NEW YORK – Ikea’s U.S. division is raising the minimum wage for thousands of its retail workers, pegging it to each location’s cost of living instead of to its competition.
The 17 percent average raise, announced Thursday, is the Swedish ready-to-assemble furniture chain’s biggest in 10 years in the U.S.
The pay increase will take effect Jan. 1. It will translate to an average wage of $10.76 an hour, a $1.59 increase from the previous $9.17.
About half of Ikea’s 11,000 hourly store workers will get a raise. How much will vary based on the cost of living in each store location.
Ikea, which has cultivated a reputation for fair treatment of its workers, evaluates its benefits plans every year and had always adjusted wages based on its competition. But Rob Olson, Ikea’s acting U.S. president, says the latest move shifts its approach.
Now, we decided to focus less on the competition and more about the co-workers, Olson said. He says he was guided by its vision of creating a better life for its workers. That will improve the company’s relationship with employees and reduce worker turnover, which he says is already well below the retail industry’s average. About 19 percent of full-time retail workers leave their jobs annually, according to the National Retail Federation.
Ikea’s raises come when a push to raise wages for hourly workers has made headlines.
Fast-food workers asking for higher pay in cities have staged protests across the country. Union groups have also held protests at Wal-Mart Stores Inc., the nation’s largest private employer. And President Barack Obama is endorsing a bill that would raise the federal minimum wage to $10.10 an hour by 2016.
Many business groups have opposed the measure, saying it would hurt the economy and lead to job losses.
Still, some are making public splashes with across-the-board raises. Gap Inc. said in February that it will set the minimum wage for workers at $9 an hour this year and $10 an hour in 2015. Most retail workers already make more than the federal minimum wage of $7.25 an hour, though not necessarily much more.