With a tightening labor market and a holiday hiring spree underway, Target Corp. said it will raise the minimum wage of all hourly workers to $11 starting in October.
It will bump the rate to $15 an hour by the end of 2020, becoming one of the nation's first major employers to set a date to hit that mark, the Minneapolis-based retailer said Monday.
"It's part of our overall commitment to investing in our team and making sure we're attracting and retaining great talent," Target CEO Brian Cornell told reporters.
Cornell and other executives declined to say how many of its 323,000 hourly employees at stores and distribution centers might get a raise from the current base pay of $10 an hour.
The new policy also will apply to 100,000 seasonal workers it is hiring for the upcoming holiday shopping season.
An improving economy and constricting job market is putting pressure on companies to boost pay for entry-level jobs such as cashiers and shelf stockers, where turnover is high.
"Right now, labor conditions in the retail industry are tight," said Craig Johnson, a retail analyst with Customer Growth Partners. "That's why you see 30 people in line but only two or three checkout lines manned. That drives people nuts. That's because much of retail doesn't pay sufficiently for the services offered."
Target is signaling it wants to compete more aggressively with Costco as "employer of choice," Johnson said, noting Costco's relatively low turnover rate and better pay and benefits.
At a time when consumers can make easy price comparisons on similar products, retailers' best chance of winning new business is through superior customer service, which means getting people in and out of stores quickly and making sure enough workers are around to answer questions.
"All that means human capital," Johnson said.
The move puts Target in step with a national movement by organized labor and anti-poverty groups to raise the federal minimum wage to $15 an hour. Minneapolis this summer joined at least three dozen other cities that have voted to raise hourly pay to at least $15 an hour in the coming years.
In a statement, Minneapolis Mayor Betsy Hodges commended Target for its "bold and visionary" move.
"I hope it will spur other businesses, here and nationwide, to take similar steps to ensure that everyone who works full-time can earn a living wage and no one who works full-time has to live in poverty," said Hodges, who is running for re-election.
Celeste Robinson, lead organizer of the group 15 Now Minnesota, said Target's decision underscores the power of social movements.
"Just like the city or state doesn't regularly raise the minimum wages of its citizens, corporations don't raise wages unless there's significant social or political pressure to do so," she said. "Just a few years ago $15 was considered laughable by most of the political establishment and the business world."
But the retail industry's largest lobbying group couched the decision in purely business terms, saying it reflects investments needed to compete in an era of "rapid transformation and disruption."
"These decisions are being driven by a robust marketplace, not government mandates," National Retail Federation CEO Matthew Shay said in a statement. "It is encouraging for both current and future retail employees, and will benefit the consumers they serve every day across America."
Cornell said Target takes a market-by-market approach to evaluating and adjusting starting pay for its front-line workers, adding that all employees earn above the federal minimum wage of $7.25. That threshold has not been raised since 2009. Minnesota's minimum wage for large employers is $9.50 an hour.
The new $11 an hour rate exceeds every state minimum wage except in Massachusetts and Washington, which both have an $11 hourly minimum. It also is below the District of Columbia's, which is $11.50.
Target is ahead of the retail pack with its wage-boosting announcement. Two years ago, rival Walmart garnered national attention when it said it would raise entry-level wages to $10 by 2016. Target and other retailers, including the parent company of T.J. Maxx and Marshalls, quickly followed suit.
The wage adjustment won't change Target's previous earnings guidance for this year, though it comes as the retailer is trying to keep positive sales momentum going as it moves into the crucial fourth quarter.
Company officials said higher labor costs are consistent with previously announced plans to invest in the company's future, which include spending $7 billion over three years to update stores, beefing up its digital strategy, improving the supply chain and introducing more exclusive brands.