Analyze and answer all of the questions at the end of the case. Your analysis should be one page, double-spaced, or one page in question/answer form.

• IKEA Tries to Provide a Living Wage
• How Target Aims for Competitive Employee Wages
• Jet.com's No-Haggle Approach to Compensation

Here is the case study:

''IKEA Tries to Provide a Living Wage''

Along with a legal requirement to pay at least the minimum wage, some employers also see a social responsibility requirement to pay workers at least a living wagethat is, enough to provide themselves and their families with the basics of daily life. Paying a living wage is one way to treat employees with dignity.

Sweden-based furniture and home furnishings retailer IKEA is among the companies that have committed to paying a living wage. IKEA in 2014 announced that in the United States it would raise the lowest hourly wage it pays, going from $9.17 per hour to a nationwide average of $10.76. The change affects about half of the employees in its 38 existing stores and will apply to those hired at new locations.

The $10.76 figure was not a set amount that would apply nationwide, but an average across facilities. IKEA calculates a minimum for each store based on the local cost of living. It uses the MIT Living Wage Calculator, which factors in the costs of food, housing, taxes, and transportation. IKEA's wages are based on the amounts calculated for a single person without children. In Pittsburgh and West Chester, Ohio, the minimum was set at $8.69; at the other extreme, workers in Woodbridge, Virginia, received wages starting at $13.22 per hour. Thus, wages are influenced by employee needs, not solely based on market rates. IKEA also said it would review wages every year. Although the company did not commit to raising rates every time the calculator shows a higher cost of living, it did raise wages again in 2016, setting the new minimum at $11.87 per hour.

Before the wage increase, IKEA already exceeded the federal minimum wage of $7.25. IKEA also is generous relative to competitors. In the same year IKEA announced its first increase, Gap, whose stores include Old Navy and Banana Republic, announced it would phase in an increase to $9 in 2014 and then to $10 in 2015. Following IKEA's page 399announcement of the $10.76 minimum wage, Walmart's Twitter account sent a tweet saying its "average hourly wage for full and part time associates is $11.81." However, Walmart did not draw a comparison with its hourly minimum.

IKEA sees the establishment of a living wage as supporting its mission of creating a better everyday life for peoplein this case, its employees. Rob Olson, IKEA's chief financial officer, indicated that the company did not intend to raise prices to make up for the added expense of higher wages. Rather, management hoped that because the company "invests in" its employees, they in turn will invest more of themselves in the stores and their customers.

Questions:

What are some risks and challenges that IKEA is likely to face as a result of basing its minimum pay on the living-wage formula, rather than just legal requirements and the market rate?

Given that IKEA's management considers the living wage to be consistent with the company's mission, what advice would you give the company for implementing it successfully?