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Gap Inc. to Raise Minimum Wage for Its Employees, Joining Other National Retailers

Tuesday, February 25, 2014

By Chris Opfer  

Feb. 20 --A federal minimum wage increase faces uncertainty in Congress, but Gap Inc. announced Feb. 19 it has joined a handful of other national retailers and at least one fast food company that have chosen to voluntarily raise the pay floor for hourly workers.

Gap said it will boost the minimum hourly pay for workers to $9 starting in June and to $10 a year later. The clothing retailer, which also owns the Old Navy and Banana Republic brands, said the move will increase earnings for about 65,000 employees working in stores, at call centers and in distribution hubs across the country.

“To us, this is not a political issue,” Gap chairman and CEO Glenn Murphy said in a statement announcing the move. “Our decision to invest in frontline employees will directly support our business, and is one that we expect to deliver a return many times over.”

Lawmakers in the Senate are expected to vote in the coming weeks on legislation (H.R. 1010, S. 1737) that would raise the federal minimum wage to $10.10 from $7.25 in three steps culminating in 2016 and peg additional annual increases to inflation.

Groups representing the retail and fast food industries, including the National Retail Federation and the National Restaurant Association, have been some of the most vocal opponents of the measure. They argue that a mandatory wage hike would force employers to cut jobs in order to meet rising payroll costs.

The Congressional Budget Office concluded in a report issued Feb. 18 that the wage increase would likely cost about 500,000 workers their jobs (see story in this issue). The CBO also estimated that the legislation would boost earnings for most of the country's 16.5 million low-wage workers and increase overall real income by about $2 million.

Companies Cite Loyalty, Low Turnover

Industry opposition to the wage hike legislation hasn't stopped large retailers like Costco and Whole Foods Markets--as well as fast food chain In-N-Out Burger--from voluntarily raising the floor for their hourly workers' pay.

Robin Kelly, a spokesperson for Whole Foods, told Bloomberg BNA Feb. 20 that paying team members at the company's organic grocery stores at least $10 an hour has helped keep employee turnover at a “very low” rate of less than 10 percent.

“Competitive wages and benefits, in addition to a culture that supports team member happiness, helps us hire and retain team members who enjoy working for Whole Foods Market and share the company's mission,” Kelly said. The company, which Kelly said has paid workers a $10 minimum wage for a decade, also offers employee bonuses through a profit sharing plan.

Similarly, Gap officials said they recognize that lower-wage workers often serve as the face of the company for shoppers.

“We always think of our people that work in the field and that are closest to our customers,” Keith Herbert, a Gap senior vice president, said in a message posted to the company's website along with the wage increase announcement. “You never can go wrong with an investment like that.”

NRF: Raises Are 'Individual Business Decision.'

Bill Thorne, a senior vice president for the National Retail Federation, told Bloomberg BNA Feb. 20 that one employer's decision to give its workers a raise doesn't mean that other retailers should be forced to do the same.

“Gap Inc. decided that raising their wage makes sense for their business, and we certainly respect that,” Thorne said. “But it should be an individual business decision, not another burdensome government mandate,” he added. “Let the market dictate wages, not those who know more about scoring political points than running a business or meeting a payroll.”

Meanwhile, President Barack Obama applauded Gap's decision in a statement issued by the White House Feb. 19 and implored Congress to pass the federal minimum wage legislation. “It's time to pass that bill and give America a raise,” Obama said.

 

To contact the reporter on this story: Chris Opfer in Washington at copfer@bna.com

To contact the editor responsible for this story: Susan J. McGolrick at smcgolrick@bna.com

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