company more than $1 billion in the next year.

The company’s announcement has made waves in the low cost retailer industry and is even starting a broader national conversation on wage increases. But Wal-Mart’s decision to increase wages isn’t just a good move for corporate social responsibility. It’s a good move for making money, too.

Wal-Mart is becoming the focal point for a national discussion surrounding the federal minimum wage and whether or not an increase should be put in place to provide a more viable living wage. The company has made a name off of its bottom-line, cost-cutting business strategy. This has largely helped it become the ninth largest company in market value in the world, according to the Financial Times. Its decision to depart from the federal minimum wage of $7.25 an hour makes a big statement to the industry.

Accordingly, other low cost retailers have followed suit. TJX, the company that owns discount clothing chains T.J. Maxx and Marshalls, announced that it would follow Wal-Mart and raise its minimum wage to $9 an hour. The ripple effect might make Wal-Mart seem something of a hero, but in actuality, retailers like Costco and Trader Joe’s have been paying higher wages for a while.

The truth is Wal-Mart has perfectly good reasons to pay its workers more from a profitability standpoint. Because it’s a low-cost retailer, it saw some of its best days during the 2008 economic recession. Families strapped on cash flocked to Wal-Mart to save money. But economic conditions today are far more optimistic. The University of Michigan’s consumer sentiment study shows that Americans reached the highest post-recession levels of confidence in the economy this month.

That means that people are willing to shell out the extra money at other, slightly more expensive retailers. One reason consumers are shopping at other retailers is the quality of the shopping experience. Wal-Mart is known for its generally unattractive shopping experience and unfavorable public image. People of Walmart is a popular website profiling unsightly customers at Wal-Mart stores around the country. In 2008, a Black Friday crowd trampled an employee to death, which garnered national attention and more poor press for the company.

A lot of the issues surrounding poor atmosphere and public image come from unhappy employees. Wal-Mart has been in several public disputes with its employees, ranging from issues concerning poor work conditions to high turnover and even discrimination. That’s significant because Wal-Mart is the biggest U.S. based employer of Americans, according to S&P Capital.

By paying its employees more, Wal-Mart is taking the first step to make its workers a little bit happier. Happier employees mean happier customers and happier customers mean more money.

The very straightforwardly titled book “Make More Money by Making Your Employees Happy” by Noelle Nelson makes the observation that companies in Fortune’s 100 Best Companies to Work For had their stock increase significantly more than the overall market.

Wal-Mart has always made its profits by cost cutting, but in an economic environment that isn’t favoring low-cost retailers, it must focus on increasing the quality of its public image. By paying its employees more and making an active effort to improve the shopping experiences for consumers, Wal-Mart won’t only be making a socially responsible move, but making a smart business move. And that is well worth $1 billion.

Brian Cheung is a senior broadcast and digital journalism and finance dual major. His column appears weekly. He can be reached at [email protected] and followed on Twitter @bcheungz.

Published on March 2, 2015 at 12:20 am