海角大神

IKEA to raise hourly pay again. Does the flexible wage model work?

Swedish furniture company IKEA will raise the average minimum hourly pay for its US employees starting January next year.

For the second year in a row, IKEA is giving its workers a wage hike.

Starting Jan. 1, the Swedish furniture retailer will up the average minimum hourly pay for its US employees to $11.47, which is a 10 percent increase from the store鈥檚 current hourly average and $4.62 above the federal minimum wage, according to reports.

The announcement makes IKEA the latest in a series of major companies to boost hourly pay, in response to a more competitive job market and in the face of a national debate around 鈥渓iving wage.鈥� It also implies the success, at least initially, of the flexible wage model that IKEA introduced last year 鈥� a model that takes into account the cost of living in a store鈥檚 area.

鈥淲e鈥檙e very pleased so far,鈥� Rob Olson, chief financial officer for IKEA US, The Huffington Post.

Amid calls for better pay and working conditions by labor-backed groups across the nation, companies such as Gap, Walmart, and McDonald鈥檚 have implemented higher minimum wage standards for their workers, as have cities such as Seattle and Los Angeles. The debate has heated up as critics argue that raising the minimum wage would hurt both businesses and workers, while failing to address unemployment.

鈥淭he very last thing that we should be doing as a city is creating a competitive disadvantage for our businesses with those in neighboring cities,鈥� Republican city councilman Mitchell Englander in May, after the LA city council voted to raise minimum wage to $15 by 2020.

The move, he added, would 鈥渕ake it impossible for entire industries to do business鈥� in Los Angeles.

IKEA鈥檚 experience, however, may provide a model for making wage hikes work.

Since January, the company has used a minimum wage system that is based on the Massachusetts Institute of Technology鈥檚 calculator, which looks at an area鈥檚 cost of housing, food, medical care, transportation, and taxes. The idea, Mr. Olson said, is to pay employees the amount they need to afford basic necessities where they live and work.

鈥淲e always wanted to make sure we were fair,鈥� he The Washington Post. 鈥淭he way we compared fair in the past was being above average. The realization we had was that鈥檚 not enough.鈥�

January鈥檚 wage hike raised the minimum wage by an average of 17 percent for about half the company鈥檚 workers in 38 US store locations.

In May, MIT鈥檚 Amy Glasmeier, who developed the calculator, that featured new data and adjustments to the method for measuring living wage in different areas. The changes led to higher amounts across the board 鈥� and for IKEA, that means a pay hike for 32 percent of its 10,500 workers come 2016, the Associated Press .

The raises have also benefited the company by luring better-qualified applicants, Olson told The Huffington Post. At the same time, the last six months had seen a drop in employee turnover rates, which means IKEA is spending less on recruiting and training, he added.

Of course, the company鈥檚 apparent success so far doesn鈥檛 mean that raising wages is the solution to all of the nation鈥檚 economic woes.

A wage hike may help bridge the disconnect between the national job numbers and Americans鈥� personal experience and satisfaction, Sherle Schwenninger, director of the economic growth program at the Washington, D.C.-based New America Foundation, told 海角大神. But, he noted, real change requires innovation, investment in a range of sectors, and political will and coordination.

Still, there鈥檚 something to be said for a company that not only consistently raises the wage floor but also a desirable benefits plan for long-term employees.

As 海角大神鈥檚 Schuyler Velasco put it, 鈥淚KEA is still ahead.鈥