IKEA Setting a New Standard For Employee Wages In US
By Christine Kern, contributing writer
Retailer raises minimum wage for second time with a 10.3 percent hike.
IKEA has announced that they will raise the average minimum wage for its workers for the second time in just a year, announcing a 10.3 percent hike, according to the Huffington Post. The retailer made headlines in June of 2014 when it announced that it was adopting a new minimum hourly wage structure for its US retail workers, starting in January of 2015.
This latest announcement will bring the average store’s starting pay to $11.87 starting in 2016, $4.62 above the current U.S. federal minimum wage of $7.25, according to Time. The decision will affect 30 percent of IKEA’s U.S. employees.
The Huffington Post explained that the system previously established by IKEA sets starting wages for a given store that reflects the cost of living in that particular area as determined by the MIT Living Wage Calculator, which takes into account the local cost of rent, food, transportation and other expenses.
And contrary to predictions that such wage hikes would spell disaster for retailers, IKEA CFO Rob Olson reported that the company was already seeing benefits from its decision. Among the positive results is the decrease in employee turnover. Olson told the Huffington Post that just six months after the first raise was implemented, IKEA is trending to reduce turnover by at least 5 percent for fiscal year 2015, which represents savings in recruiting and training of new employees.
Olson also says that IKEA is now attracting more qualified job seekers, since the average retail wage for U.S. workers is generally lower than IKEA’s new average. The move to raise wages, and to implement the MIT Living Wage Calculator, makes Ikea’s approach unique, but it also comes from more than just a philanthropic benevolence.
Quoting the company's stated vision, Olson said the wage raises are meant to "create a better everyday life for the many people" -- the many people, in this case, being Ikea's employees.
As Policy.Mic concluded, “The key takeaway is that IKEA has determined that decent wages and a well-run business are not only not mutually exclusive but, in fact, complementary. The chief financial officer for IKEA U.S. told the Huffington Post that the new raise atop last year's raise "makes strong business sense." Indeed, surveys find that small business owners routinely see more productivity and less turnover among better paid employees, and that they're able to accommodate higher wages without infringing on profitability.”
Other retailers have also recently made moves to retain quality employees. Walmart announced that it was raising baseline wages of an estimated 500,000 workers to $10 per hour by February 2016, a move with unique implications. The move by Walmart was a seeming game changer for the industry.
Target and Dollar General also entered the discussion with their own unique solutions to the issue: Target announced that it is raising wages, while Dollar General is adding hours, rather than hiking hourly wages, to its employees’ basket. The move brought Target’s minimum wage to $9 an hour beginning in April 2015, a move that would be implemented market by market, according to Target CEO Brian Cornell. And Dollar General responded to employee requests for more hours and scheduling flexibility as a way of keeping its workers content. Dollar General is banking on enticing good workers with schedules closer to full-time, rather than higher wages.