With the holiday season approaching, this week Target became the first low-wage chain to announce it will raise pay to $15 an hour. Chief executive Brian Cornell said the decision to raise wages to $15 by 2020 will help Target attract and retain talent as the hyper-competitive retail sector enters its busiest quarter.
It also shows the growing impact of the Fight for $15–and puts pressure on other major players like Amazon, Walmart and McDonalds to follow suit.
Since striking fast-food workers launched the Fight for $15 in 2012, states and cities comprising more than 18 percent of the U.S. workforce—including Target’s home city of Minneapolis—have approved $15 minimum wages. And scores of companies have raised pay to $15, including insurance giants Aetna and Allstate, major hospital chains across the country, and tech leader Facebook for its contracted bus drivers, janitors and security guards.
But Target’s role as an industry leader in retail—which together with restaurants employs the largest share of workers paid less than $15–illustrates what business strategists have long argued: historically low-paying sectors can make the shift to significantly higher pay. MIT business professor Zeynep Ton has shown how industry leaders like Costco and Trader Joe’s provide a roadmap for how investing in retail workers with good wages and benefits goes hand-in-hand with strong growth and productivity.
Target’s move blows up the claims of corporate lobbyists who argue it’s simply not possible for industries like retail and restaurants to pay a $15 minimum wage. In fact, growing numbers of business owners and economists confirm that a phased-in $15 minimum wage is realistic for employers and will help boost the consumer spending that ultimately drives job growth. But ultimately the imperative to pay a living wage is about our nation’s values. As La Colombe CEO Todd Carmichael argued last week, “unless you pay your employees a nonpredatory living wage that keeps people and their families above the poverty line, you don’t deserve to be in business.”
Part of what’s driving employers like Target to pay $15 an hour is the simple fact that, everywhere in America—not just on the coasts– a single worker will soon need to earn at least that much just to afford the basics. And workers on the coasts or supporting kids will need even more. Yet more than 43 percent of America’s workers struggle on less than $15 an hour. Far from teenagers, the median age of the millions of workers earning less than $15 an hour in the U.S. is 32. They include hospital workers and preschool teachers, auto-parts workers and waitresses. In other words, many of the front line jobs in which U.S. workers today spend their careers pay less than $15 an hour.
And we all end up subsidizing those low wages. Low pay by corporations like McDonald’s and Walmart cost taxpayers a whopping $153 billion a year in public assistance to working families, according to a recent study by researchers at the University of California, Berkeley.
A key issue when employers like Target raise pay is what happens to the growing numbers of employees who don’t work for them directly but instead through staffing agencies or service contractors. In the Twin Cities, Target has already been a leader in tackling this issue, agreeing last year to support the efforts of its contracted janitors to unionize and raise their pay substantially. Ensuring that more employers raise standards for contracted and direct employees alike is essential in our increasingly “fissured” workplaces.
Low pay is hurting America’s working families and holding back our economy, which depends on a thriving consumer class to drive growth. Target’s plan to raise pay to $15 an hour over the next 30 months is smart business strategy, and what our nation’s workforce and economy need. There’s now a bullseye on the back of employers like Amazon, Walmart and McDonalds. They should follow Target’s lead.
Read the original op-ed at CNBC.