IKEA has announced it will raise its average minimum wage in its US stores to $10.76, a 17 percent increase over the current wage, and $3.51 above the current federal minimum wage.
The furniture company says the increase will impact approximately half of its US retail workers. Hourly wages will vary based on the cost of living in each store location -- this is a departure from determining wages based on the local competitive situation and is centered on the needs of the employee. The wage increase is based on the MIT Living Wage Calculator, which takes into consideration housing, food, medical and transportation costs plus annual taxes.
All of IKEA's 38 existing US retail locations, as well as three new locations, which will open before the end of 2015, will adopt the new structure. All IKEA US non-retail locations – including five distribution centers, two service centers and a manufacturing facility – have hourly wage jobs that are already paying minimum wages above the local living wage.
IKEA says the transition to the new minimum hourly wage structure is not only the right thing to do, but makes good business sense. The company is betting that focusing on employee satisfaction will allow them to better serve customers and contribute to overall business success.
The wage increase is the latest in a series of investments that IKEA has made in its workers. In the past year, IKEA has introduced the TACK! loyalty program, which makes contributions to a new retirement fund, and has increased the employer-matched contributions to worker 401(k) plans, as well as launched the new One IKEA Bonus program for all employees.
While more multinational companies are making efforts to ensure workers throughout their supply chain are paid a livable wage, this is the second announcement in recent weeks of a corporation going above and beyond to improve the lives of its operational employees in the US: Earlier this month, Starbucks launched the Starbucks College Achievement Plan — an opportunity for eligible employees to complete a Bachelor’s degree with full tuition reimbursement through a collaboration with ASU's online degree program. Starbucks says that the investment is designed to support the nearly 50 percent of college students who fail to complete their degrees due to mounting debt, a tenuous work-life balance and a lack of support.
The importance of living wages for employees was highlighted in a letter published in November in the Financial Times by a group of UK investors, who said they wish to invest in companies that focus on the longevity and productivity of their business operations. The investors asserted there is “considerable evidence that paying the living wage helps to achieve these objectives.”