TIME Wages

This Big Retailer Just Raised its Minimum Wage for U.S. Workers — Again

Richard Cadan Media Kitchen cabinet fronts made at Ikea’s factory in Älmhult.

Company is already reaping the benefits of the last pay hike

Last June, Ikea announced it would raise its hourly minimum wage in U.S. stores from $9.17 to $10.76, a 17.3% hike. Now, almost exactly one year later to the day, Ikea is doing it again.

The Swedish furniture giant says the pay will go up to $11.87, a 10% increase for Ikea and a whole $4.62 above the current U.S. federal minimum wage of $7.25. (There is a movement underway to bring that up to $12 by 2020.) The hike will take effect on the first day of 2016 and will have an impact on 30% of Ikea’s U.S. employees.

This is a smart business move by Ikea, which has been expanding globally at a rapid pace, and it is one that will inevitably reap good P.R. The last time around went well for the company: Rob Olson, Ikea’s U.S. CFO, told the Huffington Post that in the six months since the last hike, Ikea has had 5 percent less worker turnover and is already attracting better talent.

Ikea was one of Fortune’s Best Companies to Work For in 2006 and 2007, but then dropped off the list. Perhaps its continued attention to better worker wages will get it back on.

MONEY Income equality

Why This CEO Pays Every Employee $70,000 a Year

Dan Price
Dan Price

Dan Price's decision to dramatically increase wages at his company sparked a lot of controversy. Here's why he did it.

Growing up in rural Idaho, Gravity Payments CEO Dan Price remembers learning that one’s values are most sacred.

“My dad would ask me a question…He’d say, ‘How much money is your integrity worth?’ His point was there’s no amount of money that he would be willing to sell his integrity for. And that was ingrained in me at a very, very young age.”

Fast forward to today, the 30-year-old CEO is staying true to those principles. Just last week he announced he’d be taking a $930,000 pay cut to help afford raising the minimum wage at his Seattle-based credit card processing company to $70,000. This means that out of the 120 employees, 70 will be getting raises and 30 will see their incomes double.

For Price, this will also mean reducing his $1 million annual salary to $70,000. “I may have to sell my house, to be honest,” he told me.

I spoke with Price on my daily podcast, So Money, about how he arrived at choosing $70,000 as the company’s starting salary and how he’ll be measuring the success of this bold decision. While Price’s move was born out of a desire to bring more income equality to his workforce, he’ll be looking to his customers to learn if, in fact, he made the best decision.

Farnoosh Torabi: You were inspired to raise the minimum wage because of a well-known Princeton study that found that emotional well-being rises with income—but only to an extent, which is around $75,000 dollars. Was it just the study that was the game changer for you? The numbers also had to make sense for the business, right?

Dan Price: To me, once you know the right thing to do, and it’s the right thing for everybody involved and it’s going to be beneficial to everyone, it becomes a moral imperative to actually do it. In the past, as much as I would have wanted to do something like this, it wasn’t practical, it wasn’t the right timing. And so, with that Princeton study, one of the other aspects that really hit home with me was, “The dollars that you’re making underneath that amount are causing harm to your well-being.” And that, to me, is powerful stuff. And we only get to live this life once. And I want everybody that I’m partnered with at Gravity to really live the fullest, best life that they can. And so, that was a big part of it. And to be honest with you, all of those studies and stuff, you can throw them out the window. If you just talk to people around Seattle, or really anywhere, and you see how it’s impacting them, that’s the top thing for me.

The day I decided to do this, I was on a hike with a friend who had her rent hiked up a little bit. And she’s incredibly smart, very hard-working, and her employer does a great job taking care of her, but market rates being what they are, and living expenses being what they are, it was creating a very difficult, stressful situation for her.

[Editor’s note: The cost of living in Seattle is 24% above the national average, according to PayScale, mainly due to the high price of housing. Home prices are 51% above the national average.]

FT: You said from the beginning that this is really just an experiment for now. How will you be measuring its success?

DP: First and foremost will be our client satisfaction. That’s what we’ve always built the whole company on. In my mind, I am a butler, I’m a servant for our clients, which are amazing independent businesses all over the country, and we help them accept credit cards for less and give them great service. And so, if our clients are more satisfied, that’s going to be, for me, the most important bellwether.

We never really had trouble attracting talent because we’re very purpose-oriented. We never really had trouble retaining talent because the most important thing we provide our team isn’t money, but an opportunity—an opportunity to serve, an opportunity to grow. But I do think that there was some level of distraction, and there must be when you’re living paycheck to paycheck. And so, I honestly believe that removing that distraction will significantly increase our ability to take care of our clients.

Every day, MONEY contributing editor Farnoosh Torabi interviews entrepreneurs, authors, and financial luminaries about their money philosophies, successes, failures and habits for her podcast, So Money—which is a “New and Noteworthy” podcast on iTunes.

