The Canadian-born chief executive of Gap Inc. is shaking up America’s heated debate over raising the national minimum wage.
Glenn Murphy, who rose to prominence as the boss of Toronto-based Shoppers Drug Mart Corp., told Gap’s U.S.-based employees Wednesday that he planned to raise the company’s hourly wage floor to $9 (U.S.) this year and $10 in 2015.
“To us, this is not a political issue,” Mr. Murphy said in a statement. “Our decision to invest in front-line employees will directly support our business, and is one that we expect to deliver a return many times over.”
The decision will mean raises for about 65,000 employees at the company’s various brands, which include the ubiquitous Gap, Banana Republic, and Old Navy. The wage increase will apply only to Gap Inc.’s employees in the United States.
Mr. Murphy’s decision may have been apolitical, but there will be no avoiding the politics.
President Barack Obama and Democratic leaders in Congress are fighting with the Republicans over legislation that would raise the national minimum wage to $10.10 an hour from the current setting of $7.25. After news of Gap’s plan emerged late Wednesday afternoon, Mr. Obama issued a statement commending Mr. Murphy on his decision.
“I applaud Gap Inc. for announcing that they intend to raise wages for their employees beginning this year,” Mr. Obama said. “But only action from Congress can make a difference nationwide…It’s time to pass that bill and give America a raise.”
The U.S. debate over the minimum wage is not only a partisan political clash, but a philosophical one. Advocates of higher base pay see it as measure of fairness at a time when the income of the America’s wealthiest has soared, while the salaries of the most everyone else have stagnated. An equal number of detractors say wages should be set by local market forces and that legislating minimum wages risks hurting the poor by giving employers a reason to higher fewer low-skill workers.
The Congressional Budget Office this week provided ammunition for both sides of the debate, concluding in a report that increasing the federal minimum hourly wage to $10.10 would give raises to more than 16 million workers and lift 900,000 people above the poverty line – but while potentially sacrificing 500,000 low-wage, low-skill jobs.
Republican House Speaker John Boehner seized on the CBO report as evidence that Mr. Obama’s bid to raise the minimum wage was job killer. The White House highlighted the positive effects on poverty levels and criticized the CBO’s conclusion that raising the wage floor would hurt employment as out of step with contemporary economic thinking.
With Washington deadlocked on the issue, Mr. Murphy’s decision suggests an alternate, if slower path to higher minimum wages in the United States.
One of the business reasons for a national company such as Gap to raise its base rates of pay is that big cities and populous states in which the company operates are demanding it.
The minimum wage in San Francisco, where Gap is based, is $10.74 an hour and California will demand a minimum wage of $10 an hour by 2016. Washington, D.C., voted late last year to lift its minimum wage to $11.50 an hour by 2016 from $8.25.
Mr. Murphy told the New York Times that the company’s new strategy of using stores and pickup points for online shoppers demanded a skilled and motivated work force, demanding appropriate compensation. Rather than simply processing in-store purchases, Mr. Murphy now expects his staff to be skillful enough to manage online orders and to persuade those shoppers to buy more when they visit stores to conclude their Web shopping.
“Over the years, we’ve made significant investments in e-commerce technology that are providing us with a competitive advantage,” Mr. Murphy said in his statement. “Looking ahead, it will be the combination of innovation and people that will further set us apart.”
A big employer such as Gap also could force wages higher by forcing other companies to compete for talent.
In a shift, Wal-Mart Stores Inc. said Wednesday that it is considering getting behind the push for a higher minimum wage, recognizing that paying its employees more could translate into higher sales at its stores.