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Ikea’s US division is raising the minimum wage for the second year in a row as the Swedish ready-to-assemble furniture chain looks to improve its relations with workers and reduce worker turnover.
Starting January 1, Ikea’s average minimum hourly wage will increase to $11.87, which is $4.62 above the current federal wage and marks a $1.11 increase, or 10 perc ent, from this year’s average minimum pay.
The increase will involve 32 per cent of Ikea’s 10,500 US store workers and will raise the average hourly wage to $15.45. That’s up from the current $14.19 per hour. The increase also covers workers in some distribution centres.
Ikea raised the minimum wage in June 2014 by an average of 17 per cent, effective 2015. That marked the biggest increase in 10 years in the US for the retailer.
It also pegged the raise to the cost of living in each location, instead of what competitors are offering as most stores do, signalling a new approach to its pay structure.
The pay raise comes as several retailers, including Wal-Mart Stores Inc, have announced wage hikes and other incentives to attract workers and to stay competitive in an improving job market. They’ve also faced pressure from labour-backed groups to increase wages and improve working conditions.
Rob Olson, chief financial officer at Ikea’s US division, told The Associated Press on Tuesday that the increase announced last year was based on data a few years old from the MIT Living Wage Calculator, which takes into consideration housing, food, medical and transportation costs plus annual taxes.
Ikea saw the need to raise wages for next year based on new data from the living wage calculator.
Like other retailers, Ikea had always adjusted wages based on what competitors were offering. Starting with the increase announced last year, raises vary based on the cost of living in each of its 40 US store locations. For instance, Olson said that Ikea workers in the Elizabeth, New Jersey, store will see a 22 per cent raise in pay.
He noted Ikea has already seen an improved turnover rate and a broader pool of strong applicants for store openings.
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