Target Banks on Raising Employee Wages

In our last blog, we wrote about fears that multi-family developers face, and one of those involved Class-C properties' affordability. Rental rates for these properties have hit a ceiling because most tenants' wages have been stuck on the same floor. With many tenants already shelling out their monthly maximum for housing, rental rates for Class-C properties may soon seem as stagnant as the tenants' wage growth has been. Yet, one employer recently announced that they plan to invest in their minimum-wage earning employees; a step that, if other employers follow suit, may have ramifications for housing down the road.

According to their own website, retail giant Target announced that they'll raise the minimum hourly wage to $11/hr in October of this year, increase them over the next few years and top out at $15/hr by 2020. Target's CEO points to the move being an investment in Target team members; hoping to provide “meaningful pay” as well as training and tools for success at the company. The company has increased wages over the past few years, from $9/hr, to $10/hr in 2016 with the next increase expected this fall as announced. The company's site points out that the pay raise will coincide with the onset of the retailer's holiday season and their planned seasonal worker hires.


According to an NPR article, this move and timing is designed to gear up for the vital retail holiday season. The numbers they cite claim that the holidays account for up to 30% of annual sales. Attracting and retaining a qualified, talented workforce is clearly important – especially with the holidays looming and competition from other retailers omnipresent. Retail giants like WalMart have also boosted employee wages in the attempt to lure workers in an economy with low unemployment. According to NPR data, WalMart may have fired the starting gun on the retail-wages race; however, Target may now be in the lead and is receiving loads of press for it...which can only help their goals of employee attraction and team building.

When it comes to Class-C properties, more than half of tenant households earn less than $50,000 per year according to the NREI article we cited. Target's strategic move to attract new skilled workers, build a dynamic employee team, and retain talent may pay off in the larger economy as well. Other retailers may find themselves having to raise wages to compete with Target for the same talent, and this mindset may expand beyond the retail industry. According to a Forbes article the decision by Target indicates that the “fight for $15” is unnecessary at the government level, as employers will decide to increase the pay-rate for their own profitability. With minimum-wage employees potentially earning more, this could lead to the rental rates at Class-C properties becoming upwardly mobile again in the future.

The dramatic hourly increase announced by Target will have an immediate positive effect on its employees and likely encourage skilled new hires in time for this holiday season and beyond, keeping the retailer competitive with similar employers. The effect on the larger economy, other employers, and the multi-family housing industry will be seen over time, as we head toward the upper end of Target's wage hike in 2020. Stay tuned for our next article where we look at incentive programs and how they're desperately needed to keep up with the demand for affordable housing.

Elizabeth WheelerComment