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‘Look, I can quit’: Why Target is giving workers a big raise

Target workers will see a pay increase next month. (Nathan Denette/Canadian Press/AP)

As employers across the country are struggling to fill jobs, Target just took a bold step to attract and keep more workers. The retail giant unveiled plans Monday to raise its minimum hourly wage to $11 by October — and pledged to reach $15 in 2020.

Hitting the $15 goal would make Target's starting pay the industry's highest, beating out even upscale competitors, such as Nordstrom and Bloomingdale's. Labor groups see the raise as a victory after a five-year campaign to significantly boost pay for low-income workers.

Target framed the choice as part of its long-term business strategy.

This significant investment in its team will allow Target to continue to recruit and retain strong team members and provide an elevated experience for its guests and in the communities it serves,” the company said in a statement.

The pay hike for Target employees follows Walmart’s decision last year to increase wages to at least $10 an hour. It also comes as the nation’s unemployment rate tightens and job vacancies continue to climb, making it harder for businesses to hang on to trained staffers. 

“The biggest piece of leverage an employee has is to say, ‘Look, I can quit and go to this other place,’ ” said Heidi Shierholz, senior economist at the Economic Policy Institute, a think tank in the District. “When that starts happening, employers have to raise wages.”

About 323,000 people work at Target, which also offers health-care coverage, and the store said it will hire another 100,000 temporary staffers to handle the holiday season’s demand surge.

(Walmart, by contrast, is offering its employees more overtime opportunities in November and December, rather than beefing up its workforce.)

The economic timing is right to ramp up perks, said Shierholz, who previously worked as the chief economist for the Obama administration's Labor Department.

“As we get more into the scene where employers are chasing workers rather than workers chasing jobs, that shifts bargaining power toward workers,” she said.

The retail industry is the country’s largest private-sector employer — and offers some of its lowest wages. The average worker on a store's floor makes $10.90 an hour, according to the Bureau of Labor Statistics.

The last two years, though, have brought a steady trickle of income changes, as labor groups pushed for higher pay and states have raised the minimum wage.

Washington and Massachusetts mandated in January that workers must make at least $11 an hour. Costco, another all-purpose retailer, recently increased its starting hourly pay for the first time in nine years, boosting it to $13.

Fight for $15, the advocacy movement sparked in 2012 by the Service Employees International Union, released a statement Monday from Steven Suffridge, a McDonald’s employee in Minneapolis who works on the campaign, urging other companies to follow Target's example.

“If Target can pay $15/hour, companies like McDonald’s can and should too,” Suffridge said. “They should follow Target’s lead instead of paying workers so little they have to rely on public assistance to get by.”

Brian Kropp, human resources practice leader at CEB, a Virginia consulting firm, said the Target raise is a financially savvy move, because turnover tends to be costly.

Ensuring workers stick around, especially before the holiday rush — and especially in this labor market — could ultimately save the retailer money, he said.

“A quarter more could make all the difference in where hourly employees decide to go work,” he said.

Karla Walter, director of employment policy at the Center for American Progress, a left-leaning research organization, said Target increasing its average pay from $10 to $15 would help lift families out of poverty.

“We know most minimum wage workers aren’t teen workers,” she said. “The majority are women, working parents, and they’re bringing home money that supports their household.”

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