US retailers face pressure to raise wages

Associated Press

NEW YORK

Gap’s decision this week to raise the hourly wages of workers at its stores nationwide puts pressure on other major U.S. retailers to do the same.

Following Gap’s announcement that it will set the minimum wage for workers at $9 an hour this year and $10 an hour in 2015, big store chains from Wal-Mart to Sears said Thursday that they will continue to evaluate their wages.

But ultimately, industry watchers say whether they follow Gap’s move will depend greatly on whether or not they decide that they need to in order to remain competitive.

“I think more people will wait on the sidelines and not take on additional expenses,” said Ken Perkins, president of RetailMetrics, a retail research firm. “It’s a gamble on Gap’s part.”

Gap’s move comes at a time when the plight of hourly workers has made headlines. Protests by fast-food workers asking for higher pay last year in cities across the country made headlines. Several states are considering raising their minimum wages. And President Barack Obama is endorsing a bill in Congress that includes a proposed increase in the federal minimum wage to $10.10 an hour by 2016.

There’s no question that whatever the major players in the U.S. retail industry decide to do will have a big impact on the job market. In fact, the industry supports one in every four U.S. jobs, representing about 42 million workers.

Still, the industry mostly has shunned the idea of higher wages. The National Retail Federation, which represents some of the nation’s largest retailers, is fighting Obama’s proposal, saying the financial burden could force them to raise prices or reduce workforce.

Indeed, the decision to raise wages is a complex one for stores. Retailers have little wiggle room. To stay competitive, experts say retailers have to offer U.S. shoppers the low prices they demand. But to make a profit, they say they also must keep labor costs low.

The issue is highlighted at a time when the industry’s profits are disappointing. Earnings for the fourth quarter, which covered the holiday shopping season, are expected to be down 5 percent compared with a year ago — the worst since the second quarter of 2009 when that figure was down 6.7 percent, according to RetailMetrics’ tally of 122 stores.