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The Strategy Room

Leading Companies Take Bold Stances on Wage Debate. Will it Pay Off?

By: The Stanton Team

Labor_Protest
One of today’s big stories was a glowing jobs report showing the U.S. economy added 223,000 jobs in April, bringing the unemployment rate down to 5.4 percent, a seven year low.

This is welcome news to everyone, especially after the previous month’s report, which suggested the country might be losing some of the gains of the past year.

As everyone knows, one benefit of job growth is higher wages, which have tended to rise slower than usual in this recovery. Fortunately, we’re seeing signs of change, and some companies are taking advantage of the opportunity to generate positive PR when it comes to the wage debate, particularly on the heated issue of minimum wages.

The topic has been on the radar for a while, but it’s gotten more attention recently. Last month, in what some have called one of the largest labor actions in recent memory, people in 200 cities gathered to call for a federal minimum wage of $15 per hour. Meanwhile, members of Congress recently introduced the Raise the Wage Act, which would increase the minimum wage over five years from $7.25 to $12 per hour. The measure is unlikely to become law, but that isn’t stopping companies who see business and PR-related opportunities for acting on the issue.

The most well-known recent move was by Walmart, which earlier this year announced a plan to raise its starting wage to $9 an hour, stating “Walmart has represented a ladder of opportunity since Sam started the business, and we want to make sure that’s the case going forward everywhere we operate, including here in the United States.”

It’s a strategic decision. Economists generally agree that companies don’t increase wages unless the labor market is tightening. But by positioning what is likely a smart business move as something loftier, Walmart is helping to shake its reputation as a low-wage employer.

Other companies are doing the same. Last June IKEA made a similar announcement, increasing the minimum wage for its retail workers by $1.59 to $10.76 per hour. Rob Olson, IKEA U.S. Acting President and CFO stated “At IKEA, we are guided by our mission ‘to create a better everyday life for the many people,’ a vision that includes our co-workers, customers and the communities impacted by our business.”

The company went on to affirm the decision not only made good business sense, but was “the right thing to do,” adding “We are basing our wages on our co-workers and their needs, rather than what the local employment market dictates.”

Companies that haven’t faced as much heat for low wages are taking a different approach. For example, Gap, Inc., last year announced it was raising the minimum hourly wage for store employees from $9 to $10 per hour, citing a desire to “strengthen our ability to attract and retain a skilled, enthusiastic and engaged workforce.” They vaguely linked the move to their values, noting their promise “to do more than sell clothes” and “be broader than a commercially–driven company.”

McDonald’s has probably gotten the most public criticism over its wages. Much of the so-called “Fight for 15” protests have been aimed at the fast-food chain. In April, the company responded by introducing a minimum wage of $1 over the locally-mandated minimum wage at restaurants owned by the company, and also adding other benefits, like personal paid time off. “We know that a motivated workforce leads to better customer service so we believe this initial step not only benefits our employees, it will improve the McDonald’s restaurant experience,” the company stated.

It’s a tough position for McDonald’s. The company has been struggling with declining revenues, making it difficult to enact the kind of wage hikes that are needed to improve its image.

Nevertheless, rising wages present an opportunity for employers to show they are attuned to the concerns of employees and the larger issue of stagnating wages. Those that stand up with bolder proposals are likely to see the most benefits, assuming the economy continues to improve.




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