Dive Brief:

• Wal-Mart’s upcoming wage boost to $10 is hitting the retail giant’s bottom line hard, but it may also hurt retailers that similarly match its pay scale in order to compete.

• Matching Wal-Mart’s wage increases could cost larger retailers $4 billion more compared to their wage outlays last year, according to research from the Hay Group, which surveyed 100 retailers chains that together employ 5 million people. 

• Some 10% of companies are considering an increase to $10 an hour, and more are likely to follow suit, according to Hay Group retail practice VP Craig Rowley.

Dive Insight:

Retail companies already have notoriously thin margins, and those that are forced—by Wal-Mart’s raise and other market pressures—to boost their own minimum wages could, like Wal-Mart, get hit hard.

There’s good news here for some companies, though. There are many retailers already paying workers beyond the federal minimum wage. Costco has performed well despite its relatively generous pay and benefits packages, and Ikea pays a living wage to its workers in the U.S., using the Massachusetts Institute of Technology’s living wage calculator, which determines cost-of-living by region. Those companies are already folding in their compensation costs.

It’s the retailers like Gap and Target that have reacted to the challenge presented by Wal-Mart that will take a hit. Gap has responded with a plan to raise wages, and, while Target hasn’t made such promises, that retailer says it will respond to the market in determing what to pay its workers. 

The bottom line is that they’ll likely have to raise wages in order to compete for workers who will stick around after they’ve been trained, says Rowley.

"When Wal-Mart and Gap both raised starting wages, it caught everyone’s attention—even at the board level," Rowley told Bloomberg. "Boards started asking questions, like, ‘What are you doing to make sure you can hire talent?’ Boards don’t typically ask about talent compensation."