More from Farnoosh Torabi:
How to Raise Kids Who Aren’t Obsessed With “Stuff”
Self-Help Guru Tim Ferriss Confesses His Biggest Financial Mistake
How I Conquered My Fear of Going Broke

TIME Careers & Workplace

Why You’re Probably Going to Get a Raise This Year

TIME.com stock photos Money Dollar Bills
Elizabeth Renstrom for TIME

When companies battle for talent, workers win

Raises are back—finally. A new report says roughly 90% of companies will give raises this year, but workers are going to have to earn those fatter paychecks: More than half of companies responding to PayScales’s annual Compensation Best Practices Report say their main reason for giving raises is to reward performance; only about 20% say the increased cost of living is the main reason they give raises.

And don’t hold your breath for a windfall. The vast majority of these say raises will be 5% or less.

Still, this is an improvement. In its annual Compensation Best Practices Report, compensation research company PayScale finds that 85% of responding companies gave raises last year and 89% of companies say they’ll give raises this year. The percentage of companies doling out pay increases has crept up for the past few years, after hitting a low of roughly 30% in 2010, and was above 80% last year. In addition, three quarters of responding companies say they’ve adjusted their compensation structure within the past year.

Smaller companies are more likely to dole out raises to keep valuable workers on board — something to keep in mind if you work at one. Small firms also are more likely to have individualized salary ranges for each position.

About two thirds of respondents say they gave cost-of-living raises last year, with this practice most common in the healthcare and social assistance sector — almost three quarters of these companies gave cost-of-living raises. On the flip side, this is the sector least likely to give workers bonuses.

Companies that rely on large labor pools of lower-skilled workers may give cost-of-living pay increases because there’s not as many good ways to measure performance, and the relative competitiveness of the work often doesn’t demand it. “However, even in industries like retail and healthcare which have a lot of minimum wage positions, there are still highly competitive jobs in segments of their workforce,” like management and IT, PayScale vice president of marketing Tim Low explains.

In more competitive sectors, though, talented workers can command even more. Just over three in five companies said they’ll increase pay for jobs that are in high demand. “We see a strong trend towards pay for performance,” Low said. Professional, Scientific and Tech Services, along with Information, Media, and Telecommunications are the two categories — as defined by PayScale — in which companies are most likely to report that over 50 percent of positions are competitive.

“The trend has been emerging for a while, but it’s part of a greater connection between compensation and business outcomes,” Low says. “The current economy in many sectors gives employees more choices now than they had just a few years ago.”

Read next: Wal-Mart Is Giving Half a Million Employees a Raise

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MONEY salary negotiation

New Study Reveals the Odds You’ll Actually Get the Raise You Ask For

Your boss's decision to grant—or deny—your request could be influenced by a lot more than your performance.

Perhaps you’ve resolved to make 2015 the year that you finally get a big bump up in pay.

If so, you’ll first have to clear the biggest hurdle standing in your way: You.

Less than half of working Americans ever even ask for a raise and close to 30% are uncomfortable negotiating salary, according to a new study by Payscale.

It may help you feel more confident to go after what you want if you know the odds are generally in your favor. Of people who have put themselves out there to request better compensation, three quarters saw their paychecks go up: 44% received the amount they asked for and 31% got an amount that was less than they asked for. (Hey, that’s still something!)

That Payscale study also broke down the likelihood that those who ask shall receive based on annual salary, job, degree level, college major and state of residency.

You’ll have the best shot if you…

 

  • …Already Earn a Decent Wage

    Once again, it’s good to be rich. The higher your annual salary, the more likely you are to have asked for a raise and the more likely you are to have received the raise you requested.

    Individuals earning $150,000 or more a year were the most likely to see their employer match the exact raise they requested, with a 70% success rate. Only 8% of these high-earners saw their request for a raise go unfulfilled.

    Meanwhile, only 25% of those earning between $10,000 and $20,000 saw their incomes increase by the amount they asked for, while 51% had their request for a pay raise denied entirely.

    Somewhere in the middle? The good news is that if your annual income tops $70,000, you have at least a 50% chance of getting the pay raise you request.

    image (3)

    image (4)

  • …Wear a White Collar

    Unsurprisingly, those who work in higher-paying jobs also have a better shot at having their compensation wishes granted.

    Chief executives were 76% successful in getting the exact pay raises they wanted. First-line supervisors in the construction trades had their requests granted 62% of the time. Other high-wager earners such as financial analysts and electrical engineers rounded out the top five professions most likely to receive a requested raise.

    Those with jobs that commanded lower annual salaries tended to have their requests for raises denied more frequently. Nursing aides and orderlies have the worst chance of getting the raise they want followed by security guards and cashiers. Below are the top five and bottom five occupations for getting a wage increase.

    image (3) copy

  • …Went to Law School

    While the level of education a person has obtained didn’t have much impact on their willingness to ask for a raise, it did affect the likelihood that their wish would be granted.

    Those with post-graduate degrees were most likely to be successful in their requests, though success rates were highest for those with an M.B.A. (55%) and a law degree (59%).

