Ikea to raise minimum wage to $10.76

BURBANK, Calif. (KABC) -- Ikea's U.S. division will raise its minimum wage to about $10.76 by Jan. 1 next year, the furniture chain announced Thursday.

The pay increase is the largest hike the company's had in a decade. About half of Ikea's 11,000 hourly workers will get a raise based on the cost of living at each store location.

The new minimum wage will be an extra $1.59 an hour, or a 17% increase, a Burbank store manager said.

Lawanda Anderson has worked at IKEA for about two years and said the extra money will help, but won't be enough. She still lives at home with her mom, because she can't afford to pay rent.

"I think everyone right now is just trying to save because the cost of living is already so high, so even if minimum wage is raised higher, eventually the cost of living is going to go up," Anderson said.

California's minimum wage is increasing to $9 per hour next Tuesday and $10 by 2016.

As for other retail companies, Gap recently announced a nationwide increase for its employees to match California's $9 per hour this year and $10 per hour next year.

Economist Ed Leamer said that will create a loyal workforce and put pressure on the competition.

"We have a growing income inequality problem in this country," Leamer said. "We have a lot of hard-working people who are making such small-levels of wages that they're still in poverty."

The new minimum wage structure will be a significant investment, but will not increase prices, according to an Ikea statement.

The Associated Press contributed to this report.