Ikea to raise minimum wage for U.S. workers based on cost of living in each area

Conshohocken, Pa. -- Ikea is planning to raise the hourly minimum wage for employees in its U.S. stores by an average 17%, beginning January 1, 2015. In a move unprecedented among U.S. retailers, Ikea’s wage hike will vary in that it will be based on the cost of living in each store’s location. According to Ikea, the change will take the average minimum hourly wage in its existing U.S. stores (as of June 2014) to $10.76, a $1.59 or 17% increase, and $3.51 above the current federal minimum wage.

The increase is based on MIT’s “living wage” calculator, which takes into consideration such expenses as housing, food, medical and transportation costs in a particular geographical area. Ikea’s 38 existing U.S. stores, as well as three new ones in the works, will adopt the new pay rate, which will apply to all employees regardless of how many hours per week they work.

“The transition to the new minimum hourly wage structure is not only the right thing to do, it makes good business sense,” said Rob Olson, Ikea U.S. acting president and CFO. We are basing our wages on our co-workers and their needs, rather than what the local employment market dictates. Our focus is to ensure that Ikea is a great place to work by providing an environment that develops our co-workers and also meets our customers’ expectations. All of this contributes to our business success.”

Ikea noted that all its U.S. non-retail locations – including five distribution centers, two service centers and a manufacturing facility – have hourly wage jobs that are already paying minimum wages above the local living wage

The company will use MIT's living wage rate for a single adult without children. While it is the lowest category in the calculator, it is almost always higher than the federal or state minimum wage rates.
According to Olson, the new minimum wage structure is part of a broader Ikea effort to make its pay and benefits package more attractive.

Ikea’s decision to hike its minimum wage comes amid the ongoing national debate about raising the federal minimum wage. In February, Gap Inc. announced that it would raise its minimum for U.S. workers to $9 per hour this year and $10 next year.

 

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