Wages rise in US as companies scramble for staff
Agence France-Presse
August 11, 2021
Help Wanted Sign (AFP)
An acute labor crunch amid the coronavirus pandemic is boosting US wages, with many large chains now paying $15 an hour, a minimum level long sought by Democrats and labor activists.
The disruption of Covid-19 has led to record job openings, but also millions of unemployed workers, some of whom dropped out of the labor force to stay home to take care of children.
But some workers have used the pandemic to retire or try to change careers.
Economists say that so far, the wage bump has not resulted in troubling inflation.
"For the first time since the late 1990s, low-wage workers have a little more leverage to demand higher pay," said David Cooper, an economist at the Economic Policy Institute, a progressive Washington think tank.
Facing a sudden jump in business as the US economy reopened, restaurants, retailers and other employers have struggled to fill open positions, and have boosted pay, and even offered signing bonuses or other perks to new workers.
Last week, pharmacy chain CVS became the latest big chain to announce plans to lift its minimum wage to $15 an hour, joining a group that already includes Target, Chipotle and Amazon, among others. The new policy will take effect at CVS in July 2022.
Walmart, the biggest private US employer, in late July announced it was dropping the $1-a-day fee for its employee education program. The initiative supplements wages at the giant retailer, which pays less than its much smaller rival Costco.
Inaction in Congress
The announcements comes as President Joe Biden's effort to win a significant boost to the federal minimum wage remains stalled in Congress.
Upon taking office, Biden sought to more than double the wage to $15 an hour from $7.25 where it has been for the last 12 years.
"What the Democrats could not accomplish, businesses are delivering to them because of pandemic effects," Rubeela Farooqi, chief US economist at High Frequency Economics, told AFP.
"There was so much opposition to a $15 minimum wage but companies have no choice right now but to pay up to attract/retain workers."
The competition for workers means average pay for supermarket and restaurant workers has now topped $15, according to an article in The Washington Post.
"Overall nearly 80 percent of US workers now earn at least $15 an hour, up from 60 percent in 2014," the newspaper said, while adding that a $15 average wage is different from a minimum wage and many workers still earn less.
The trend of rising wage pressure is expected to continue for some time. Companies surveyed by Willis Towers Watson expect to lift wages three percent in 2022, up from 2.7 percent this year.
Permanent change?
But experts do not believe the trend to necessarily endure beyond the pandemic.
"The structures of the US economy that have suppressed wage growth ... for decades haven't changed," Cooper said. "We should be careful not to conclude that this will be a long-term permanent change."
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Gregory Daco, chief US economist at Oxford Economics, said many of the companies boosting wages should also see a benefit.
"It's the people with the lowest salaries who are getting a raise and that usually means more of it goes to consumption," Daco said. "Whatever more the companies are giving to workers, they're likely to make up in higher sales."
Farooqi also expects the current period of wage hikes to end, noting the large number of unemployed workers.
"We do not expect a wage spiral that will feed into inflation," Farooqi said. "Wages are not likely to keep accelerating if businesses can find workers easily."
The next major update on inflation will come Wednesday with the consumer price index for July, which is expected to rise 0.5 percent after surging 0.9 percent in June.
Hourly wages rose 0.4 percent in July compared with June and 4.7 percent over the year-ago period, according to the Labor Department.
Last week, pharmacy chain CVS became the latest big chain to announce plans to lift its minimum wage to $15 an hour, joining a group that already includes Target, Chipotle and Amazon, among others. The new policy will take effect at CVS in July 2022.
Walmart, the biggest private US employer, in late July announced it was dropping the $1-a-day fee for its employee education program. The initiative supplements wages at the giant retailer, which pays less than its much smaller rival Costco.
Inaction in Congress
The announcements comes as President Joe Biden's effort to win a significant boost to the federal minimum wage remains stalled in Congress.
Upon taking office, Biden sought to more than double the wage to $15 an hour from $7.25 where it has been for the last 12 years.
"What the Democrats could not accomplish, businesses are delivering to them because of pandemic effects," Rubeela Farooqi, chief US economist at High Frequency Economics, told AFP.
"There was so much opposition to a $15 minimum wage but companies have no choice right now but to pay up to attract/retain workers."
