Target to Boost Minimum Wages in Battle for Store Workers
September 25 2017 - 8:29AM
Dow Jones News
By Khadeeja Safdar
Target Corp. said it is raising its minimum wage to $11 an hour
starting next month and to $15 an hour within three years, as the
retailer competes to fill low-wage jobs in a tighter labor
market.
The retailer, which employs about 323,000 people, said the new
rate will apply to current staff as well as 100,000 temporary
workers it plans to hire for the holidays. In the past, Target has
resisted publicly commenting on its minimum wages. It quietly
boosted starting pay to $10 an hour in 2016, after Wal-Mart Stores
Inc. said it would increase wages for most of its U.S. workers.
The U.S. unemployment rate is near its lowest levels in 16
years, driving competition in unskilled jobs such as cashiers and
clerks where turnover is often high and big chains must add tens of
thousands of seasonal staff. Meanwhile, 19 states raised their
minimum pay levels in January.
"We're investing to make sure that we recruit and retain the
existing team, that we attract new team members and, importantly,
that we provide an exceptional service environment," Chief
Executive Brian Cornell said to reporters, adding that the move was
tied to Target's holiday hiring plans. He declined to say how much
more Target would be spending on wages following the change, but
maintained the company's previous financial projections for the
year.
Mr. Cornell is trying to turn around the retail chain's fortunes
after it reported weak holiday sales last year and was forced to
lower its profit and sales goals for the current fiscal year. The
company, whose stock is down 19% so far this year, has been cutting
prices, remodeling stores and ramping up spending on its supply
chain and e-commerce capabilities. Some of those efforts paid off
last quarter as sales rose for the first time in a year.
Retail is the largest private sector employer in the U.S., and
competition for hourly workers has ratcheted up in recent years.
There were 625,000 seasonally adjusted retail job openings in July,
according to the Bureau of Labor Statistics, and the industry's
rate of openings is about double what it was in 2010.
An hourly wage of $11 will match minimums in Massachusetts and
Washington and is higher than required in the other 48 states. Two
of the most populous states, New York and California, have passed
legislation that would lift their lowest pay rate to $15 over
several years. Currently, 29 states have set rates higher than the
federal minimum wage, which has been $7.25 since 2009.
State and municipal-level wage increases won't pressure
retailers much because market forces have already compelled them to
raise their minimums in those areas, said Mark Zandi, chief
economist at Moody's Analytics. "They've got a broad, long-term
problem because the labor market is tight and it's going to get
tighter."
A 2014 study from the nonpartisan Congressional Budget Office
found raising the federal minimum wage to $10.10 an hour would
reduce job creation by 500,000 over two years. At the same time,
the report estimated that the increase in the federal minimum wage
would raise the pay of 16.5 million workers who kept their jobs,
including moving about 900,000 people above the poverty line.
For years, retailers have been increasing minimum wages to
reduce costly turnover endemic to the industry. In early 2014, Gap
Inc. told employees it would raise pay to at least $10 an hour by
the next year, saying it hoped to gain an advantage over
competitors. Last year, Costco Wholesale Corp. raised its starting
hourly wage to $13.
Wal-Mart, which employs about 1.5 million Americans, helped
accelerate the wage war in 2015, when it announced plans to raise
wages to $9 an hour. The following year Wal-Mart said new hires
could earn $10 after a monthslong training course. Executives have
said the wage investment and new training programs cost the company
$2.7 billion, an expense that ate into profits and weighed on the
stock.
Mr. Cornell dismissed concerns that existing staff would bristle
at the prospect of new workers starting at a wage that it took them
longer to attain. "I think this news is going to be very well
received by our team, " he said.
Target said it expects fiscal year per-share profit of $4.34 to
$4.54, the same range it disclosed in August because the wage
increase had already been factored into the outlook. It expects
full-year comparable sales growth to remain around flat.
--Sarah Nassauer and Eric Morath contributed to this
article.
Write to Khadeeja Safdar at khadeeja.safdar@wsj.com
(END) Dow Jones Newswires
September 25, 2017 08:14 ET (12:14 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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