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By announcing it would be raising the wages of its U.S. employees for the second year in a row, the Ikea Corporation (people still refer to it as a Swedish company even though its headquarters, for years, have been located in the Netherlands) has been basking in the limelight, as if the announcement were some sort of emancipation proclamation. Yes, it’s good news for workers. Indeed, any raise is good news. But it’s not as “spectacular” as it seems.
Starting January 1, Ikea’s minimum wage will be raised to $11. 87 per hour. Let’s consider that. While $11.87 is $4.62 higher than the federal minimum (which, to be honest, is part fantasy, part cruel joke), it’s almost certainly not enough for a person to actually “live” on. If you make $11.87 per hour, and work 40 hours a week, for 52 weeks, and never miss a day, your pre-tax, pre-deduction income will be $24,690. Can one “live” independently on what’s left over?
Also, while Ikea has proudly stated that the Jan. 1 increase will raise the “average pay” of its U.S. employees to $15.45, such statistics can be wildly misleading. Say a company employing 100 people has four hourly pay rates: $12, $14, $16, and $30. But the only workers making that $30 wage are the 6 maintenance guys. The other 94 employees fall into the lesser rates. Still, the company can accurately say that its “average” pay rate is $18.
Example: If I and two friends are having lunch with the NBA’s LeBron James, and we decide to compute what the “average” income of our table is, we would total up our yearly incomes and then divide by four. Voila! We would find that the “average” income of the four people sitting there is more than $8 million a year. Rather misleading, no?
But Ikea’s pay raises do bring with them some useful lessons. By having raised its wages a year ago, Ikea has learned two important things: They have been able to attract a higher caliber worker, and they have been able to reduce employee turnover (which saves recruitment and training costs). Neither of which should surprise anyone.
In the 1990s I had a friend who owned a limousine service. Because punctuality and reliability were absolute necessities, his business suffered gravely when a driver called in sick or suddenly quit. To prevent employee turnover, he raised the drivers’ pay by a whopping 33-percent, paying them significantly more than the competition. The result? No driver ever quit—never, ever, not a single one—and his business flourished.
Former Secretary of Labor Robert Reich (whom I once interviewed for CounterPunch) has long maintained that union jobs—jobs that offer superior wages, benefits and working conditions—are going to attract the most qualified workers in a community.
And why wouldn’t they? Where would the most talented workers in a community opt to work? At some low-rent mom & pop shop, or a sleek, unionized factory? As that time-honored union maxim goes, “When you pay peanuts, you’re going to attract monkeys.”