Ikea Will Pay Its Workers a Living Wage

Moneybox
A blog about business and economics.
June 26 2014 12:34 PM

Ikea Will Pay Its Workers a Living Wage

Par7517591
As if coastal liberal types didn't love Ikea enough already.

Photo by Pascal Guyot/AFP/Getty Images

A bit of news that should make just about everybody happy today: Ikea is announcing plans to raise the average minimum wage in its U.S. stores by 17 percent, to $10.76 per hour. The company will now set its pay based on MIT’s Living Wage Calculator, which reports how much a worker must earn to comfortably cover essentials like food, housing, child care, and transportation, depending on where they live in the country. Ikea is setting its pay floor at the living wage for a single adult without children. So, as the Huffington Post points out, that means employees at its Woodbridge, Virginia, outpost will make at least $13.20 per hour, while hires in low-cost Merriam, Kansas, will earn at least $9.36 per hour. In the end, it amounts to a raise for about half the company’s American retail workers.

Notably, Ikea isn’t raising prices on its furniture to pay for the raise. Instead, the company’s management says it believes the pay hike will help them compete for and keep talent, which is of course good for business. The Gap used a similar justification when it announced it would raise its own minimum to $10 by 2015.

Advertisement

Which I think hints at something about what would likely happen if the U.S. raised the federal minimum. The conservatives who argue that higher pay floors kill jobs also tend to assume that businesses are already running at pretty much peak efficiency. According to this logic, forcing companies to spend more on labor will lead to less hiring. But left-leaning economists see it differently. They tend to argue that increasing wages can lead to savings for business by reducing worker turnover, for instance, and forcing managers to make better use of their staff.

Companies like Ikea and the Gap probably aren’t raising pay for thousands of workers as a PR initiative or out of a sense of humanitarianism. They seem to have made a judgment that low wages simply aren’t an efficient way to do business. And—even if they haven't realized it yet—I'd guess many other companies are in the exact same boat.

Jordan Weissmann is Slate's senior business and economics correspondent.

TODAY IN SLATE

The World

The Budget Disaster that Sabotaged the WHO’s Response to Ebola

Can Democratic Sen. Mary Landrieu Pull Off One More Louisiana Miracle?

PowerPoint Is the Worst, and Now It’s the Latest Way to Hack Into Your Computer

Everything You Should Know About Today’s Eclipse

Fascinating Maps Based on Reddit, Craigslist, and OkCupid Data

Education

Welcome to 13th Grade!

Some high schools are offering a fifth year. That’s a great idea.

Culturebox

The Actual World

“Mount Thoreau” and the naming of things in the wilderness.

Want Kids to Delay Sex? Let Planned Parenthood Teach Them Sex Ed.

How Movies Like Contagion and Outbreak Distort Our Response to Real Epidemics

  News & Politics
The World
Oct. 23 2014 1:51 PM Is This the ISIS Backlash We've Been Waiting For?
  Business
Moneybox
Oct. 23 2014 11:51 AM It Seems No One Is Rich or Happy: I Looked
  Life
Atlas Obscura
Oct. 23 2014 1:34 PM Leave Me Be Beneath a Tree: Trunyan Cemetery in Bali
  Double X
The XX Factor
Oct. 23 2014 11:33 AM Watch Little Princesses Curse for the Feminist Cause
  Slate Plus
Working
Oct. 23 2014 11:28 AM Slate’s Working Podcast: Episode 2 Transcript Read what David Plotz asked Dr. Meri Kolbrener about her workday.
  Arts
Culturebox
Oct. 23 2014 1:46 PM The Real Secret of Serial Has Sarah Koenig made up her mind yet? 
  Technology
Technology
Oct. 23 2014 11:45 AM The United States of Reddit  How social media is redrawing our borders. 
  Health & Science
Bad Astronomy
Oct. 23 2014 7:30 AM Our Solar System and Galaxy … Seen by an Astronaut
  Sports
Sports Nut
Oct. 20 2014 5:09 PM Keepaway, on Three. Ready—Break! On his record-breaking touchdown pass, Peyton Manning couldn’t even leave the celebration to chance.