Ikea will announce Thursday a plan to raise its average minimum wage at U.S. stores to $10.76 an hour, a 17 percent increase over the current wage.
The lowest wage at its 38 locations won’t all raise to the same level, but will be set based on the cost of living in each area given housing, food, transportation, and taxes. It will be as low as $8.69 in Pittsburgh and as high as $13.22 in Woodbridge, VA. The change will increase pay for about half of the 13,120 American workers employed at its stores.
The store is increasing pay because it is “investing in our co-workers,” Rob Olson, acting president for the United States and CFO, told the New York Times. “We believe they will invest in our customers, and they will invest in Ikea’s stores. We believe that it will be a win-win-win for our co-workers, our customers and our stores.” He noted that while the new pay structure will “be a significant investment,” it won’t mean higher prices for its products.
Ikea’s announcement comes after some other large companies have announced their own voluntary wage increases. The Gap said in February that it will eventually raise its lowest wage to $10 an hour. A hospital in Dallas is increasing its minimum wage to $10.25 an hour with money originally meant for executive bonuses. Two pizza companies in St. Louis raised their lowest pay to $10.10 an hour.
These companies usually cite the same reason: they expect it to help them attract and retain better employees, which will help their bottom lines. The Gap says it has already seen this effect, with the number of job applicants jumping 10 percent since it announced a higher wage. Research backs this idea up, showing that higher minimum wages can make it easier to recruit workers, improve their efficiency, and lower turnover — and the latter is costly, consuming the equivalent of about 20 percent of former employees’ pay to replace them.
The companies’ wage adjustments come while legislative action to raise all workers’ minimum wages has stalled. President Obama and Congressional Democrats have pushed for a $10.10 federal minimum wage, but Republicans blocked it. At least nine states have raised their wages this year, however.
Ikea also offers benefits to its workers. It has a 100 percent match for the first 4 percent of pay contributed to the company’s 401(k) plans, and a 50 percent match for the next 2 percent, as well as a bonus program for all employees.