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[21 comments]

Gap raises its minimum wage saying store staff behind its success

February 20, 2014

Entry-level workers at Gap Inc.'s six companies (Gap, Banana Republic, Old Navy, Piperlime, Athleta, Intermix) are getting a boost in pay. Yesterday, the company announced it would increase its minimum wage to $9 an hour this year and $10 in 2015. The move will affect some 65,000 workers.

In an open letter, Gap Inc. chairman and CEO Glenn Murphy wrote that the company had made significant investments in e-commerce technology to gain a competitive advantage in the marketplace in recent years. "Looking ahead, it will be the combination of innovation and people that will further set us apart."

Mr. Murphy positioned the move as an adherence to a core company value established by co-founder Don Fisher "to do more than sell clothes."

For investors concerned that giving Gap employees a higher wage would negatively affect them, Mr. Murphy wrote, "Our decision to invest in frontline employees will directly support our business, and is one that we expect to deliver a return many times over."

The announcement by Gap Inc. received praise from President Obama. Last week, Mr. Obama signed an executive order hiking the minimum wage for workers employed under federal contracts to $10.10 an hour.

A new report from the Congressional Budget office said lifting the federal minimum wage could result in 500,000 jobs being lost while helping to lift 900,000 people out of poverty. Gap Inc.'s announcement suggests the company doesn't see its move as having negative effects on its own job creation.

FINANCIALS:     [NYSE:GPS] [ ]

Discussion Questions:

Do you think Gap's pay hike will have a motivating influence on job performance? Do you think other retail chains will follow?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

Will raising the minimum wage it pays employees help or hurt Gap Inc.'s business performance?

Comments:

Smart guy. Especially if he accompanies the raise in base pay with an actual career path.

There's no doubt that the in-store experience has fallen behind the web in convenience, and even just plain pleasantness. Anything retailers can do to get their employees engaged will help them change that story. But again, I really think that creating a career path for employees might be even more important than a buck-an-hour difference.

I wish Gap luck!

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Paula Rosenblum, Managing Partner, RSR Research

I think it's pretty hard to live on $400 a week gross (assuming workers are employed full time), so the "raise" is not likely to rally the troops or turn the commercial tide.

I also think Gap workers may wonder why -- a year from now -- this example of corporate largess gets them to 10 cents below the new federal minimum. Again -- quite the inspirational statement if you ask me. Looks like Gap was just trying to squeak by with a bow toward the inevitable, not make a statement of how valuable its workforce is to them.

So, yes, I expect other retail chains will follow since a hike to a $10.00 an hour wage seems almost inevitable and -- when it comes to wages -- have a demonstrated fondness for "minimum" efforts.

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Ryan Mathews, Founder, ceo, Black Monk Consulting

The people who work at Gap aren't there just to hang the clothes and ring up customers. They set the tone that puts the shopper at ease, they explain promotions like GapCash, and they suggest looks. The question for the retail industry is whether they should entrust crucial frontline tasks like those to someone making the federal minimum wage, and an increasing number of retailers are realizing they shouldn't. Think Starbucks -- retailers with a high level of customer interaction can't afford to hire the least-qualified people.

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Cathy Hotka, Principal, Cathy Hotka & Associates

This is a great move for the Gap for all kinds of reasons. Will it motivate employees? NO. Money has been proven not to be a key motivator over the long run at the front-line level. Lack of money has proven to be a demotivator.

Will it help to attract more and possible better candidates to apply? Yes.

Will management be able to determine who the better candidates are? Maybe.

Will paying people more get them to work harder over the long run? NO!

Will it get people to stay longer? The more you pay the more frustration and more management the employee will put up with.

The winning combination:

1. Pay more and hire better people.

2. Give those people a reason to work hard and feel good about the job that they do.

3. Make sure you have great managers who people want to work for.

Pay what the job is worth not the lowest rate you can get somebody to do the job for.

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Mel Kleiman, President, Humetrics

Initially there is likely to be an increase in morale. If the increase in the minimum wage is followed with a career path plan and another increase when and if the minimum wage goes to $10.10, then the increased morale will not last. This announcement is a signal that at least some retailers are seeing the increase as inevitable.

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Camille P. Schuster, Ph.D., President, Global Collaborations, Inc.

For about a day.

Too much research already done demonstrating that money is not a motivator -- only that lack of it can be a DEmotivator. And adding a buck an hour to minimum wage hardly qualifies as getting retail salaries out of that bucket.

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Ben Ball, Senior Vice President, Dechert-Hampe

This won't affect workers who live in states like Washington where the minimum wage is over $9 an hour. Plus, many retail entry level jobs are part-time or seasonal. There's no discussion here about whether Gap will maintain the same level of employees or cut back in their numbers or limit full-time employees. Sounds good on the surface, but will likely have little real impact on their staff.

I think Paula is right. What's more important is offering an actual career path.

'pgmg'

Aside from some positive PR from the left leaning mainstream media, the move will help Gap attract a better entry-level worker, at least initially. However, it will do little to motivate workers.

