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Target's minimum wage now up to $24/hour: What to expect from salary growth overall, from an economist

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Pedestrians wearing protective masks walk past a Target store in New York, on Monday, Aug. 17, 2020.
Jeenah Moon | Bloomberg | Getty Images
Key Points
  • Target said Monday it will adopt minimum wages that range from $15 to $24 an hour this year.
  • Hourly Target store workers who work at least 25 hours per week will quality for health-care benefits.
  • "I have some concerns that that kind of leverage that workers have right now will not be sustained in the long run," says Elise Gould, a senior economist at the Economic Policy Institute.

Workers at Target could start seeing their wages rise to as much as $24 an hour starting this year, the company announced February 28.

The Minneapolis-based retailer said it will adopt minimum wages that range from $15 to $24 an hour, with the highest pay going to employees in the most competitive markets like New York.

The pay hike is part of a plan in which Target will spend $300 million in the year ahead on employees, which includes signing more workers for health-care benefits. Hourly employees who work at least 25-hours per week will qualify for health-care benefits, which means about 20% more employees will have access.

In the last few months, pay has risen fastest in certain sectors, says Elise Gould, a senior economist at the Economic Policy Institute. Areas like leisure, retail, and hospitality are "where lower-wage workers have been seeing some increases in opportunities and experienced wage growth."

Despite the fact that Target is one the largest retailers in the world, its decision to increase wages doesn't necessarily mean other employers will follow suit, though, Gould says, adding, "I have some concerns that that kind of leverage that workers have right now will not be sustained in the long run."

Why are some employers hiking wages?

In retail especially, employers are faced with "high levels of turnover, and if you can raise wages, and build a workforce that has lower turnover, that certainly can lead to higher productivity and lower costs in the long run," Gould says.

Another reasons some employers are incentivizing employees with higher pay and better benefits is because the candidate pool has shrunk, Gould says. "There are so many sidelined workers that I think, as the pandemic is behind us, will come back in."

Scarcity is giving employees leverage

Workers want to make more money in general, Gould says. "They've had such low levels of wages for so long and they've had little leverage to be able to get up their wages, that it often takes a very low unemployment rate, a much stronger economy, for them to get any of that leverage."

The best leverage many employees have right now is a shrinking candidate pool. "Really, it's their scarcity that gives them the leverage, because employers have to work a little harder to attract and retain the workers they want, and that is the leverage that that workers are exercising," Gould says.

Federal intervention could lock in higher wages

Without federal intervention, the workers' advantage may not last long. "Employees won't be able to lock these wages in if we don't have federal policy stepping up with a higher minimum wage, or if it isn't made easier for some workers to form a union to lock in some of those wage increases with some sort of contract," Gould says.

In his first State of the Union address Tuesday, President Joe Biden called to raise the federal minimum wage to $15, something Democrats have long pushed.

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What happens if the federal minimum wage is raised to $15 per hour

Video by Stephen Parkhurst

The federal minimum wage is currently $7.25 and hasn't been updated in more than a decade, though many states have set their own minimum wages higher.

Starting this year, Biden was able to raise the minimum wage for all federal workers to $15, but there's been little movement on the overall federal minimum wage. When the American Rescue Plan was drafted, Democrats initially included the measure, but it was dropped when the bill reached the Senate.

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