The Economic Times has reported that Ikea's US division is raising the minimum wage for its retail workers, linking it to the cost of living in each location, instead of its competition. The 17% average raise, expected to be announced shortly, is the Swedish furniture chain's biggest in 10 years in the US, About half of Ikea's 11,000 hourly store workers will get a raise.
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 the latest move shifts its approach from focusing on the competition to on the vision of "creating a better life" for its workers. That will improve the company's relationship with employees and reduce worker turnover, which is already well below the retail industry's average (about 19 % of full-time retail workers leave their jobs annually, according to the National Retail Federation).
Ikea has also expanded other employee benefits. In the past year, it has introduced an employee loyalty program, which makes contributions to a new retirement fund. The pay increase is not expected to lead to higher prices, reduced work hours or job losses since the raises are being offset by such cost-cutting measures as using national purchase programs for such items as cleaning services or printer paper. In the past, each store would use individual suppliers.
Ikea is basing its wage increase after taking into consideration housing, food, medical and transportation costs plus annual taxes. Ikea says it's a significant departure from the retail industry standard, which sets wages according to the local employment market. All 38 US locations as well new locations planned for Merriam, Kansas; Miami; and St. Louis will use the new wage structure. It doesn't affect the remaining 2,615 salaried and hourly employees at five distribution centers, two service centers and a manufacturing plant. Those employees who have hourly jobs are already paid above the local living wage.