Gap Raises Its Minimum Wage; All Eyes on Wal-Mart



It looks like at least one big corporation was listening on January 28, when President Barack Obama urged U.S. business leaders to “do what you can to raise your employees’ wages.” On an all-employee conference call on Thursday, Gap Inc. (NYSE:GPS) Chairman and CEO Glenn Murphy announced that the company would raise its hourly minimum wage to $10 per hour by 2015. The move is expected to impact about 65,000 employees.

The move speaks volumes about the culture at Gap. In an explanation of the decision, the company’s executive team lauded its retail team and emphasized its belief that if it takes care of its employees, 75 percent of which interface directly with customers, its employees will take care of the company.

“Over the last five years, retail has changed rapidly, and we’ve stayed ahead of others by investing in technology,” Gap explained in an FAQ prepared for the announcement. “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.”

This is a philosophy shared by Costco Wholesale Corp. (NASDAQ:COST) President and CEO Craig Jelinek. “At Costco, we know that paying employees good wages makes good sense for business,” Jelinek said in a statement in 2013. “We pay a starting hourly wage of $11.50 in all states where we do business, and we are still able to keep our overhead costs low. An important reason for the success of Costco’s business model is the attraction and retention of great employees. Instead of minimizing wages, we know it’s a lot more profitable in the long term to minimize employee turnover and maximize employee productivity, commitment and loyalty.”

While Jalinek has come out in favor of the Fair Minimum Wage Act — a piece of legislation introduced by Sen. Tom Harkin (D-Iowa) and Rep. George Miller (D-Calif.) that would raise the federal minimum wage from $7.25 to $10.10 per hour — Gap doesn’t appear to have taken that step. Still, Obama praised the move on Thursday, and the wage increase will serve as fuel for the ongoing debate about the minimum wage.

A principal player in that debate right now is Wal-Mart Stores Inc. (NYSE:WMT), the largest retailer and private employer in the world. Wal-Mart has been aggressively criticized over the past few years for its wage and labor policies. At the the end of January, the National Labor Relations Board brought a complaint against Wal-Mart over three alleged violations of the National Labor Relations Act.

“We are looking into the impact that this proposal will be on our business,” Wal-Mart spokeswoman Brooke Buchanan told Reuters on Wednesday, referring to the Fair Minimum Wage Act. “We remain neutral. Our position has not changed.”

More from Wall St. Cheat Sheet: