Ikea is Raising Minimum Wage a Second Time Since the First was so Successful

by Walter Einenkel –

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The nordic Ikea already has a pretty decent environmental record. Last year Ikea upped its game by raising the average minimum wage for US employees. They used MIT’s Living Wage Calculator in their decision making process. The website purportedly calculates the living wage in counties and states of the United States. Ikea’s policy used the calculator for its American retail businesses as a starting point for employees. That decision was good news last year:

The change means wages will go up for 50 percent of Ikea’s retail employees. The other 50 percent, Olson said, are already paid a living wage or higher. No one’s pay would decrease as a result of these changes.

The program has been a real success and Ikea announced that they are going ahead with scheduling a second round of raises.

Ikea said Wednesday that it plans to implement another nationwide raise to its wage floor next year, bringing the average store’s starting pay to nearly $12 per hour.Under the system that the ready-to-assemble furniture maker first established in January, the starting wage for any given store in the U.S. 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 the like. After the second round of raises, which is slated for this coming January, all of the company’s U.S. stores will be paying at least $10 per hour, and the average minimum wage across all locations will be $11.87 — a 10.3 percent increase over the previous year, according to the company.

This was a surprise to conservative naysayers who assumed most Ikeas would have burned to the ground during the living wage apocalypse that happened last year after the announcement. Instead, Ikea claims that there are real benefits to trying to pay a living wage to the people that make you lots of money. It turns out that paying people better, treating employees better, makes things … better. Ikea CFO Rob Olson was asked about the benefits:

For one, less turnover. Although it’s only been six months since the raises went into effect, Olson said Ikea is on pace to reduce turnover by 5 percent or better this fiscal year. Holding onto employees longer means the company is spending less on recruiting and training new replacements.Ikea is also attracting more qualified job seekers to work at its stores, according to Olson. Pay for retail sales workers in the U.S. is generally very low, with an average industry wage of just $12.38 per hour, according to the Bureau of Labor Statistics. But Ikea’s average store wage is heading north of $15. After its living wage announcement last year, the company opened two new locations — one in Merriam, Kansas, and another in Miami — and the higher wages (and attendant publicity) likely helped the company lure more candidates.

That’s strange.


Reprinted with permission from Daily Kos