Home-furnishing giant Ikea plans to raise the average minimum hourly wage it pays U.S. workers by 17%, and increase that puts the wage $3.51 above the current federal minimum wage.
The increase by Sweden-based Ikea is a move that “is not only the right thing to do, it makes good business sense,” according to Rob Olson, Ikea’s U.S. acting president and chief financial officer. The move is also a savvy public relations move, and comes just a few days after Gap (GPS) announced it has pledged to raise its minimum hourly wage to $9.
Ikea’s plan to become the latest retailer to voluntarily raise its minimum wage comes more than a year after President Obama announced his support for a higher minimum wage in the February 2013 State of the Union address. States and cities have sought to announce their own wage increases above the federal minimum, and a majority of Americans favor a hike to the federal wage, according to a recent poll by CNNMoney.
Ikea’s increase won’t have the same affect on the U.S. population as Gap’s move. Gap has over 2,000 stores across all formats it operates in the U.S., while Ikea only has 38 stores. As of the beginning of 2015, Ikea plans to pay an average minimum hourly wage of $10.76, and about 50% of the company’s U.S. retail workers will benefit from the change. The hourly wage will vary based on cost of living in each Ikea location in the U.S.
Ikea said the new wage structure will be a “significant investment,” but won’t result in higher prices. The increase will also be in effect at three new locations Ikea is opening before the end of 2015. Meanwhile, the company’s non-retail locations — including distribution centers and a manufacturing facility — already pay minimum wages above the local living wage.