Gap’s minimum-wage hike getting looks

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Posted: Monday, February 24, 2014 12:00 am

NEW YORK (AP) — Gap’s decision last week to raise the hourly wages of workers at its stores nationwide puts pressure on other major U.S. retailers to do the same.

Following Gap’s announcement that it will set its minimum wage at $9 an hour this year and $10 an hour in 2015, big chains from Walmart to Sears have said they will continue to evaluate their wages.

But ultimately, industry watchers say, whether rivals follow Gap’s lead will depend on whether they decide they must do so to remain competitive.

“I think more people will wait on the sidelines and not take on additional expenses,” said Ken Perkins, president of RetailMetrics, a retail research firm. “It’s a gamble on Gap’s part.”

The plight of hourly workers has been making headlines lately.

Fast-food workers protested for higher pay last year in cities across the country. Several states are considering raising their minimum wages. And President Barack Obama has endorsed a bill in Congress to increase the federal minimum wage to $10.10 an hour by 2016.

There’s no question that what the major players in the U.S. retail industry do will have a big effect on the job market. In fact, the industry accounts for one in four U.S. jobs, representing about 42 million workers.

Still, the industry has mostly shunned the idea of higher wages.

The National Retail Federation, which represents some of the nation’s largest retailers, is fighting Obama’s proposal, saying the financial burden could force them to raise prices or reduce workforce.

The decision to raise wages is a complex one for stores. Retailers have little wiggle room. To stay competitive, experts say, retailers must offer U.S. shoppers the low prices they demand. But to make a profit, they say, they must also keep labor costs low.

The issue is highlighted at a time when the industry’s profits have been disappointing. Earnings for the fourth quarter, which covered the holiday shopping season, are expected to be down 5 percent compared with a year ago — the worst since the second quarter of 2009, when that figure was down 6.7 percent, according to RetailMetrics’ tally of 122 stores.

Gap Inc. has been one of the bright spots in the clothing industry, enjoying a sales turnaround that started in early 2012. The company owns the Gap, Old Navy, Banana Republic and Athleta chains and employs 90,000 hourly and salaried workers in the United States.

The nation’s largest clothing chain declined to say what its employees’ average wage is, but said the vast majority earn more than the federal minimum. The company said the new raise would affect 65,000 hourly workers.

Gap declined to comment on how much the pay hike will cost. But it said there were no plans to offset the cost with cuts in jobs or store hours or with price increases.

Nancy Green, general manager of Gap’s Athleta brand, said she believes some competitors can’t afford to raise wages but “others will be inspired.”

So far, though, rivals don’t seem inspired.

Target Corp. spokeswoman Molly Snyder declined to comment on the average pay for the company’s hourly workers but said it is “considering how best to balance the needs of working Americans while maintaining a healthy business environment conducive to job creation.”

Walmart Stores, the nation’s largest private employer with 1.3 million workers, said that less than 1 percent of that workforce makes just minimum wage. Its average wage for full- and part-time hourly workers is nearly $12 an hour, the company said.

“Our wages are determined on a market-by-market basis, and we continually look at them in order to remain competitive,” said David Tovar, a Wal-Mart spokesman.

Likewise, Sears Holdings, which operates Kmart and Sears, said it offers “competitive compensation packages” and plans to “continually monitor and evaluate our pay and benefit programs in light of business and market conditions.”

© 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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