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Minimum Wage Issue Spreading to the Private Sector

Last week, furniture retailer IKEA announced that it would be raising pay in its 38 retail locations in the United States stores to an average minimum of $10.76 an hour, and as high as $13 in some high-cost areas, beginning Jan. 1, 2015. IKEA’s current hourly wages start at $9.17 an hour. This would represent a wage hike of 17%, and $3.51 above the current federal minimum of $7.25. In all, nearly half of the company's 13,651 U.S. employees will get a raise. IKEA’s acting U.S. president, Rob Olson, stated that raising wages would ultimately benefit the bottom line by reducing employee turnover and boosting recruitment.

Clothing retailer Gap, Inc. announced it raised its hourly minimum wage to $9 an hour in June and to $10 an hour by 2015. These raises would affect roughly 65,000 of the 90,000 employees who work at Gap, Inc., which includes Gap, Old Navy, Banana Republic, and Athleta. Gap claims that, since announcing it is raising its minimum wage, it has seen a 20% increase in job applications. “When it’s all said and done, this is a race for talent, and if we have the best talent, then we’re going to win,” said Gap, Inc.’s CEO Glenn Murphy.

As the current Federal minimum wage of $7.25 an hour has not changed since 2009, President Obama has been campaigning for legislation that would boost the minimum wage to $10.10 an hour. The President also recently signed an Executive Order that raises the minimum wage for Federal contractors up to $10.10.

Minimum wages have been rising at the State and local level throughout the nation. On June 26, Milwaukee County supervisors agreed to place an advisory referendum on this November’s ballot that would raise the state minimum wage to $10.10 an hour. So far this year, 38 states have considered minimum wage bills, and eight states and the District of Columbia have enacted new wage laws. On June 26, Massachusetts passed a law which will raise the minimum wage $1 from the current $8 an hour every year, starting on January 1, 2015, up to a highest State minimum of $11 an hour in 2017. On July 1, the minimum wage in California was increased to $9 an hour from $8. In 2016, the State minimum wage will rise again to $10 an hour.

Since 2012, groups of fast-food workers and their community supporters, with the support of organized labor, have organized a series of wide-ranging strikes and rallies calling for a minimum wage increase to $15 an hour. Last week, a group of Federally-contracted workers, including fast-food workers, went on strike against the $10.10 increase in minimum wages for Federal contractors, saying it was not enough to lift them out of poverty. They also asked that the President recognize their union, “Good Jobs Nation” and give them the right to bargain. On June 23, a group of fast-food workers and their representatives met with the President at the first-ever “White House Summit on Working Families.” Others protested, and were arrested, at the North Carolina state legislature as part of the “Moral Monday” protest. In spite of these strikes, the large fast-food and retail companies that are their primary targets have not raised their minimum wages, although McDonald’s and Wal Mart have both said they would not object to any increase at the national level.

The jury is still out on any impact a higher minimum wage could have on business and job growth. Critics worry that higher minimum wages could stifle job growth by raising the cost of labor and thus driving companies to hire fewer workers to cut costs, or to automate duties and functions that are currently performed by employees. Clients are encouraged to monitor this issue carefully, as it is developing at a very accelerated pace, and seems to be very politically volatile, particularly in an election year.

© MICHAEL BEST & FRIEDRICH LLP

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About this Author

Robert W. Mulcaahy Michael Best Friedrich LLP
Partner

Rob Mulcahy is a partner and Chair of the firm’s Community Outreach Committee.  His practice covers both public and private sector management labor and employment law, including privatization, inter-governmental co-operation agreements, collective bargaining, contract administration, employment discrimination matters, wage and hour, open meeting, public records, ethics opinions and interest arbitration proceedings

414.225.2761
Carlos R. Pastrana-Torres Attorney Michael Best Friedrich LLP
Attorney

Carlos Pastrana is an attorney in the firm’s Labor and Employment Practice Group in the Milwaukee office. He focuses his practice in the areas of labor and employment law, including client counseling, litigation and trial of discrimination, retaliation, and sexual harassment cases, as well labor relations disputes with unions and employment-based immigration.

141-347-4740