IKEA Ups Minimum Wage To $11 An Hour — And Won't Offset It With Higher Prices

As Congress continues to stall on raising the minimum wage, IKEA will raise the minimum wage for its employees to an average of $10.76 an hour, the company announced Thursday. Each store will have its own minimum, based on the estimated living wage in store’s geographic location; on average, this will amount to a 17 percent pay increase for around 6,500 U.S. workers. The move came the same day as Massachusetts increased its minimum wage to $11 an hour, the highest of any state in the country.

The precise rates will be determined via MIT’s Living Wage Calculator, a popular online tool developed in the early-2000s. IKEA’s rates wil be highest in Woodbridge, Virginia, where workers will earn a minimum of $13.22 an hour, while employees in Pittsburgh and West Chester, Ohio will only get $8.69 hour. Still, even that’s higher than the federal minimum wage, which stands at $7.25. On average, IKEA employees throughout the country will be getting around $3.51 more per hour than workers earning the federal minimum.

The Obama administration and Congressional Democrats have endorsed a plan to increase the federal minimum wage to $10.10 an hour, but the House Republicans haven’t taken any action on that, and almost certainly won't do so any time soon. As such, several state and local governments have increased their own minimum wages. Seattle has the highest minimum wage in the country, at $15 an hour, while Massachusetts’ new $11 minimum is the highest of any state.

According to IKEA’s acting president, Rob Olsen, one of the intents behind the change is to bolster recruitment and employer retention. There’s some precedent for that: Ever since the Gap announced a plan to up its minimum wage to $10 an hour, the company has seen a 10 percent increase in job applications. won’t be offset by higher prices or layoffs. Olsen added that the wage increase won’t be offset by higher costs or layoffs.

"What we decided to do was stop looking at the competition and focus solely on the co-worker," Olson said in explaining why different locations would have different minimums. "A co-worker in one market isn't concerned with what it costs to live in another market. That's the way we've looked at it."

MIT’s Living Wage Calculator is a widely-used online tool that takes into account factors such as transportation, food, housing and health care costs. It’s come under fire fire underestimating the true minimum living wage; its creator, Amy Glasmeier, says that it’s intended to calculate the bare minimum needed to get by, not the minimum that would allow people to start or maintain a savings.