    Go figure that attorneys are good at negotiation.

    image (3) copy 2

     

  • …Got a B.S. in Social Work

    Surprisingly, English language and/or English literature majors were the most likely to have asked for a raise (51%)—call it their way with words. Their requests paid off 49% of the time.

    Those who studied public administration and social services were the most lucky in terms of receiving, getting what they wanted 56% of the time

    Those whose college majors tended to land them jobs in the public sector, such as homeland security, law enforcement, firefighting and other protective services were least likely to have asked for a raise—perhaps because these jobs typically have set pay structures. Workers who came from these majors who did ask were only met with a yes 18% of the time, giving them the lowest success rate.

    image (2) copy

    image (3) copy 5

  • …Live in Juneau

    Alaska residents are the most likely to push for a raise, with 53% of the population having requested one (and they’ll need it to offset those heating bills). Residents of Rhode Island come in second with 51%, followed by Oregonians and West Virginians, with 48%. Dwellers of Massachusetts, Oklahoma, and Idaho tied for fifth with 47% advocating for a raise.

    South Dakotans were least likely to ask for a pay increase, (31%), followed by residents of Arkansas (34%), Nevada (37%) and Nebraska (37%).

    Alaskans’ assertiveness pays off, apparently, as they are also the state residents most likely to receive the pay increase requested. Delawareans were the least successful in their requests with only 32% getting the amount they were after. Below are the top six and worst six states for getting a raise request approved:

    image (3) copy 6

     

    More from this series on Money.com:

MONEY pay raise

5 Ways to Get a Big Raise Now

Envelope With a Money. Image shot 03/2013. Exact date unknown.
Alamy

The best salary bumps go to the most valued workers. Here’s how to make sure you’re one of them.

All signs point to a rapidly improving job market, giving workers the upper hand over employers when it comes to getting a decent pay increase.

“The economy is heating up, and employment is improving. Employees should have more leverage and more confidence to ask for more,” says Bill Driscoll of staffing firm Accountemps.

It’s about time. While pay increases have steadily been rising since the end of the recession, the gains have been modest. Mercer is projecting an average pay raise of 3% for workers in 2015. That’s up from 2.9% this year, 2.8% in 2013 and 2.7% in 2012.

But for top performing and highly skilled workers, the pay bumps are much plumper.

Mercer’s survey shows the highest-performing employees received average base pay increases of 4.8% in 2014 compared with 2.6% for average performers and 0.1% for the lowest performers.

“Differentiating salary increases based on performance has become the norm,” according to Rebecca Adractas, a principal in Mercer’s Rewards consulting business. “It’s an effective way for employers to recognize top performers without increasing budgets dramatically.”

Here are five ways you can snag a better-than-average raise.

1. Gather your accolades. You know you’re good at what you do, but when clients, customers and respected colleagues say so, that carries weight with higher-ups. Collect emails of praise from your boss, ask customers or clients to write testimonials for your work, and get feedback from your manager after completing projects.

2. Prove you’re a top performer. There’s nothing like a number to show you are delivering on the job. Quantify your accomplishments. Sure, that’s easier if you’re in sales and you can show you’ve more than hit your targets or landed a big account. Did you implement more efficient ways to get things done, cut costs to meet budgets, take on additional responsibilities above and beyond your normal job duties? Those count too.

3. Know what to ask for. Are other people at your firm getting raises? How is your company doing? Is it hiring people or laying them off? Even companies cutting back don’t want to lose experienced employees. That doesn’t mean you’ll get a raise, but it will help if your request is grounded in reality.

It’s also important to know how you stack up against others in your position. If you’ve been at your company a long time, you may not be making as much as recent hires. Use tools such as PayScale.com’s salary calculator to research compensation by experience level, company size, and the city where you work. You can also talk to colleagues or even co-workers who have recently left your company about how much people make in your position. It’s still taboo to talk about salary, but if you ask for ranges, it’ll be an easier discussion to have.

4. Ask. Seems like the obvious place to start, but 56% of workers have never asked for a raise, according to a recent CareerBuilder survey. Sure, it can be an uncomfortable conversation, but this stat from the survey should give you courage: Two-thirds of workers who asked for a raise received one.

And now is a good time to have the conversation. Companies draw up their budgets for the next year in the fall, beginning in September. Wait till December to talk with your boss and it may be too late.

5. Don’t take no for an answer. If your manager isn’t willing to give you the pay bump you’re looking for, ask what you can do to get it down the road. Take notes and set a time to follow up. After the meeting, send an email thanking your boss for talking with you and summarize what you discussed so you have in writing what was laid out.

If a bigger than average pay increase isn’t in the cards because budgets are tight, consider other perks that you’d value. “Smart companies are retaining their talent in a myriad of ways besides salary increases,” says Driscoll. That includes one-time bonuses, working a flexible schedule, additional vacation days, telecommuting, covering more of the cost of health benefits, a richer 401(k) contribution, even cell phone reimbursement. “There are other ways to increase your salary without getting a pay raise,” he says.

Related:
7 Reasons It’s a Great Time to Ask for a Raise

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