IKEA Shuts Down People Who Argue Against Higher Wages

June 24th 2015

Alex Mierjeski

The Swedish furniture giant Ikea announced plans Wednesday to implement nationwide raises to reflect the cost of living in the area of a given store, bringing the average starting pay to almost $12 per hour, the Huffington Post reports. The move comes almost exactly one year after the company increased minimum wages in U.S. stores by more than 17 percent, which it says boosted worker retention as well as applicant-pool quality.

Ikea says that the increase, which starts in January, will raise the the average minimum hourly wage for some store workers by 10.3 percent, to $11.87. This is  affect around 32 percent of the store's 10,500 U.S. workers.

With the announcement, Ikea, for a second time, joins other major retailers whose employees have also seen wage hikes in recent months after nationwide worker demonstrations about the fight for a $15 minimum wage, including marketplace factors such as an improving economy and tightening job market. Corporations such as Target, Gap, and even Walmart have also raised their minimum wage floors, but Ikea is setting itself apart by relying on a Living Wage Calculator developed by the Massachusetts Institute of Technology that adjusts livable wages using localized data like the costs housing, transportation, medical, food, and annual taxes––a departure from the competitive-market-based wage hikes that companies might traditionally use. Ikea's previous wage increases also relied on Wage Calculator data.

A wage calculator suits the needs of employees better than across the board increases, since places like San Francisco and New York have drastically higher costs of living than other places. In Elizabeth, New Jersey, for example, wages will increase by over 20 percent. In Portland, Ore., it should go up 17.7 percent, the Washington Post notes.

"We always wanted to make sure we were fair," Ikea's U.S. CFO Rob Olson told the Post. "The way we compared fair in the past was being above average. The realization we had was that's not enough," he said, adding that by tethering wages to public data using the calculator, the company adds a degree of transparency to setting fair prices.

Wage calculator data for one store, in Sunrise, Fla. suggested lowering the company's wages there from $11.72 to $11.55, but according to Olson, existing and new workers at that store would keep the higher wage. Market competitiveness and local minimum wage ordinances also play a role in determining amounts, which the company accredits to wages higher than what the calculator recommends.

Since last year's increases, which were implemented just under six months ago, the company has already seen a positive impact. Olson told the Post that turnover for existing employees dropped five percent, and applicant pools for new stores the company opens have been "above expectations."