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Gap Readies Minimum Wage Increase

The retailer is one of the first U.S. companies to heed the call to raise minimum wages for its 65,000 U.S. store employees.

Gap Inc. is one of the first U.S. companies to heed the call to raise minimum wages for its 65,000 U.S. store employees.

This story first appeared in the February 20, 2014 issue of WWD.  Subscribe Today.

On Wednesday, chairman and chief executive officer Glenn Murphy said in a letter on Gap’s Web site that the company will make a strategic investment to increase the minimum hourly rate for employees to $9 in 2014 and $10 in 2015.

The move comes as there is growing pressure nationwide to raise the federal and state minimum wage rates. President Obama urged Congress in his State of the Union address to pass an existing bill increasing the national minimum wage to $10.10 an hour from $7.25 and indexing it to inflation by the second half of 2016. He also signed an executive order last week to require federal contractors pay federally funded employees a “fair wage” of at least $10.10 an hour.

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A bill that would raise California’s minimum wage to $10 an hour by 2016 was approved in September by the state legislature and subsequently signed by Gov. Jerry Brown. The measure would increase the wage from $8, the current minimum, to $9 an hour on July 1 and to $10 on Jan. 1, 2016.

The nonpartisan Congressional Budget Office said in a report released Tuesday that an increase in the federal minimum wage to $10.10 by 2016, a legislative proposal supported by President Obama and Congressional Democrats, but opposed by some retail groups, could lead to a loss of 500,000 jobs.

Gap said its decision had less to do with the California time frame than its desire to “do more for employees,” adding that it had been contemplating the move for some time.

Explaining the move to raise hourly rates, Gap said that over the last five years, “we’ve stayed ahead of others by investing in technology. And yet, a customer’s lasting impression is often shaped by the interactions with the people in our stores. To connect and enhance the in-store and digital experience for our customers even more, we must attract and retain great talent. As a result, we’re raising the minimum hourly rate for people who work in our U.S. stores.”

The increases will impact all of the company’s brands, including Gap, Old Navy, Banana Republic, Athleta, Piperlime and Intermix. Gap said 75 percent of its employees work on the front line serving customers.

The company said the majority of employees in stores and distribution centers earn more than the $7.25 minimum wage, but did not specify how much they earn.

“To us, this is not a political issue,” said Murphy. “Our decision to invest in frontline employees will directly support our business, and is one that we expect to deliver a return many times over.

“The people in our company who engage directly with our customers carry an incredible responsibility,” he added. “Our success is a result of their hard work, love of fashion and commitment. We hope this decision provides them with some additional support as they grow their careers with Gap Inc.”

Murphy said the decision reflected the values set by Gap founders Doris and Don Fisher. “They invented specialty apparel retail, but Don also challenged us to live up to our promise to ‘do more than sell clothes,’” Murphy said.