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 Minneapolis-based company, which employs about 323,000
people, said the new rate would apply to all 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 level in 16 years,
driving competition in unskilled jobs such as cashiers and clerks
where turnover is often high. During the holiday shopping season,
big chains also 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.
The retail industry is the largest private-sector employer in
the U.S., and competition for hourly workers has ratcheted up both
in traditional stores and distribution centers that fulfill online
orders. Retail trade workers in the U.S. earn an average hourly
wage of $15.35 as of August, an increase of about 10% from five
years ago, according to Bureau of Labor Statistics data.
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.
Target, 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
in the latest quarter as sales rose for the first time in a
year.
Target's wage increase "is one more example of the investments
retailers are making to compete successfully in an era of rapid
transformation and disruption," said Matthew Shay, the president of
the National Retail Federation, which has opposed higher wage
legislation. "These decisions are being driven by a robust
marketplace, not government mandates."
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," he said.
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 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 2015, Gap Inc.
raised pay to at least $10 an hour, 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.
Smaller companies are feeling the pressure as chains like
Wal-Mart and Target make broad-based wage investments. Such moves
"have had a trickle-down effect to the rest of the market," said
William Rhodes, CEO of auto-parts retailer AutoZone Inc., last
week. "It really is unprecedented in my career to see the wages go
up the extent that they have this year."
Higher introductory pay rates have come with some challenges at
retailers, with longer-tenured employees occasionally bristling
when new colleagues are hired at wages it took them years to
attain. Target's Mr. Cornell dismissed such concerns.
"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 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 19:17 ET (23:17 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
Walmart (NYSE:WMT)
Historical Stock Chart
From Mar 2024 to Apr 2024
Walmart (NYSE:WMT)
Historical Stock Chart
From Apr 2023 to Apr 2024