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An Ikea store in Covina, Calif.
An Ikea store in Covina, Calif. Photograph by John Sciulli—Getty Images

IKEA is the latest company to bump up the wages of its lowest-paid staff

Jun 25, 2015

IKEA is following Walmart (wmt) and Target (tgt) in giving a big bump to its lowest-paid staff's wages, as it tries to reduce staff turnover and burnish its image as a responsible employer.

The company says it will raise its hourly minimum wage at its stores from the start of next year from $10.76 to $11.87, a $1.11, a raise of 10.3% that will leave it $4.62 above the current federal minimum wage. It also said that its five U.S. distribution centers and three non-retail locations will also have minimum wages above the local living wage, and no co-worker will have a minimum hourly wage below $10.00. The move will affect just under a third of IKEA's 15,000 staff at its 40 U.S..

The move comes after IKEA decided last year to base its pay scales on local indexes of the cost of living, which factored in things like housing and food costs. That led to an average increase in pay of 17% for half of its staff across the country, according to The Wall Street Journal.

With the economic recovery maturing and the jobless rate back at a post-crisis low, competition for labor is heating up around the country, forcing employers to pay more to attract and keep staff. The trend has been particularly visible in the labor-intensive retail industry. Target, Walmart and TJX have all announced similar measures in recent months.

"This is not only the right thing to do for our co-workers, it’s also good for business," IKEA's U.S. president Lars Petersson said. He said that staff turnover rates have fallen by five percent since the company launched its initiative.

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