The competition for workers means average pay for supermarket and restaurant workers has now topped $15, according to an article in The Washington Post.
"Overall nearly 80 percent of US workers now earn at least $15 an hour, up from 60 percent in 2014," the newspaper said, while adding that a $15 average wage is different from a minimum wage and many workers still earn less.
The trend of rising wage pressure is expected to continue for some time. Companies surveyed by Willis Towers Watson expect to lift wages three percent in 2022, up from 2.7 percent this year.
Permanent change?
But experts do not believe the trend to necessarily endure beyond the pandemic.
"The structures of the US economy that have suppressed wage growth ... for decades haven't changed," Cooper said. "We should be careful not to conclude that this will be a long-term permanent change."
Report Advertisement
Gregory Daco, chief US economist at Oxford Economics, said many of the companies boosting wages should also see a benefit.
"It's the people with the lowest salaries who are getting a raise and that usually means more of it goes to consumption," Daco said. "Whatever more the companies are giving to workers, they're likely to make up in higher sales."
Farooqi also expects the current period of wage hikes to end, noting the large number of unemployed workers.
"We do not expect a wage spiral that will feed into inflation," Farooqi said. "Wages are not likely to keep accelerating if businesses can find workers easily."
The next major update on inflation will come Wednesday with the consumer price index for July, which is expected to rise 0.5 percent after surging 0.9 percent in June.
Hourly wages rose 0.4 percent in July compared with June and 4.7 percent over the year-ago period, according to the Labor Department.
Jefferson coffee shop flooded with applications after raising wage to $15 an hour
By Andrew McGinn, Jefferson Herald
So, people don’t want to work, eh? Rich Osborne, owner of Greene Bean Coffee in Jefferson, has been inundated with applications after raising his starting wage to $15 an hour. “I’ve never seen a turnout like this to a job posting,” he said.By Andrew McGinn
JEFFERSON: Bold. Refreshing. Ethically sourced.
And that’s just the coffee shop owner.
Rich Osborne, who owns Greene Bean Coffee in downtown Jefferson with wife Reagan, said they “knew it was the right thing to do, the right direction to go” when they recently instituted a new starting wage for all employees: $15 an hour.
What they couldn’t foresee was how the move would upend the narrative that an ongoing labor shortage — one that has caused some businesses to limit hours — is the fault of people who “don’t want to work.”
The Osbornes in early July advertised their first opening for a full-time barista at the new wage of $15 an hour. On Monday, they received their 47th application.
No, that’s not a typo.
The applications, in fact, just keep pouring in. From all over. From Perry. Fort Dodge. Lake City.
“My jaw drops with every new one,” Rich Osborne, 45, confessed. “I can’t believe how many valid applications we’re getting.”
Sydney Roberts prepares a drink at Greene Bean Coffee. By raising its starting wages to $15 an hour, the local coffee shop has thrust itself into the debate about the cost of living and about whether the federal minimum wage should be much higher than the current $7.25 an hour.By Andrew McGinn
Before, Osborne explained, they might get between four and six applications for an opening.
“Two or three would be so poor quality,” he said, “they’d go to the trash.”
In the past, he’s even resorted to headhunting new employees.
With Iowa’s minimum wage still set at $7.25 an hour — a rate that went into effect on Jan. 1, 2008 — Osborne suspects he’s unlocked the secret to finding a wealth of quality applicants. So is it time for other businesses to wake up and smell the, well, you know?
“That’s why people don’t want to work,” Osborne said, pausing.
“For you.”
You know, there’s nothing quite like being roasted by a guy who roasts his own beans.
Customers are unlikely to notice the pricing change that enabled Osborne to bump his six existing employees (four of whom are full-time) up to $15 an hour. Coffee drinks such as lattes and mochas now cost a quarter more.
“We’re still one of the cheapest coffee shops out there,” he said.
The recent move thrusts the Osbornes and Greene Bean squarely into the center of an intense, often politicized debate about the cost of living and about whether the federal minimum wage should be much higher than the current $7.25 per hour.
“The (Facebook) posts we’ve made about wages are the only ones the Chamber hasn’t reshared,” Osborne observed. “There’s a lot to be said in silence.”
