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