Increasing Minimum Wage to Living Wage Brings Ikea Less Turnover, Better Applicants

I noted Wednesday that South Dakota’s minimum-wage increase appears not to be hurting job creation. Swedish furniture and meatball retailer Ikea is having the same experience. Last year, Ikea raised its minimum wage to reflect data from the MIT Living Wage Calculator. We’ve used MIT Living Wage data on this blog to discuss South Dakota’s bogus wage/cost-of-living claims and weak income levels in South Dakota counties. Ikea uses that data to determine the base pay it should give to its workers in each location.

And what did Ikea get for its trouble? Less turnover and better workers:

Ikea workers make living wageAlthough it’s only been six months since the raises went into effect, [CFO Rob] Olson said Ikea is on pace to reduce turnover by 5 percent or better this fiscal year. Holding onto employees longer means the company is spending less on recruiting and training new replacements.

Ikea is also attracting more qualified job seekers to work at its stores, according to Olson. Pay for retail sales workers in the U.S. is generally very low, with an average industry wage of just $12.38 per hour, according to the Bureau of Labor Statistics. But Ikea’s average store wage is heading north of $15. After its living wage announcementlast year, the company opened two new locations — one in Merriam, Kansas, and another in Miami — and the higher wages (and attendant publicity) likely helped the company lure more candidates.

“At both of those stores, the applicant pool was fantastic,” Olson said.

The living wage has worked so well, Ikea is sticking with it and raising its minimum wage again. By January, “all of the company’s U.S. stores will be paying at least $10 per hour, and the average minimum wage across all locations will be $11.87—a 10.3 percent increase over the previous year.”

MIT says the living wage for one adult in South Dakota is $9.48 an hour. The wage necessary to support a two-adult, two-child family is $21.42 an hour.


2 Responses to Increasing Minimum Wage to Living Wage Brings Ikea Less Turnover, Better Applicants

  1. Roger Elgersma

    With all these trade deals we are making, starting with NAFTA and now the Pacific trade deals the Republicans and Obama are trying to fast track, wages keep going down and jobs keep going overseas. So the workers get laid off or their wages do not keep pace with inflation. In this situation we get some very good people who lose their jobs. When they find out that they will not get a good job back because it is overseas, then they will apply for the one who pays the best. They can take their pick of what job they want of what is left so those who pay better will get distinctly better applicants. For some reason Trail King did not get these applicants. Because very good people have some loyalty.

  2. Deb Geelsdottir

    MIT says $9.48 per hour is a living wage for one person? Wow. That is awfully low. Do they mean just enough to keep the person alive? I can’t see how she could pay for housing, food and other basic necessities on $9.48. Jeez.