Good News–Pay Increases at the Bottom of the Ladder

In an article in today’s Wall Street Journal by Erich Morath and Julie Jargon, raises for lowest-paid workers are not only seen as good business but possibly hint at a corporate shift toward more profit-sharing.    

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. . . For Americans in the bottom quarter of the income scale, who were left behind for much of the expansion, pay is rising at the fastest rate since the recession.

The gains appear to be driven by more competition for workers, minimum-wage increases and initiatives by companies from McDonald’s Corp. to Nationwide Mutual Insurance Co. to J.P. Morgan Chase & Co., who have proudly declared that they would give their lowest-paid workers a boost. . . 

. . . The raises aren’t being quietly slipped into paychecks. Instead, large employers are setting a public example, putting pressure on competitors to follow suit and reaping ancillary benefits in the form of good will from employees, customers and investors.

J.P. Morgan Chase Chief Executive Jamie Dimon used an op-ed piece in the New York Times last month to announce that his company would increase minimum pay for 18,000 workers to at least $12 an hour.

Starbucks Corp. Chief Executive Howard Schultz used a recent letter to employees—published on the company’s public website—to tell workers about a minimum 5% raise this year. McDonald’s, Wal-Mart Stores Inc. and Gap Inc. have made similar moves in recent years.

Nationwide said last September that it was increasing the minimum wage for its lowest-paid workers to $15 an hour from $10.50. About 900 workers at call centers in Des Moines, Iowa, and San Antonio got raises.

Competitive pressures and low unemployment in those cities was a factor, said Gale King, Nationwide’s chief administrative officer. . .

. . . The companies say increasing pay at the bottom of the scale can be a smart financial decision, leading to a more a stable employment base and lower hiring and training costs. It can also be a wise public-relations move.

“Baristas, bank tellers, these are people customers see as the face of the brand,” said Kirsten Davidson, head of employer brand at job-rating website Glassdoor. “If a company is not talking about pay raises for those employees, that’s a huge lost opportunity.”

Such pay increases also hint at a corporate shift toward more profit-sharing, said Princeton economist Alan Krueger, a former economic adviser to President Barack Obama.

“It shows company wage policy is not fully dictated by the market,” said Mr. Krueger. “That’s one of those myths that the labor market is purely set by supply and demand.” A solely market-driven company would set different wages in every city, not announce nationwide raises, he said. . .

. . . Raises for lower-paid workers can make customers, and even investors, feel better about a company. That can be especially important for businesses targeted by protesters demanding a $15-an-hour national minimum wage.

Weekly wages in the leisure and hospitality industries, including restaurants, are advancing at nearly the same rate as for information workers, who earn three times as much, Labor Department statistics show. . .

End of article

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