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Retail Wages are Rising But Is it Enough to Draw New Workers?

Images Courtesy of Amazon and Target


Employment rates have yet to reach pre-pandemic levels and that’s put the labor market in a pinch. Like the rest of the American workplace, retailers including Target, Walmart, and Marcy’s are struggling to fill vacant positions brought on by the labor shortage

To make matters worse, a record 4.5 million workers quit their jobs last November and the emergence of Omicron restricted everything from store hours to operational capacities during the winter months. 

Of course, working remotely is not an option for physical retailers and that’s only contributed to the industry’s vulnerability. There is, however, one strategy an increasing number of retailers are using to encourage employees to come back to work for the long haul: increasing the minimum wage. 


Target, Amazon, and others make commitments 

Since 2009, the federal minimum wage has sat at $7.25 per hour. States including Florida, Delaware, Massachusetts, New Jersey, Washington, and Virginia have plans to raise their minimums to $15 per hour over the next few years, but as of February, only California has fully made the transition.  

For most states, the federal rate will continue to predominate wages and it’ll be up to companies to set standards for increased pay. Macy’s, for example, is one of the most recent retailers to move towards a $15 minimum wage for all its employees—a commitment they’re saying will take until May of this year to complete. 

Amazon also has plans to up their starting hourly rate to $18 per hour from the $17 rate they implemented almost a year ago. According to Dave Bozeman, vice president of Amazon Transportation Services, the company will accompany raised wages with starting bonuses of $3,000, all in an effort to hire upwards of 125,000 more employees as soon as possible. 


retail wages


And back in 2017, Target announced it would increase starting wages to $15. But it’s been over two years since that was accomplished and the company still faces labor shortages. Because of this, the retailer has plans to step up further and offer a starting hourly pay between $15 and $24 per hour. 

“When you pursue growth by way of volume expansion and with it, customer satisfaction, you need to constantly improve the caliber and commitment of your workforce… Obviously increased compensation and benefits, especially in a very tight labor market, go a long way toward accomplishing this.”

“Amazon is clearly raising the bar of the entire industry and Target and Walmart are following their lead,” said Mark Cohen, director of retail studies at Columbia University’s Graduate School of Business. 


retail wages


In Target’s case, a drastic improvement in compensation will impact operations in a couple of key areas. First, by appealing to a broader pool of applicants, Target can be more selective during the hiring process. This brings more qualified associates onto the store floor and helps the retailer set itself apart from other low-cost rivals like Walmart. 

Second, offering workers a living wage boosts consumer spending despite rising inflation levels. Living wages also depend heavily on workers’ geographics, but regardless, the more money employees have in their pockets, the more customers Target and their competitors have. 


Higher wages combat recent spikes in inflation 

Offering a living wage doesn’t just help retailers, either, as a growing number of workers struggle with inflation adversity. In fact, a recent study by the National League of Cities found 64% of workers in the retail industry fail to make a living wage. 

Compounded by a growing number of consumers who care about ethical and sustainable supply chains, supporting an industry that’s dependant on underpaid workers is surely off-base with today’s consumer standards.    

For many retailers, every penny counts when it comes to maintaining profits, and hourly wages can cut into those margins. However, profits for retailers including Target, Walmart, and Costco are rising and that means more flexibility when it comes to offering higher wages. 

For retail employees, a slight percentage pump in hourly pay may not provide an adequate living wage, but it will help to offset the rise of inflation. The current labor shortage won’t last forever, but the above retailers must raise wages to meet the cost of living standards, boost consumer spending, and hire more qualified applicants.