The Gap Inc. (NYSE:GPS)’s army of clothes folders is getting a raise. While numerous Republicans in Congress along with various lobbying groups like the National Retail Federation have used scare tactics to keep the minimum wage where it is, Gap as decided to voluntarily raise the wages is that it pays 65,000 of its roughly 90,000 U.S.-based employees.
Opposition to raising the minimum wage
The aforementioned opposition to the raising of the Federal Minimum Wage from its current mark of $7.25 maintains that by raising it fewer jobs will be available to unskilled workers. However, a coalition of 75 economists, including 7 Nobel winners in the field contest this point and supports the idea.
As does President Obama, who called for an increase to $10.10 in the next three years in his State of the Union address recently.
Gap — which operates The Gap Inc. (NYSE:GPS), Old Navy, Banana Republic and Athleta stores will begin paying workers a minimum of $9 per hour beginning this June with a raise to $10 next year.
“To us, this is not a political issue,” Gap CEO Glenn Murphy said in a 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.”
Obama responds
The move was immediately heralded by the President Obama. “In my State of the Union address, I asked more businesses to do what they can to raise their employees’ wages,” the President said. “Today, I applaud The Gap Inc. (NYSE:GPS) for announcing that they intend to raise wages for their employees beginning this year. But only action from Congress can make a difference nationwide.”
It’s often argued that this type of wage increase will simply be paid by customers, but Lynn Albright, a vice president at Old Navy, told CNN that this wasn’t necessarily the case and that the move will lower turnover costs. “We’re coming from place where we can afford to make this investment,” she said.
The Congressional Budget Office, a nonpartisan arm of Congress that assesses the impact of proposed legislation, estimated in a report on Tuesday that if the minimum wage was raised to $10.10 as Obama has called for the result would be 900,000 people out of poverty but could cost 500,000 jobs as business make cuts to staff.
Six of one, half dozen of the other in many ways. The Gap Inc. (NYSE:GPS) will join companies like Whole Foods Market, Inc. (NASDAQ:WFM) and Costco Wholesale Corporation (NASDAQ:COST) who pay considerably more than the minimum wage in order to keep turnover costs down and their employees’ families fed.
