Ikea to raise minimum wage for some workers

Ikea USA said half of 11,000 employees would be affected.
Ikea USA said half of 11,000 employees would be affected. (VICTOR J. BLUE / Bloomberg)
Posted: June 28, 2014

Joining a movement toward increasing income for low-wage workers, Ikea USA announced Thursday that more than half its minimum-wage hourly workers would get an average 17 percent raise, effective Jan. 1.

The announcement by the Swedish retailer, which has its U.S. headquarters in Conshohocken, came days after Gap Inc. instituted a wage increase for its 65,000 workers and a week after City Council passed an ordinance raising minimum wages for employees of Philadelphia contractors and subcontractors.

"The transition to the new minimum hourly wage structure is not only the right thing to do, it makes good business sense," said Rob Olson, Ikea US acting president and chief financial officer. "We are basing our wages on our coworkers and their needs, rather than what the local employment market dictates."

The company employs 13,651 in the U.S.; half of 11,000 employees would be affected. Workers at its distribution center in Westampton would not be affected, since they already earn above minimum wage, the company said.

President Obama has been pushing Congress to raise the minimum hourly wage to $10.10 an hour, up from the current $7.25. An increase has been proposed in Pennsylvania, and New Jersey voters last year approved an increase in the minimum wage to $8.25 an hour.

Ikea's increase is different from other measures in that it does not set a blanket minimum for all its 38 U.S. locations.

Instead, it is basing its lowest hourly wage on a "living-wage" calculator established by the Massachusetts Institute of Technology. The calculator measures costs in different regions, and the "living wage" varies according to local economic conditions.

Nationally, the company said, the average minimum wage would rise to $10.76, or $3.51 above the current national minimum wage of $7.25 an hour.

For its South Philadelphia and Plymouth Meeting locations, the calculator sets the minimum living wage at $10.09 for a single person with no children, the standard Ikea plans to use.

At its Elizabeth, N.J., store, the calculator mandates a minimum wage of $10.83. By contrast, the wage at Ikea's Pittsburgh store would rise to $8.29.

The National Retail Federation and the U.S. Chamber of Commerce are on record opposing increases in the minimum wage.

Economists opposed to raising it have argued that employers would cut hours or cut jobs. Those in favor say raising wages will spur consumption, which boosts the economy. Both views were affirmed in a February report by the federal Congressional Budget Office.

"It's really important that we have a large retailer paving the way for retailers to show they can pay living wages in the community in which they are located," said Philadelphia economist Eileen Appelbaum, author of several books on low-wage workers and an analyst at the Center for Economic and Policy Research.

"It's reputational. I think it promotes their brand." Companies like Walmart and McDonald's have been criticized for their pay practices, she said.

"We think this is morally the right thing to do, to lift up the wages of the workers, and we are hopeful the other businesses will take up the lead," said Bishop Dwayne Royster, leader of POWER, a Philadelphia-based group pushing for higher pay for low-wage workers, particularly at Philadelphia International Airport.





Inquirer staff writer Joseph N. DiStefano contributed to this article.

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