The key to that lies in creating a culture that engages and inspires people to work harder, perform better, and stay longer. And while compensation is a part of that formula, it is only one of eight key ingredients. (e.g. vision and values, recognition, growth, autonomy, etc.)

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Eric Chester, Keynote Speaker, Author, Reviving Work Ethic, LLC

I applaud Gap for taking this step. We need retail to be a more attractive and rewarding career path.

I believe the influence on the current employees will be short-lived, but I do think long-term it can help attract better job candidates and reduce turnover.

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Doug Fleener, President and Managing Partner, Dynamic Experiences Group

Hardly a game changer, but others will follow if they want to avoid getting the bottom of the bucket. People will naturally gravitate to whoever pays better, even if it's only a buck an hour. Can any of us seriously imagine living on minimum wage? My idea of hell.

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Warren Thayer, Editor & Managing Partner, Frozen & Refrigerated Buyer

Excellent move on Gap's part...but I'm sure that more came into play re this decision vs "it's the right thing to do." It's all about the spin their marketing department wants to put on this, but in the end, it's the employees that are also positively affected and that's a good thing..especially with the decline in "mall" shopping.

'Mitch210'

With higher wages, GAP will be able to select from higher quality employment candidates. This will pay off in the short and long term with store appearance as well as customer perception and satisfaction.

Money is still the reason most people go to work. I have listened to and read many things that are more important in life than the size of a pay check. But it is the paycheck where size matters the most to the vast majority of people everywhere in the good ole' USA. Likewise, it is here where the best of the best get the most...money that is.

'gjarnoldjr'

I think it will help them attract and retain a higher quality employee. I'm not sure if that qualifies as a motivating influence. I don't think there will be a mass shift of retail chains following, but it could be the start of a trend.

'karenk'

If I'm a shareholder, this feels more motivated by public relations and marketing concerns than anything else. They do come off hitting the right note, however.

From a business perspective, if increasing wages generated a net positive ROI, store-level wages would be higher throughout the industry. My best guess is that all this will do is increase store-level payroll without an appreciable boost in revenue. Not a good combination.

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Ted Hurlbut, Principal, Hurlbut & Associates

This is a good move, but I agree with Paula, it's a great move if accompanied by a career path. The sales associate is where the brand meets the customer and it's always astonished me how few resources are employed to select, train, and pay these essential and influential people.

Increased pay won't fix everything, but it should bring in a more qualified and higher quality pool of candidates to choose from. A great start!

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Marge Laney, President, Alert Technologies, Inc.

Unfortunately, the article doesn't contain the current pay levels. Can we really evaluate the effect?

'Roadster'

Congratulations to Gap for following the lead of the President and getting on board the train. We are seeing more of this pattern lately. Good for those companies seeing the merit.

The Container Store has believed and followed the plan to hire better associates and pay them more. Why it is taking others so long is beyond me.

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Ed Rosenbaum, CEO, The Customer Service Rainmaker, Rainmaker Solutions

$9/hr...really? Is it necessary anymore to ask why retail nowadays (seemingly) doesn't attract the best and brightest?

'notcom'

I wouldn't be too critical of a retailer who chooses to stand out from their peer group by offering a more competitive salary than the rest. That the industry in general isn't the highest paying, or by nature of its business has fewer choices for advancement than others. All the other comments are certainly valid, but in fairness, comparing the Gap to its peers is a reasonable approach.

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Peter J. Charness, SVP America, Global CMO, TXT Group

I do most of the clothing shopping at the Gap, both in-store and online, and feel that the staff does a great job both with every normal store operations and with handling more specialized customer service issues. I applaud the hourly pay increase in staff and think they should go higher - the good ones are clearly worth $15/hour and they work hard for it.

If anyone from Gap happens to be reading these comments (and I hope they are), my only other suggestion would be to find a way to eliminate the lines that form on a busy Saturday afternoon.

'savyshopper'

Bravo to Gap! This is a smart move in the right direction, and it definitely follows the lead of several other well-respected retailers.

Of all the factors that influence a consumer's choice of where to shop, store associates rank 2nd from the bottom. That's a crime in an era where brick-and-mortar stores are working hard to compete with e-commerce pure plays and where everyone is talking "omnichannel" all the time. One of these channels is the brick-and-mortar store, and the associates could (and should!) be one of the key reasons consumers choose to shop there.

By investing more in their frontline employees -- not just with higher pay, but also with better training, more insightful management style, and a real focus on empowering people as a means to build engagement -- retailers like Gap join the ranks of other enlightened retailers like Costco, Whole Foods, and Trader Joe's. These steps do have a motivating influence--without a doubt.

Craig Jelinek, CEO of Costco, is onto something when he says, "Always do what's right for your employees. You build trust with your employees -- which is really just common sense and good business. This isn't rocket science."

These retailers do more to treat their employees well, and it shows in the day-to-day interactions we have every time we shop in their stores. It creates a more positive shopping experience when we're interacting with happy, engaged store associates. When we're happy, we buy more and we want to shop there again. And so the virtuous cycle continues.

I hope Gap is a bellwether, leading other retailers in this very positive direction.

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Lance Thornswood, VP/Managing Director, inRetail

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