Target announced Monday that it will be raising its hourly minimum wage to $11 starting in October, with plans to raise it to $15 by the end of 2020.
The company said that the new rate will apply to all 323,000 current staff members, as well as the 100,000 temporary workers it plans to hire over the holiday season.
Experts believe the decision is intended to keep Target ahead of Wal-Mart and other competitors, as each vies for potential employee talent. CEO Brian Cornell gave credence to this in his statement.
“We’re investing to make sure that we recruit and retain the existing team, that we attract new team members and, importantly, that we provide an exceptional service environment,” he told reporters. “We thought the timing was right as we move into the holiday season.”
A silent wage war
The announcement marks a departure from Target’s past strategy of keeping wage announcements discreet. In April 2015, the company quietly increased its minimum hourly wage to $9 after Wal-Mart announced plans to raise its own minimum wage to $10 by 2016. Last May, Target raised the wage again to $10.
With the latest increase to $11 per hour, Target’s minimum wage will outstrip Wal-Mart’s hourly minimum wage and set it above minimum requirements in 48 states, according to the Wall Street Journal. However, the company’s promise to raise its minimum hourly wage to $15 by 2020 complies with new legislation in both New York and California, where the minimum wage will increase to $15 per hour in the coming years.
Of course, one of the problems companies must consider when raising their minimum wage is how much the decision will affect their profits. Executives at Wal-mart have stated that past wage increases cost the company as much as $2.7 billion, a figure that weighed heavily on the company’s stock.
While Cornell did not disclose how much the wage increase would cost Target, the company said that the decision shouldn’t affect its projections for fiscal year per-share profit, since the wage increase had already been factored in when the company announced those numbers in August.
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