Target Corporation (NYSE:TGT), the second-largest discount retailer in the United States, decided to raise the minimum wage for its employees to $10 per hour amid a competitive job market and pressure from labor groups, according to Reuters based on information from people familiar with the situation.
According to two sources, the management of Target informed store managers about the salary increase. Employees receiving less than $10 an hour will start receiving an increase in the wages next month.
The report indicated that Target will also increase the salaries of its employees who are already receiving more than $10 an hour. The sources said those workers will be entitled to an annual merit raise and a pay-grade increase, which is related to their position and experience.
Wage hike could pressure Target’s earnings
Wall Street analysts commented that Target’s decision to increase the salary of its employees could pressure its earnings since the company is also investing billions to improve its supply chain and technology infrastructure.
Burt Flickenger, managing director of Strategic Resource Group, commented, “This move will make it difficult for Target to meet its aggressive profit projections.”
Target followed Wal-Mart
Target followed the step of Wal-Mart Stores (NYSE:WMT), which already increased the wages for its more than 1.2 million associates at Walmart U.S. and Sam’s Club earlier this year. The world’s largest retailer raised the salary of its employees hired before January 1, 2016 to $10 per hour.
In April 2015, Target raised the minimum wage for its employees from the $7.25 per hour (federal minimum rate) to $9 per hour. The second-largest discount retailer followed a similar step by Wal-Mart at the time.
Target spokesperson Molly Snyder declined to comment on the report and explained that the company does not disclose the details of its compensation programs.
However, she said Target “pay market competitive rates and regularly benchmark the marketplace to ensure that our compensation and benefits packages will help us to both recruit and retain great talent.”
Labor groups demand for a $15 minimum wage
Labor groups are pushing for a $15 minimum wage under a movement called “Fight for Fifteen,” which is becoming popular in cities across the United States. It has also become one of the important topics in the U.S. presidential campaign. Democratic presidential candidate Bernie Sanders is proposing a $15 “living wage.”
California Governor Jerry Brown Cuomo and New York Governor Andrew Cuomo recently signed a legislation that would increase the minimum wage in their states to $15 per hour.
In California, the $15 minimum wage will take effect by 2023. The wages of fast- food workers in New York City will increase from $12 per hour (December 31, 2016) to $15 per hour by 2018 and for the rest of the state, from $10.75 per hour to $15 per hour by 2023.