NEW YORK — Ikea's U.S. division is raising the minimum wage for thousands of its retail workers, pegging it to the cost of living in each location, instead of its competition.
The 17 percent average raise, announced Thursday, is the Swedish ready-to-assemble furniture chain's biggest in 10 years in the United States.
The pay increase will take effect Jan. 1. It will translate to an average wage of $10.76 an hour, a $1.59 increase from the previous $9.17.
About half of Ikea's 11,000 hourly store workers will get a raise. How much will vary based on the cost of living in each location.
Ikea, which has cultivated a reputation for fair treatment of its workers, evaluates its benefits plans every year and had always adjusted wages based on its competition. But Rob Olson, Ikea's acting U.S. president, says the latest move shifts its approach.
"Now, we decided to focus less on the competition and more about the co-workers," Olson told the Associated Press in an interview this week. He says he was guided by its vision of "creating a better life" for workers. That will improve the company's relationship with employees and reduce turnover, which he says is already well below the retail industry's average. About 19 percent of full-time retail workers leave their jobs annually, according to the National Retail Federation.
Ikea's raises come as a push to raise wages for hourly workers has made headlines.
Fast-food workers asking for higher pay in cities have staged protests across the country. Union groups have also held protests at Wal-Mart Stores Inc., the nation's largest private employer. And President Barack Obama is endorsing a bill that would raise the federal minimum wage to $10.10 an hour by 2016.
Many business groups have opposed the measure, saying it would hurt the economy and lead to job losses.
Olson emphasized that the pay increase will not lead to higher prices, reduced work hours or job losses. The raises are being offset by such cost-cutting measures as using national purchase programs for items like cleaning services or printer paper. In the past, each store used individual suppliers.