Results and Impacts of Gap’s Effort to Increase Hourly Wages

In March, I wrote about Gap’s efforts to raise the minimum wage for its employees. As a former employee of Gap, I thought this was a bold move that showed how the company values its employees, especially those on the front lines. When I worked there, minimum wage was $5.25. I remember getting my paycheck after a few 4-hour shifts and feeling so defeated having put in hours of work and not seeing much payoff. But the discount was good!

It’s been a few months since Gap took this initiative, and they are already seeing results.  The company shared that “employment applications at the Gap and Old Navy chains have surged by at least 10 percent from a year earlier.” Not only have the effects impacted recruiting, they are also touching the brand as a whole: “Gap’s stock has gained 6.5 percent this year, outpacing a 5.5 percent advance by the Standard & Poor’s 500 Index.” While there are other factors that contribute to a rising stock price, this one certainly didn’t hurt it. Gap’s efforts have also sparked a trend. Ikea pledged to increase hourly pay by 17% in certain cities.

While the early indicators are showing positive results, the jury is still out on the long-term effects. Looking ahead, there are a few other indicators for Gap to look at after making a move like this:

  • Quality of Candidates: In terms of quality of candidates, we often argue that volume does not necessarily indicate success when recruiting because you could cast a wide net and have 1,000 candidates apply with no viable ones, whereas a more targeted strategy may return only 500 candidates, but within this pool, 250 are qualified. In the case of hourly, retail workers, volume may actually be the appropriate strategy since these positions are trainable. And in this particular instance, candidates from other retailers, who already have relevant experience, may be looking for higher pay. Thus, Gap’s recruitment process just got a lot more selective.
  • Retention: It’s one thing to get candidates to apply and in the door after offering more compensation, but is it enough to stick around? Retention among hourly employees is usually typically low, but it will be interesting to see if Gap’s retention increases among its competitors.
  • Customer Satisfaction:  This indicator is twofold: impacts on the customer experience and on prices. With a more competitive applicant pool, and possibly the best of the best in retail working there, will the customer experience improve? And finally, will the increase in wages be passed through to the price of the products?

These are all things to consider for the long-term. Either way, kudos to Gap on taking a stand and experiencing early success. Hopefully the long-term impacts will prove that you can compensate your employees well and thrive as a business.  

Lexi Gordon is a Lead Consultant for exaqueo, a workforce consultancy that helps startups and high-growth companies build their cultures, employer brands and talent strategies. Contact exaqueo to learn more about how we can help you build a workforce that’s aligned with your company culture and develop an employer brand that will allow your business to scale the right way.

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