Ikea is raising its average minimum wage for American employees to $10.76 per hour, a 17 percent increase. Jordan Weissmann is encouraged by the news:
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.
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.
But Bouie is less than thrilled:
[I]t’s worth noting that there’s less than meets the eye to Ikea’s promise to hew to local and municipal minimum wage hikes.
Most Ikea stores are located in suburbs, as opposed to urban centers. The Ikea near Charlotte, North Carolina, for instance, is located on the outskirts of the area, as is the Ikea near Seattle (in Renton) and the one in Dallas (near Frisco). By virtue of geography, these stores will avoid city-mandated wage hikes. What’s more, for as much as Ikea and similar stores might be good for workers, their overwhelmingly suburban locations makes them isolated from large numbers of potential workers who lack employment opportunities in their own areas and neighborhoods.
But Danny Vinik details one way Ikea is taking geography into account in a big way:
[The company] added a smart twist: They will tie the wage level in each store to the cost-of-living in the surrounding area, meaning Ikea workers in Pittsburgh will receive a different hourly wage than those in Woodbridge, Vermont.
At first glance, this may seem unfair. Those workers in Woodbridge and Pittsburgh are doing the same jobs. Why shouldn’t they receive the same pay? But Ikea has the right idea. The minimum wage is an arbitrary interference with the free market. Most economists justify it, and most Americans support it, because they want to make sure low-wage workers have an adequate standard of living. But living standards vary widely across the country.
Much more Dish on the minimum wage here.
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