Economy

After Laying Off 1,700 And Spending $2 Billion On Stock Buybacks, Target Raises Minimum Pay To $9

CREDIT: AP Photo/Damian Dovarganes

Target will increase all of its workers’ pay to at least $9 an hour starting in April, the Wall Street Journal reports.

Unlike high-profile announcements from Walmart and the owner of T.J. Maxx and Marshalls, the company doesn’t plan to make a public statement. Instead, store managers are telling workers about the wage increase, and those who make below the $9 level will soon see larger paychecks. A company spokesperson said that all of its 347,000 employees already make above the federal minimum wage of $7.25 but declined to say how many can expect a raise. “Our goal is to always be competitive with the marketplace,” she told the Journal.

After Walmart announced that it would raise all base pay to at least $10 an hour by next year and TJX said it would increase pay to $9 starting in June, Target’s CFO had indicated the company wasn’t going to institute an across-the-board increase, saying it “just isn’t reasonable” to set a higher floor for stores across the country. After those comments, the company faced an ad campaign from a group pressuring it to raise its wages.

Target’s wage increase also comes just weeks after it announced that it was laying off 1,700 workers as part of an effort to save $2 billion. At the same time, it said it would spend $2 billion on stock buybacks, which serve to enrich shareholders.

Walmart’s announcement has put pressure on other retailers to spend more on employees. Although Dollar General isn’t planning to raise wages, it is spending more of its profits on increasing hours for its employees to stay competitive. And even before the announcement, Gap and Ikea had announced they were voluntarily raising their base wages. Retail wages have picked up slightly, up 2.8 percent in February compared to the year before.

Many of the companies increasing pay say they are expecting to benefit from spending more on employees by reducing turnover and improving customer experience. Economists have indeed found that higher minimum wages lead to lower turnover, increased performance and productivity, better customer service, and improved job candidates.