Ikea raises min­i­mum wage in US

The China Post - - WORLD BUSINESS - BY ANNE D’INNOCENZIO

Ikea’s U.S di­vi­sion is rais­ing the min­i­mum wage for the sec­ond year in a row as the Swedish ready-toassem­ble fur­ni­ture chain looks to im­prove its re­la­tions with work­ers and re­duce worker turnover.

Start­ing Jan. 1, Ikea’s av­er­age min­i­mum hourly wage will in­crease to US$11.87, which is US$4.62 above the cur­rent fed­eral wage and marks a US$1.11 in­crease, or 10 per­cent, from this year’s av­er­age min­i­mum pay.

The in­crease will af­fect 32 per­cent of Ikea’s 10,500 U.S. store work­ers and will raise the av­er­age hourly wage to US$15.45. That’s up from the cur­rent US$14.19 per hour. The in­crease also cov­ers work­ers in some dis­tri­bu­tion cen­ters.

Ikea raised the min­i­mum wage in June 2014 by an av­er­age of 17 per­cent, ef­fec­tive 2015. That marked the big­gest in­crease in 10 years in the U.S. for the re­tailer. It also pegged the raise to the cost of liv­ing in each lo­ca­tion, in­stead of what com­peti­tors are of­fer­ing as most stores do, sig­nal­ing a new ap­proach to its pay struc­ture.

The pay raise comes as sev­eral re­tail­ers, in­clud­ing Wal-Mart Stores Inc., have an­nounced wage hikes and other in­cen­tives to at­tract work­ers and to stay com­pet­i­tive in an im­prov­ing job mar­ket. They’ve also faced pres­sure from la­bor-backed groups to in­crease wages and im­prove work­ing con­di­tions.

Rob Olsen, chief fi­nan­cial of­fi­cer at Ikea’s U.S. di­vi­sion, told The As­so­ci­ated Press on Tues­day that the in­crease an­nounced last year was based on data a few years old from the MIT Liv­ing Wage Cal­cu­la­tor, which takes into con­sid­er­a­tion hous­ing, food, med­i­cal and trans­porta­tion costs plus an­nual taxes. Ikea saw the need to raise wages for next year based on new data from the liv­ing wage cal­cu­la­tor.

Like other re­tail­ers, Ikea had al­ways ad­justed wages based on what com­peti­tors were of­fer­ing. Start­ing with the in­crease an­nounced last year, raises vary based on the cost of liv­ing in each of its 40 U.S. store lo­ca­tions. For in­stance, Olsen said that Ikea work­ers in the El­iz­a­beth, New Jersey, store will see a 22 per­cent raise in pay.

He noted Ikea has al­ready seen an im­proved turnover rate and a broader pool of strong ap­pli­cants for store open­ings. Olsen de­clined to of­fer the com­pany’s turnover rate, but he said that it’s sur­passed its goal of low­er­ing the rate by 5 per­cent­age points just six months af­ter the wage hike.

Olsen noted Ikea’s turnover rate has al­ways been be­low the in­dus­try av­er­age. About 19 per­cent of full­time re­tail work­ers leave their jobs an­nu­ally, ac­cord­ing to the Na­tional Re­tail Fed­er­a­tion.

Wal-Mart told the media ear­lier this month that it’s al­ready start­ing to see lower turnover at the stores as a re­sult of the higher wages.

Still, la­bor backed groups are push­ing for com­pa­nies to start en­try level wages at US$15 per hour.

There’s much na­tional de­bate about what is a “liv­ing wage,” or enough money for a worker to make in or­der to make ends meet. Most re­tail work­ers al­ready make more than the fed­eral min­i­mum wage but not much more. In fact, more than half of re­tail work­ers make US$10 or less, ac­cord­ing to David Cooper of The Eco­nomic Pol­icy In­sti­tute.

AP

This June 3 file photo shows an IKEA store in Mi­ami.

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