Gap Bets on a Higher Hourly Wage

Everyone’s talking about the recent Congressional Budget Office report that estimated raising the nation’s minimum hourly wage to $10.10 per hour by 2016 could potentially eliminate 500,000 jobs, or about 0.3 percent of total employment. Opponents cite the 500,000 number, while supporters note that the report also estimated the higher wage would increase the incomes of 16.5 million low-wage workers in an average week.

San Francisco-based Gap Inc. isn’t waiting around — yesterday, CEO Glenn K. Murphy announced in a letter to the company’s employees that it would set the minimum hourly rate for its U.S. workforce at $9.00 per hour this year and establish a minimum of $10 per hour next year. “Our decision to invest in front-line employees will directly support our business, and is one we expect to deliver a return many times over.”

Murphy ended his letter with this:

The people in our company who engage directly with our customers carry an incredible responsibility. Our success is a result of their hard work, love of fashion and commitment. We hope this decision provides them with some additional support as they grow their careers with Gap Inc.”

According to a story in today’s New York Times, at Murphy’s previous position — CEO of Canadian pharmacy retailer Shoppers Drug Mart — he discovered that paying the chain’s hourly employees a higher wage than its competitors resulted in greater productivity per worker.

Gap employs 65,000 people in the United States at its Gap, Banana Republic, Old Navy and other stores. The company has not taken a public position on whether the federal minimum wage should be raised.