Target’s New Minimum Wage Pledge Outpaces Most State Government Mandates

Target Store

Executives at one of the nation’s largest retail chains proved federal and state mandates are not prerequisites to increased hourly wages for American workers.

In an announcement Monday, Target confirmed it will implement an $11-per-hour base pay beginning in October for all of its employees nationwide, including about 100,000 temporary staff members who will be hired ahead of the Christmas shopping season. The hourly wage is set to further increase to $15 by the end of 2020.

The specific details came about seven months after Target announced a plan to invest $7 billion into the company. According to CEO Brian Cornell, the wage increase is the latest move to ensure employees receive “market competitive” compensation for their work.

“With this latest commitment, we’ll be providing even more meaningful pay, as well as the tools, training and support … that set Target apart,” he said.

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While the federal minimum wage has been set at $7.25 since 2009, Target and other companies — including chief rival Walmart — have taken the initiative to set their base rates higher. When Target hiked its lowest hourly rate to $9 in 2015, Walmart responded with a promise to increase wages for its employees to at least $10 per hour by the following year.

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A number of other major retailers, including Whole Foods and Costco, have similarly given across-the-board raises to their lowest-paid employees.

Most states have enacted laws setting wages higher than the federal minimum, though Target’s latest increase will match the rates in Massachusetts and Washington, which are the highest in the nation. Several cities have passed ordinances dictating hourly wages higher than both the federal and state minimum.

Many economists and politicians agree a hike in the minimum wage is good for U.S. workers and the economy, but there is hardly a consensus regarding what that base rate should be or whether it should be forced upon employers by either state or federal regulators.

In Seattle, Washington, for example, laws bumping the city’s minimum hourly wage from $9.47 to $13 between 2015 and 2016 were tied to a corresponding reduction in hours worked and a net loss in income for low-skilled workers.

“The reduction in hours would cost the average employee $179 per month, while the wage increase would recoup only $54 of this loss, leaving a net loss of $125 per month (6.6 percent), which is sizable for a low-wage worker,” a University of Washington study found.

Minimum wage mandates by state and local governments have also been blamed for increased investment in automation by fast-food franchises and other companies unable or unwilling to maintain their previous staffing levels as payroll expenses trend upward.

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The American Enterprise Institute’s Mark J. Perry wrote in 2015 that “market-determined wages reflect supply and demand conditions that are specific to local market conditions and vary widely by geographic region and by industry.”

As Target and many other employers have shown in recent years, there is an incentive to increase wages independently from any government laws forcing them to do so. Cornell said his company’s “bolder and more vocal investment” will help Target attract high-quality job applicants and retain current employees.

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