How Target wins the "Fight for 15"

Some news from the retail sector this week which could prove instructive for political activists on both sides of the aisle. While the “Fight for 15” crew continues to hold rallies demanding that the government mandate a vast increase in the minimum wage for all, retail giant Target has chosen a different path. They’re planning to increase the wages of all their employees to at least $15 per hour by the end of 2020.

The CEO of the company described it as, not only as an investment in our team but an investment in an elevated experience for our guests and the communities we serve. (Associated Press)

Target Corp. is raising its minimum hourly wage for workers to $11 starting next month and then to $15 by the end of 2020, a move it says will help it hire and keep the best employees and make shopping a better experience for customers.

The initiative announced Monday is part of the discounter’s overall strategy to improve its business, which includes remodeling stores, expanding its online services and opening up smaller urban locations.

Target quietly raised entry-level hourly wages to $10 last year from $9 from the previous year, following initiatives by Walmart and others to hike pay in a very competitive marketplace. But Target’s increase to $15 per hour far exceeds not only the federal minimum of $7.25 but the hourly base pay at Walmart, the nation’s largest private employer, and plenty of its retail peers whose minimum hourly pay hovers around $10.

So, should conservatives opposed to stiff hikes in wages imposed by government decree be upset with Target? No. In fact, precisely the opposite. The company has made a business decision without the regulatory gun of the government pointed at their heads. Will it work out for them? It may look problematic to some observers but stranger things have happened in the past. And there are a few factors which would seem to work in their favor.

As unemployment continues to fall, the available labor pool shrinks. There are still enough people in the low end of the skills range to fill jobs such as the majority of positions that Target offers, but the market is becoming more competitive. Offering the sort of wages normally reserved for people with considerably higher level skills in the trades, the company will draw resumes from far and wide, allowing them to pick the cream of the crop. The most desirable workers currently employed by their competitors will have to consider jumping ship and putting in an application.

What do they get in return? Better performance and employee loyalty, leading to better service for the public and, possibly, more customer loyalty. If this raise had come about because of an across the board government mandate there would be no reason for anyone to change jobs since the pay is all the same anyway.

This doesn’t guarantee that it’s going to work, of course. The company is taking on a huge load in new labor costs and they’re in an incredibly competitive market space. If this leads them to either raise their prices noticeably or slash their profits, it could wind up driving them out of business. But if this model works and their gamble pays off, their competitors at places like Walmart may be forced to follow suit. The point is, no matter which way it plays out, the free market will make the decision in the end. If a $15 per hour wage turns out to be viable in retail, other companies will be offering it as well. Personally, I think they’ll wind up scaling it back in rural areas and keeping it in higher cost of living urban centers.

The beauty of Target’s decision is that the natural forces of capitalism will be on display. The government isn’t required to to increase wages. An improved, more robust economy is. If they prevail, then higher wages will follow at other companies. If they fail, the government will get to see what would have happened if they forced it on everyone at once.