Ikea’s Double-Edged Living Wage Initiative

June 26th, 2014 by Phil Mattera

ikea2In an era of rising inequality, the announcement by Ikea that it will adopt a living wage policy for employees at its stores in the United States is good news for those who will enjoy a fuller paycheck. Yet the news is not as good as it could be.

Ikea’s move, like a similar action by Gap Inc. earlier this year, is a voluntary initiative, not a legislated or negotiated policy that can be enforced. Just as Ikea adopted the wage policy on its own, it could rescind or modify that policy in the future.

It’s significant that in its announcement Ikea noted that the new wage structure, which will raise the average hourly minimum to $10.76, does not apply to those working at its U.S. distribution centers and manufacturing facilities. That’s because, the company says, those facilities “have hourly wage jobs that are already paying minimum wages above the local living wage.”

What Ikea fails to mention is that some of those workers are represented by collective bargaining agreements that brought pay rates to their current levels. Also omitted is the fact that those unions were organized because of poor conditions, including inadequate wages.

For example, in 2010 the Machinists union (IAM) and the Building and Wood Workers International labor federation organized a campaign to pressure Ikea over dangerous working conditions and discriminatory employment practices, as well as pay and benefit issues, at the company’s Swedwood furniture plant in Danville, Virginia.

That campaign served as a springboard for a successful union organizing effort at the plant, where IAM members ratified their first contract with the company in December 2011. A month later, workers at the Ikea distribution center in Perryville, Maryland voted in favor of representation by the IAM. In May 2014 Teamster members  at an Ikea distribution facility in Washington State approved their initial contract.

It’s quite possible that Ikea’s new wage policy for its stores is an effort to undermine any union organizing at those outlets. For if there is one thing large companies hate more than paying higher wages, it is paying those higher wages and having to negotiate on other conditions of work.

The desire by management to retain control is the shortcoming of both voluntary wage increases and other initiatives undertaken under the rubric of corporate social responsibility. What proponents of CSR rarely acknowledge is that these supposedly enlightened corporate policies really amount to an effort to avoid stricter, enforceable regulations. Companies would prefer to congratulate themselves for deciding to cut greenhouse gas emissions or eliminate toxics rather than being compelled to take such actions under government mandate. A management-designed wage increase is more palatable than a union contract.

Corporate apologists would have us believe that CSR is preferable to tough regulations and collective bargaining, but what they fail to acknowledge is that major corporations have a long history of engaging in abusive practices.

In the case of Ikea, taking advantage of weak labor laws in the United States is far from the whole story. Two years ago, Ikea was forced to apologize after an investigation showed that it had benefitted from forced prison labor in East Germany in the 1980s. There were similar reports concerning Cuba. And now the company is facing allegations that during the same period it channeled funds to a firm run by the secret police in Romania.

Earlier, Ikea was embroiled in controversies over the use of child labor in countries such as Pakistan, India, Vietnam and the Philippines. One way the company sought to overcome that stigma was through philanthropic initiatives such as a partnership the Ikea Foundation created in 2013 with Save the Children and UNICEF to help children in Pakistan “find a route out of child labor.” Unaddressed, of course, was the issue of how companies such as Ikea got them into child labor in the first place through their use of exploitative contractors.

The same issue applies to the wages of Ikea’s U.S. store employees. There would be no need for a living wage initiative if the company had not been paying too little to begin with. That’s the problem with much of CSR and voluntary corporate reforms: they are all too often initiatives designed to address problems that companies created themselves and are structured in a way that does not prevent them from reverting to those bad practices again in the future.

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