Target Corporation (TGT, Financial), the American retail company, may raise the minimum standard pay rate to $9 per hour following the footsteps of Walmart Stores, Inc. (WMT, Financial). The increased wage rate will be applicable to employees from this April onwards. The decision comes after the company's arch rival Walmart decided to increase the minimum wage rate to $9 per hour. Walmart revealed that its employees will be paid around $10 per hour. Such a raise of the minimum wage rate would benefit around 500,000 Walmart workers. On similar lines, TJX Companies, Inc. (TJX, Financial) stated that its employees would receive an increased wage rate of $9 an hour in June and $10 per hour in 2016. Though Target is following in its competitors’ footsteps, it still has to go a long way in matching up with the wages received by other American retail companies. Although the company has not made any official announcement yet, Reuters and Dow Jones confirmed the news.
New wage rate
The new wage rate means a 24% increase over $7.25 per hour, the federal minimum wage effective from July 24, 2009. Certain Democrats are appealing for the minimum wage rate to be increased to $10 per hour, but Republicans believe that this might tend to cause harm in the long run. The move has been finalized as the company faced flack from various labor groups who urged employees to demand a high wage. UltraViolet, an advocacy group empowered by women used social media campaigns to indicate the low wage issue. An outdoor advertisement banner even pointed out that the Walmart store located near the Target store paid a higher minimum wage. Though employees of Target may be happy with the new move, they are far from being benefited when compared to the employees of Costco Wholesale Corporation (COST, Financial) and Container Store (TCS, Financial) who get a better minimum wage rate on an hourly basis. These retail companies are providing a minimum wage of $20 per hour.
It seems that this move has given inspiration to labor group “OUR Walmart.” Barbara Gertz, a member of the group, said that the new rate has inspired them to continue to fight for $15 per hour.
Management talks
Target Chief Financial Officer John Mulligan said that it's all about how a company is competitive at departmental level within a particular marketplace. He pointed out, at a meeting, that, in spite of the high rate, workers would not be attracted. He said the move would not have any substantial effect of the company's financial results. Target's CEO Brian Cornell stated, “We will increase wages in 2015, market by market...” The management has emphasized on making “people management” one of their top priorities for the year. This wage increase will presently have an impact on 1,800 Target stores. Though the retail chain has around 347,000 employees who receive $7.25 currently, it is not confirmed to date how many of these employees will be paid the higher amount.
Conclusion
This move may be in contrast to Target's cost-saving plan worth $2 billion. The retail chain announced this month on its intentions to layoff thousands of its current employees, mostly from its headquarters. Obviously, this wage improvement move will increase the company's cost, but retaining productive employees will also reap good benefits in the long run for Target as well as rebuild its brand reputation among consumers.
