The Corporate Fight for $15: Good for America’s Employees?

Thursday, September 24, 2020, 10:00 am
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As the Fight for $15 heats up across the country, calls for local, state, and federal governments to raise minimum wages have prompted many officials to take action. Some states and cities have already enacted phased plans to achieve a $15 minimum wage over the next few years, and in some cases eliminate tip credits. In November, Florida voters will decide whether or not to join this list.

However, governments aren’t the only entities feeling pressure to elevate hourly wages. A few notable companies have announced minimum wage increases for their hourly employees:

  • In October 2018, Amazon announced that all of its employees would make a minimum of $15 per hour in the upcoming November. Earlier that year, the retail giant was criticized for low worker median pay. Amazon’s CEO Jeff Bezos responded to this criticism with the announcement of the new company-wide minimum wage, and also vowed to push for a “higher” federal minimum.
  • In July 2020, Target implemented a $15 per hour minimum starting wage for all of its employees. Along with this rise in base pay, the company also offered $200 bonuses for all “frontline” employees who worked during the pandemic. In 2017, Target had announced a phased plan to reach this $15 minimum, starting at $9 per hour that year.
  • Hobby Lobby raised the bar entirely, claiming that as of October 1, 2020, the minimum compensation rate for full-time employees would be elevated to $17 per hour. The retailer has more than 900 locations and 43,000 employees in all but 4 U.S. states, and has boasted company minimum wage increases over 10 times since 2009.

These changes demonstrate that businesses can raise wages for their workers without the prodding of the state. In fact, reports from the ADP Research Institute attributed 2019 year-over-year wage growth to a tight labor market, surmising that companies may have increased starting wages to attract and retain employees.

However, raising minimum wages continually higher over short periods of time has proven to have negative effects on the employees they seek to help. Despite promising immediately visible increases in hourly pay, these companies have historically had to reduce costs elsewhere, at the expense of their employees. For example, after raising wages in 2019, Target employees experienced reduced hours, and failed to qualify for medical coverage benefits. One employee reflected that due to fewer scheduled hours, her take home pay was less than it was prior to the wage increase.

Amazon, in its 2018 announcement regarding the new starting wages for its employees, also rearranged its costs by eliminating warehouse productivity bonuses and stock options. Senator Bernie Sanders, who originally lauded the company upon its announcement, later confronted Amazon’s public relations team about the impact of this change on employees’ total earnings. Despite assurances that all Amazon employees would be “better off”, one employee calculated a loss of $1,400 per year despite receiving $1 more per hour worked.

Historically, the real value of the federal minimum wage has averaged around $7.39 per hour, when adjusted for inflation. Studies conducted over the years show that raising minimum wage, especially in such drastic proportions, can actually hurt low-skilled employees. Increasing costs for employers forces businesses to downsize or close, slashing job openings for minimum wage workers. Large companies joining the push for $15 state and federal minimum wages may cause the nation’s small employers to reduce hours or jobs, or close altogether.

As a $15 minimum wage, and even higher rates, become the norm in highly visible companies, government officials may become even more pressured to enact sizable minimum wage increases in their own jurisdictions. But a large company’s voluntary decision doesn’t mean the policy should be mandatory for the rest.