Target raises hourly minimum wage to $13, further topping Walmart's $11

WASHINGTON (Reuters) - Target Corp will raise its U.S. minimum wage to $13 an hour in June, from $12, increasing its payroll costs and putting new pressure on rival Walmart Inc to follow suit, given a labor market that is among the tightest in half a century.

FILE PHOTO: A newly constructed Target store is shown in San Diego, California May 17, 2016. REUTERS/Mike Blake/File Photo

Minneapolis-based Target, the eight largest U.S. retailer by sales and fifth largest by employee count, runs 1,845 stores and employs more than 300,000 workers in the United States. The discount chain is investing billions of dollars to improve its supply chain, expand online sales and improve delivery of merchandise to shoppers’ homes.

Target previously raised minimum hourly pay to $12 in March 2018 from $11. In 2017, Target, said it was committed to raising its minimum wage to $15 an hour by end of 2020. The wage increase will affect “tens of thousands” of employees, a Target spokeswoman said.

Retailers have been finding it tougher to attract workers, with U.S. unemployment at its lowest level in nearly 50 years, while there has been growing political pressure on companies to pay workers a fair living wage.

Walmart, the world’s largest retailer and the largest U.S. private sector employer, pays entry-level workers $11 an hour. Walmart declined comment on the issue. The retailer’s chief executive, Doug McMillon, said in February that a Walmart worker earns $17.55 on average with wages and benefits. “I’m comfortable that we’ve got the appropriate wage investments to get the talent we need,” he said. Inc raised its minimum wage to $15 an hour in October after facing harsh criticism over poor pay and working conditions. The online retailer said at the time that it would lobby Washington for an increase in the federal minimum wage.

The $15 minimum wage movement has found support from Democrats, including Senator Elizabeth Warren, who is running for the party’s 2020 presidential nomination, and Representative Alexandria Ocasio-Cortez, part of a new crop of Democrats swept into office this year on a liberal platform.

“Croissants at LaGuardia (New York airport) are going for seven dollars a piece,” Ocasio-Cortez tweeted on April 1. “Yet some people think getting a whole hour of personal, dedicated human labor for $15 is too expensive??”

Amid the growing political pressure, other companies have also moved to raise wages. For example, Costco Wholesale Corp raised its minimum wage twice in a year and since March has been paying employees at least $15 an hour.

In a blog post due to be published on Target’s website on Thursday, the company’s chief human resources officer, Melissa Kremer, tied the minimum wage hikes to the company’s strong holiday performance, saying it “made a big difference.”

In March, Target forecast 2019 profit above Wall Street estimates after a strong holiday season.

“We were able to start them all (seasonal hires) at $12 or more - and that helped us reach our seasonal hiring goal ahead of schedule, which gave our teams a lot of extra time to train and prepare for our busiest season of the year,” Kremer said.

It was not immediately clear if Target employees who already make $13 an hour will also see an increase in pay.

Target’s spokeswoman said the company would evaluate hourly pay rates for such employees and make adjustments as appropriate. With some of Target’s previous wage hikes, such employees have been entitled to an annual merit raise and a pay-grade hike.

Reporting by Nandita Bose in Washington, Editing by Rosalba O’Brien, Lisa Shumaker and Steve Orlofsky