March 19, 2015 / 12:05 AM / 4 years ago

UPDATE 4-Target to lift minimum wage to $9 an hour, matching rivals

(Adds comments from analyst and labor group, background)

By Nathan Layne

March 18 (Reuters) - Target Corp next month will raise the minimum wage for all of its workers to $9 an hour, matching moves made by rivals including Wal-Mart Stores Inc and TJX Cos, a source familiar with the matter said.

The move comes in the face of pressure from labor groups and allies calling for a “living wage” at retailers and fast-food companies across the country, as well as increased competition for labor with the unemployment rate at its lowest in more than six years.

Target shares fell 1 percent in extended trade. The company would not comment on the new minimum, saying it does not disclose wage levels.

The clearest sign of the changing labor landscape came last month when Wal-Mart, the largest private employer in the United States, said it would move to the $9 minimum in April with a further bump to $10 next year.

A week after Wal-Mart’s announcement, T.J. Maxx and Marshalls owner TJX said it would match the $9 minimum in June.

The next group of retailers likely to face pressure to increase wages is drug store chains including Walgreens, Rite Aid Corp and CVS Health Corp, in part because they are seen as being able to pay more due to solid earnings growth, said retail consultant Burt Flickinger.

Target executives have in recent weeks said they would try to remain competitive on wages to ensure they retained workers but indicated they would make adjustments based on the circumstances of each local market.

Earlier this month Chief Financial Officer John Mulligan noted at a meeting with analysts that paying $9 an hour in New York City or the oil-crazed economy of North Dakota, for example, would not attract any workers.

“It’s about being competitive locally at a store level within a marketplace,” he said.

But pressure rose on Target, which is competing for employees with Wal-Mart. Women’s advocacy group UltraViolet, for instance, recently ran a web ad campaign that targeted shoppers and residents near three major Target stores.

Banner ads read, “Did you know there’s a Walmart near you that pays higher minimum wage than Target?”

The United Food and Commercial Workers International (UFCW), which played a key role in pressuring Wal-Mart, had also been trying to organize Target employees in key geographies like the Northeast in the past few years, Flickinger said.

“As retail workers, we’re glad to see that the pressure we are putting on Walmart is translating to real raises for our co-workers throughout the industry,” said Barbara Gertz, a member of the UFCW-backed labor group OUR Walmart, said in a statement.

“We are encouraged by Target’s actions today and will continue to fight for $15 an hour.”

Employers have also been impacted by a drop in the U.S. jobless rate to 5.5 percent, making it easier for workers to switch jobs.

The Target wage raise, which was reported earlier by Dow Jones, will affect its roughly 1,800 U.S. stores. The company already paid employees more than the federal minimum wage of $7.25 an hour, and it was not clear how many of its 347,000 employees would see an increase.

The move comes as Target seeks to cut $2 billion in costs in a restructuring unveiled this month that includes several thousand job losses, mainly from its headquarters.

While the wage hike will increase costs in the near term the investment will pay dividends in the longer-term by helping Target retain good employees, boost worker productivity and improving its image among consumers, Flickinger said. (Additional reporting by Nandita Bose in Chicago; Writing by Dan Burns and Peter Henderson; Editing by Chris Reese, Jonathan Oatis and Cynthia Osterman)

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