Target announced plans on Monday to raise its minimum hourly wage for all team members to $11 this October, along with a commitment to increasing the minimum hourly wage to $15 by the end of 2020. The company called the move a "significant investment" that will allow it to continue to recruit and retain strong team members and provide an elevated experience for customers, according to a company press release.
The retailer will provide pay increases to thousands of team members across the country before the holiday season, Target said. The increase will also apply to the more than 100,000 hourly team members Target is hiring for the holiday season.
Target on Monday also reiterated its most recent sales and earnings guidance for its third quarter and full year 2017. Target expects both third quarter and fourth quarter 2017 same-store sales growth to fall within the results in the first and second quarters, and expects its full-year 2017 same-store sales growth to be in a range around flat, plus or minus 1%, according to a company press release.
Costco is the retailer that enjoys the warmest reputation when it comes to giving workers above-average pay and benefits, a proposition that has consistently pleased its customers, research has found. Last year that retailer announced a hike in its minimum starting hourly pay, the first in nine years, boosting those wages $1.50 to $13. That number is well above the federal minimum wage of $7.25 and approaches the highest minimum wages set by some cities in recent years. In fact, Costco's above-average worker compensation is actually part and parcel of its success, many experts say.
Massachusetts Institute of Technology researcher and retail expert Zeynep Ton studied Costco, Trader Joe’s, QuikTrip (a U.S. chain of convenience stores with gas stations) and Mercadona (Spain’s largest supermarket chain) and said the results of those four retail companies defy the traditional argument that retailers have to raise prices — or lose money — in order to pay higher wages. Rather, they treat the money spent on workers as a strategic investment and design operational systems that enable their workers to be more productive. That allows those retailers to pay better than their competitors while also offering low prices and pleasing shareholders, Ton has said in her reports.
Target, which has lagged in announcing pay raises in recent years, now appears to be moving to a similar approach. The move may reflect an acknowledgement by the mass merchant that, these days, consumers frequent businesses that reflect their values, a notion backed up by recent research from global management consulting firm A.T. Kearney.
Other research has found that retailers, a major cohort of employers in the U.S., also benefit when wages are higher because consumers are able to spend more freely. In a report last year, Cowen & Co. retail analysts said they expect that a $15-per-hour minimum could stimulate spending among lower income and millennial consumers. Cowen's Oliver Chen said then that lower-income shoppers with a bit more money could boost traffic and spending for general merchandise retailers like Target and Walmart.
In recent years, several cities and a few states have moved to boost minimum hourly wages, including Maryland, Nebraska, Alaska, South Dakota and Illinois, as well as cities Los Angeles, San Francisco and Seattle. Officially, the National Retail Federation opposes legislating a national rate for hourly workers, while workers' advocates say that current rates fail to provide a living wage. Some businesses warn that higher wages make lay-offs more likely.
The enduring wage gap, which in recent years has been cited as an issue for retailers struggling to grow sales, showed signs of shrinking in the later part of Barack Obama's presidency, thanks to the strengthening economy and some new labor regulations instituted by that administration. But the reversal of some of those pro-worker regulations under President Donald Trump, plus rising costs like health care, are stoking a re-emergence of consumer stress, Cowen & Co. warned in a report earlier this month that was emailed to Retail Dive. Both trends are likely to pressure spending and retail pricing, which could in turn boost discount retailers, according to the note.
Target now pays competitive rates above the federal minimum wage at all stores nationwide, the retailer said Monday. Its last major wage increase was in 2016, when the company moved to a $10 minimum hourly wage. The new minimum hourly wage of $11 is higher than the minimum wage in 48 states, and matches the minimum wage in Massachusetts and Washington, the retailer said. Plus, Target is addressing so-called "just in time" or "on-call" scheduling practices that have often wreaked havoc on retail workers' lives, saying it offers a variety of schedules to meet the needs of its diverse population and works with its teams to build schedules around their availability. "Target posts store schedules in advance, allows store team members to trade and pick up shifts at their store location, and doesn’t do on-call or snap scheduling at its stores," the company said.
In his statement Monday, CEO Brian Cornell said the retailer has a long history of investing in its team members. "We care about and value the more than 323,000 individuals who come together every day with an absolute commitment to serving our guests," he said. "Target has always offered market competitive wages to our team members. With this latest commitment, we’ll be providing even more meaningful pay, as well as the tools, training and support our team needs to build their skills, develop professionally and offer the service and expertise that set Target apart."
The retailer also touted its training, advancement opportunities and the diversity of its employment, as well as the discounts that employees enjoy in its stores.