IKEA CASE STUDY
Jill E Keeney
Capella University
February 24, 2016

Fundamental of Human Resource Management 3040
Instructor: Professor Marni Swain

Introduction
With so many people working hard to make ends meet, the living-wage pay seems like an ideal solution to help. The living-wage allows employees to meet their basic needs. (Chapman & Thompson, 2006) IKEA is trying to create a better life for its employees by implementing the living-wage. The living-wage also creates a workforce that is higher skilled, provides better customer service, and less turnover. This is more cost efficient for a company. (Bell, 2014)
Risk and Challenges
Issues for a business implementing the living-wage is productivity, skill of workers, and employee financial issues. While IKEA is not raising prices with the living-wage, it might have to adjust the amount of employees it schedules and hires, so an employee might be doing the job of 2 to 3 instead of just one employee. IKEA might have make the workforce more productive, and this would lead to less jobs within the company. (Chan, 2015) Employees might also be working less hours than full-time due to the increase of pay and less jobs being created. The other factor is that employees may not be able to have yearly increases if the business profit/loss is not adequate. This might create a turnover in employees if the living-wage is not increased yearly. (Geiger, 2015) An issue that IKEA might be faced with is low-skilled employees slowly fading away and higher skilled employees hired since the wage is higher. (Chapman & Thompson, 2006) With jobs more desirable since they pay more than the average minimum wage, the applicants that apply might be of a higher caliber. (Von Bergen, Mawer, & Soper, 2007) Problems with employees might be arise. Employees with larger families might feel that they should receive more than employees that don’t have a family. The terms of the pay scale for living wages and what it means will need to be addressed to the employees.
Implementing Living Wage
When any type of new implementation is considered a plan needs to be created and all areas of the business considered. A group will need to be assembled with the Human Resource Department, Finance and Accounting Department, and Operations to work on the implementation of living wages. A time line for the launch of the living wages will need be set. Base wages will need to be determined, and how they will increase over time. The total cost of living wages and all the hidden cost need to be tallied up. A list of employees that will be receiving the living wages, and whether they are all full-time or both full-time and part-time. A clear picture of employees that are the sole provider for their families, and the family size will need to be factored into the plan. The cost and fiscal impact of implementing living wages in the company. Policies and training set in place with a clear description for employees. With a clear plan, all the areas and issues looked at by different departments that are in involved, the implementation will be more successful.
Conclusion
IKEA is standing by their mission of “creating a better everyday life” with implementing the living wage in their company. (Noe, Hollenbeck, Gerhart, & Wright, 2016, p.391) With living wages, employee turnover is lower and a decrease in absenteeism with employees (Chapman & Thompson, 2006) This actually helps companies maintain employees that they have invested in. While the decision for living wages with IKEA works for them, it may not be cost effective or something that every company could make work.

References
Bell, R. (2014). The age of living wage? Workforce (Media Tech Publishing, Inc.), 93(10), 54.
Chapman, J., & Thompson, J. (2006). The economic impact of local living wages. Retrieved February 24, 2016, from http://www.epi.org/publication/bp170/
Chan, S. P. (2015,). Living wage could cost more jobs, warns CBI. Daily Telegraph (London, England)
Geiger, D. (2014). Living-wage hike offers limited payoff, poses some big risks; 4,100 workers will earn more, but creating new jobs may get harder. Crain's New York Business, 30(40), 4.
Noe, R. A., Hollenbeck, J. R., Gerhart, B., & Wright, P. M. (2016). Fundamentals of human resource management (6th ed.). New York, NY: McGraw-Hill Irwin.
Von Bergen, C. W., Mawer, W. T., & Soper, B. (2007). Living wage ordinances in the public sector. Public Personnel Management, 36(3), 281.