Ikea Will Raise U.S. Minimum Wage to $11.87 to Retain Workforce

Ikea Group, the world’s largest furniture retailer, will raise the hourly minimum wage it pays workers in the U.S. by 10 percent to $11.87, seeking to keep employees from moving to other merchants that have boosted pay recently.

The increase, which takes effect Jan. 1, follows a 17 percent boost to $10.76 an hour this year. The 2016 raise will affect 32 percent of Ikea’s hourly retail staff, along with some workers in distribution, the company said Wednesday.

Many U.S. retailers have been boosting pay to retain workers in an increasingly tight labor market and to respond to mounting pressure from labor groups and politicians. Wal-Mart Stores Inc. raised its minimum wage to $9 an hour in April and said it would bump it to $10 in February 2016. TJX Cos., the parent company of discount retailers T.J. Maxx and Marshalls, announced a similar move that takes effect this month. Target Corp. and Ross Stores Inc. have increased pay this year as well.

“Every year we evaluate our wage structure,” Rob Olson, chief financial officer of Ikea’s U.S. unit, said in an interview. “It is not about being the leader, it’s about doing the right thing for our co-workers.”

Ikea said in a statement that its increase was prompted by updates to the Massachusetts Institute of Technology Living Wage Calculator, one tool it uses to determine wage rates. The company also considers local competition and minimum-wage regulations in different cities and states.

Reducing Turnover

This year’s wage increase has helped Ikea U.S. reduce staff turnover by more than 5 percent for fiscal 2015, Olson said. It also has helped stores boost sales and attract stronger job applicants, he said. The next pay hike is expected to further reduce turnover, a trend Olson said helps the company save on recruitment costs.

“We’ve been ahead of the industry sector average for a while, and we want to be even further ahead,” Olson said. “We’ve seen that trend already.”

Olson said Ikea will evaluate wages at least annually and adjust them at individual stores as needed to stay competitive and comply with local legislation.

Ikea’s wages vary by the cost of living in the cities where its stores are located. After the increase, the average hourly pay rate at its 43 U.S. stores will be $15.45.

The living wage in New York’s Kings County, where Ikea’s Brooklyn store is located, is $14.30 an hour for a single childless adult, according to the MIT calculator. It’s $13.71 for the New York metro area.

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