Calling it “the next step” in an ongoing effort to raise the wages of hourly employees, Target announced Monday (Feb. 28) that it would boost starting pay in certain tight labor markets to as much as $24 per hour.
In addition, the Minnesota-based operator of 1,900 stores said it was also revising its health benefit policy and would make them available to new employees, working as little as 25 hours per week, more quickly.
The moves not only reflect the heightened level of competition that retailers and restaurants are facing in the battle to attract workers in the service sector but also mark a major bump from the $15 base rate policy that Target began implementing in 2017.
“Our team is at the heart of our strategy and success, and their energy and resilience keep us at the forefront of meeting the changing needs of our guests year after year,” Target Chief Human Resource Officer Melissa Kremer said in the company’s press release, which pegged the cost of the upgraded wages and benefits at $300 million this year.
But Will It Work?
To be sure, Target is not alone in trying to entice workers to join its team versus that of a competitor, as reflected in its multi-million-dollar commitment to do so. Hourly wage rivals including Amazon, Walmart, McDonald’s and more have all made major efforts to attract new employees and retain existing ones, with a mix of health benefits, education funding perks, promotion opportunities, paid time off and higher pay.
As it stands, the federal minimum wage is still $7.25 per hour, but California and Washington, D.C. have both stepped up their base rates to $15 an hour this year, with a handful of other states, including New York and Connecticut, stair-stepping up to that level over a period of years.
But while states are outpacing the federal government with their own minimum wage mandates, the private sector — especially the largest companies— is outpacing them all by offering above-market rates to attract new people onto their payrolls.
For Target, “the exact starting wage within the [$15-$24] range will depend on the job and the local market, with market-level wages set by the retailer based on industry benchmarking, local wage data and more,” the announcement said, noting that the program was aimed at all hourly employees regardless of it they work in stores, supply chain facilities or at the company’s headquarters in Minneapolis.
Non-Human Alternatives
At the same time, as wage inflation continues to rise and take a larger bite out of the bottom line of businesses, the case for investing in automation and demand for robotic technology become more cost effective, having reportedly risen by 40% last year.
In addition, as PYMNTS research and prior reporting on employee wages and benefits has revealed, the decision to work in one place over another is a lot more complicated than just a starting wage.
“Pay is never the top reason they are taking the jobs they’re taking,” John Waldmann, CEO of scheduling software maker Homebase, told PYMNTS, noting that work experience and other benefits are major determinants.
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