Gap Raises Minimum Wage Ante To $10

Gap Art Decó store (Miami Beach)
Flickr/Alberto Cabello Mayero
Gap Inc. -- a retail operation that owns such store chains as GAP, Banana Republic, and Old Navy -- announced that it would raise the minimum hourly rate it pays its employees to $9 an hour this year and $10 by next year, as the company's website states.

In a written statement, CEO Glenn Murphy said that the increase wasn't a "political issue" but an investment decision "that we expect to deliver a return many times over." The increase will affect upwards of 65,000 store employees at the company.

It's a big move for the company, given that federal minimum wage remains at $7.25 an hour -- and could remain there for some time. But a combination of growing pressure from workers and concerns about income inequality among influential people in business has pushed Gap and other companies as well as individual states to take action and not wait for Congress.

Careful support from businesses
Even Wal-Mart, the largest private employer in the U.S. and often a target of labor actions, is "looking" at supporting a minimum wage increase, according to Bloomberg. According to seldom reported numbers, as provided to AOL Jobs, Wal-Mart's average hourly wage for full-time employees is $12.83, while the average for part-time workers, who make up 40 percent of the company's U.S. employees, is $10.76 per hour.

Some companies have embraced higher working pay for years. Costco, for example, has a starting wage of $11.50 an hour, as the Huffington Post reports. Back in 2005, the average pay at the company was $17 an hour, according to the New York Times, which got Wall Street analysts complaining about the extra money not going to shareholders.

The world has changed significantly since then. The Great Recession leveled the economy, which is only managing a limping recovery. There's been a growing recognition that average people have been left behind. "Almost all of the gains, certainly since the recession, but really most of the gains over the last 30 years, have gone to the very top," said former Secretary of Labor Robert Reich to CBS MoneyWatch. Pope Francis has decried the "idolatry of money," according to CBS News, and called "trickle-down theories" of economics a "new tyranny."

Pressure builds
Over the last two years, organized fast food workers have held a series of strikes, demanding that the federal minimum wage increase to $15 an hour. There have also been strikes at Wal-Mart stores. And most Americans support a higher minimum wage, according to an ABC News Poll.

But criticism has also appeared in the business community. In a conversation with the Wall Street Journal, the global managing director of business consulting firm McKinsey & Co. called "rising and persistent income inequality" the biggest challenge to capitalism in the next 20 years. In speaking about the problems that computer-driven efficiency can cause to job creation and wages, Google chairman and former CEO Eric Schmidt recently said, "We're in a race between computers and people--and we need to make sure the people win," according to Time Magazine.

It's a great deal of ongoing pressure to resist. Although a hike in the federal minimum wage might offer cover for businesses trying to avoid Wall Street's ire, short-term action doesn't seem to be in sight. Discussions over a higher minimum wage are mired in continued debate in Congress, as the Los Angeles Times reports. Political realities suggest that a hike would have a difficult time passing the House.

Alternative solutions
So various groups have had to find their own way. Companies like Gap -- and Wal-Mart, should it fall into line -- will put pressure on other businesses, because higher wages will give them an advantage in obtaining workers. That, in turn, will drive other companies to increase wages or operate at a disadvantage.

President Obama, who has supported a $10.10 federal minimum wage proposal, has raised the minimum wage for new federal contract numbers to that level, according to the Associated Press.

At the state level, 21 states already have a higher minimum than the federal's $7.25. Last year, California, Connecticut, New York, New Jersey, and Rhode Island all approved new increases in their state minimum wages. Another five states -- Hawaii, Massachusetts, Maryland, Minnesota, and South Dakota -- seem likely to do so this year.

But even then, the highest state minimum wage, in Washington state, is still $9.32 an hour, below Gap's plan. As of now, it seems that private industry may be workers' best bet for better pay.
Read Full Story