Congress might be deadlocked over the minimum wage debate, but some companies aren’t waiting. Ikea recently announced it will raise the average minimum wage in its U.S. 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 around half of its U.S. retail workforce. Notably, hourly wages will vary based on the cost of living in each store location — a departure from determining wages based on the local competitive situation — and are centered on employee needs. 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 38 existing U.S. retail locations, as well as Ikea’s three new locations set to open before the end of 2015, will adopt the new structure. All non-retail locations in the U.S. – 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 also makes good business sense. The company is betting that focusing on employee satisfaction will allow it 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, the company has introduced the TACK! loyalty program, which makes contributions to a new retirement fund, and increased the employer-matched contributions to worker 401(k) plans, as well as launched the new One Ikea Bonus program for all employees.
Ikea also has its sights set on improving its supply chain and helping those in the developing world. This week, Ikea Foundation and Save the Children announced plans to expand a child rights program aimed at protecting children living in cotton communities in India. The initiative has helped to protect more than 600,000 children to date, and the $9.4 million expansion will extend the program’s reach to keep an additional 790,000 children out of cotton fields.
It is yet to be seen if other large U.S. retailers such as Walmart will follow Ikea’s lead.
Based in San Francisco, Mike Hower is a writer, thinker and strategic communicator that revels in driving the conversation at the intersection of sustainability, social entrepreneurship, tech, politics and law. He has cultivated diverse experience working for the United States Congress in Washington, D.C., helping Silicon Valley startups with strategic communications and teaching in South America. Connect with him on LinkedIn or follow him on Twitter (@mikehower)