There is a major problem with employee salaries and it can’t continue like this, it’s simply not sustainable.
According to a new report released about a week ago by the Social Security Administration, more than half (51%) of all workers in America make less than $30,000 per year.
This is one of the scariest numbers I’ve seen in a long time, and I wonder how these workers survive and provide for their families.
These are some of the scarier numbers from the report:
- 38% made less than $20,000 last year
- 51% made less than $30,000 last year
- 62% made less than $40,000 last year
- 71% made less than $50,000 last year
To make matters even worse, these numbers are only for Americans that are actually working.
As I detailed in a previous article about unemployment in America, there are millions of working age Americans that are not working and are not included in the official unemployment numbers.
The numbers have gotten even worse since I wrote that article, there are now 102.6 million working age Americans that don’t have a job.
There are 7.9 million working age Americans that are “officially unemployed” right now and another 94.7 million working age Americans that are considered to be “not in the labor force”.
The civilian employment-population ratio is a far more accurate measurement of the employment picture in America than the official unemployment rate is.
Raising The Minimum Wage
In the past year or so, there has been an increase in the discussion around raising the minimum wage.
On April 15 of this year, many low-wage workers across the world staged protests to demand a $15 minimum wage.
There were protests in 200 American cities and solidarity actions in 35 other countries, making it the largest mobilization of underpaid workers in history.
The main argument against raising the minimum wage is that while it helps some people, it actually ends up doing more damage to the overall economy because many more workers lose their opportunity.
They also think that it ends up pushing lower-skilled workers out of the market because now higher skilled workers end up taking those jobs since they pay well.
A raise in the minimum wage is not only a good idea, but it’s the right thing to do.
Not only does raising the minimum wage help support the poorest Americans, but it sends a more important message that their contribution to society is valuable.
John Oliver does a great job of breaking this down:
Companies That Have Successfully Increased Minimum Wage
Here are three great examples of companies that have successfully paid their workers more than the minimum wage, while maintaining profits.
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Ben And Jerry’s
At Ben and Jerry’s, they pay their workers according to the living rates of each location, but always more than the minimum wage.
At their headquarters and flagship shop in Vermont, they pay their workers a starting wage of $16.92.
They continuously outsell the overall U.S ice cream market and achieve profits at the high end of the industry.
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Costco
Costco is probably the most famous example of a business succeeding while paying more than the minimum wage.
The reason the example is so famous, is because Walmart is always in the news about how they should pay their workers more.
Costco pays workers an average of $20.89 an hour, compared with Wal-Mart’s average hourly wage of $11.83.
The argument (and a very valid argument) is if Costco can do it, why can’t Walmart?
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Gravity Payments
Gravity Payments made headlines earlier this year when their CEO, Dan Price, established a $70,000 per year minimum wage for all their employees.
Their story went viral, with 500 million interactions on social media and NBC’s video becoming the most shared in network history.
What I find interesting about Gravity’s story is that it was the 2009 recession that caused him to keep wages low.
I was so scarred by the recession that I was proactively, and proudly, hurting my staffDan Price
The recession had hurt his business so much that he kept wages flat to “save the company.”
After an employee had finally snapped at him, he realized that he had gone too far with the wage control and started gradually implementing this $70,000 minimum wage.
So far, it’s paying off incredibly. Revenue is growing at double the previous rate. Profits have also doubled, and Gravity’s customer retention rate rose from 91 to 95%.
How This All Affects Employee Engagement
The real issue is that people think too short term and they have a hard time connecting the indirect benefits of raising wages.
Yes, raising wages is expensive, but so is employee turnover.
Also, the increase in employee productivity from happier workers will offset most of that cost of the wage increase.
Finally, if everyone is earning more, it puts more money in the hands of consumers, meaning potentially more business for you.
A 2003 study1 of the effects of a wage increase for workers at the San Francisco Airport found that annual turnover among security agents plunged from 95% to 19% when their hourly wage rose from $6.45 to $10 per hour.
For almost half of the employees, they reported better morale, better customer service, fewer disciplinary incidents, and improved performance.
According to an article in Harvard Business Review that compared Costco and Walmart, Costco employees steal less, are way more productive, and Costco has considerably lower turnover than Walmart (44% versus 17%).
A 2005 study2 of home care workers in the Bay Area found that turnover fell by 57% following an increase in their wages.
Recently, thousands of business owners across America (including the CEO of Costco and Ben & Jerry’s) have signed a statement to raise the Federal minimum wage.
The full statement is below:
We, the undersigned business owners and executives, support an increase in the minimum wage to benefit workers, business and our economy. We know that the minimum wage is simply not enough for workers to afford necessities for themselves and their families. We know that a fair wage floor is essential to healthy businesses and communities, and enduring economic growth. We expect an increased minimum wage to provide a boost to local economies. Businesses and communities will benefit as low-wage workers spend their much-needed pay raises at businesses in the neighborhoods where they live and work.
Higher wages benefit business by increasing consumer purchasing power, reducing costly employee turnover, raising productivity, and improving product quality, customer satisfaction and company reputation. In a recent National Consumers League survey, for example, 76 percent of American consumers said “how well a company treats/pays employees influences what they buy.”
States that raised their minimum wages above the decade-long $5.15 federal level had better employment and small business trends than the other states. Studies by the Fiscal Policy Institute and others show that in states with minimum wages above $5.15, the number of small businesses and the number of small business employees grew more than the other states — contrary to what critics predicted.
Likewise, after the last federal minimum wage increases in 1996 and 1997, the nation experienced lower unemployment, low inflation, robust growth and declining poverty rates.
At $6.55 an hour, today’s minimum wage workers still have less buying power than minimum wage workers had half a century ago.
We cannot build a strong 21st century economy on a 1950s’ wage floor. We cannot build a strong 21st century economy when more and more hardworking Americans struggle to make ends meet.
A fair minimum wage shows we value both work and responsible businesses. A fair minimum wage is a sound investment in the future of our communities and our nation.
What Are Your Thoughts On All This?
So many people are struggling out there. Do you think it makes sense to raise the minimum wage? Will it backfire? Let me know your thoughts below!