The federal minimum wage hasn’t been adjusted since July of 2009 — 12 years ago — when it was increased to $7.25 from $6.55. It’s the longest period in history without an increase, according to the UC Berkeley Center for Labor Research and Education.
Only Congress can raise the federal minimum wage, which the president must then sign into law.
A majority of states — 30 to date, plus the District of Columbia — have a minimum wage higher than the federal minimum wage, according to the Economic Policy Institute (EPI), and 45 localities have adopted minimum wages above even what their states mandate.
Iowa isn’t one of them.
In fact, according to the U.S. Department of Labor, of the six states bordering Iowa, only Wisconsin’s minimum wage is also set at the federal level of $7.25.
The next lowest is Nebraska, at $9. Illinois is highest, at $11.
Three neighboring states — Minnesota ($10.08), Missouri ($10.30) and South Dakota ($9.45) — have their minimum wage indexed for inflation, according to EPI, meaning they’re automatically adjusted annually for increases in prices.
In Iowa, on the other hand, outgoing Republican Gov. Terry Branstad in 2017 signed legislation into law that nullified local minimum wage ordinances in Johnson, Linn, Polk and Wapello counties, and preempts local governments from establishing a minimum wage higher than the state minimum wage.
To address the “severe workforce shortage” that has gripped the state’s employers this spring and summer, Republican Gov. Kim Reynolds instead took aim at pandemic-related unemployment benefits.
In her May announcement ending Iowa’s participation in federal unemployment benefit programs, effective June 12, Reynolds said extra pandemic-related payments to jobless individuals were “discouraging people from returning to work.”
Osborne, however, believes the pandemic did something to workers — it gave them leverage.
“We may be loyal to our jobs, but our jobs aren’t loyal to us,” he said, recalling how many employers nationally dumped their workers just days into the COVID-19 pandemic. “People maybe have discovered their worth.”
The Osbornes opened Greene Bean Coffee eight years ago, in part as a hedge against the unpredictable nature of modern work.
The Osbornes may have been in the vanguard of remote-workers when they decided to relocate to Jefferson from “overpriced” Colorado following RAGBRAI one year, but Rich Osborne is acutely aware that his other job as a senior support engineer for the tech giant Oracle isn’t guaranteed for life.
He’s already endured a couple of acquisitions in his tech career.
“They stopped giving away watches at 15 years,” he said. “I got a $20 gift certificate to Amazon.”
Osborne said raising starting wages at Greene Bean Coffee to $15 an hour has “been on our radar for a long time.” It was in 2012 that striking New York fast-food workers started the movement known as Fight for $15.
President Joe Biden campaigned last year on raising the federal minimum wage to $15 an hour.
Opponents, though, are equally as vocal, including the U.S. Chamber of Commerce, which has warned that raising the federal minimum wage to $15 could result in as many as 3.7 million workers losing their jobs. The U.S. Chamber says it’s not opposed to raising the minimum wage — just not to $15.
The Economic Policy Institute counters that a single adult in any part of the U.S. needs an income of at least $31,200 — a job making $15 an hour — to achieve an adequate standard of living.
“I hope people realize that $15 an hour is only 30 grand a year,” Osborne said. “For what you’re asking them to do, even that doesn’t seem enough.”
He said he recently put the question to friends in Des Moines.
“If I offered you a job for $30,000 a year and not too many great benefits, would you take it?” he asked.
There were no takers, he said.
For what it’s worth, EPI points out that had the minimum wage been raised at the same pace as productivity growth since the late 1960s, the minimum wage would now be more than $20 an hour.
EPI also notes the public cost to a low federal minimum wage, citing data that nearly half (47 percent) of families in states without laws to raise the minimum wage to $15 rely on at least one public support program because they don’t earn enough — a cost to federal and state taxpayers of $107 billion a year.
Keygan Barber, a Greene Bean barista and the assistant manager, suspects that the state’s ongoing “labor shortage” is more of a wage shortage. “People have realized they don’t have to work for peanuts,” she said.By Andrew McGinn
Keygan Barber, the assistant manager at Greene Bean, said the “cost of living is way higher than $7.25.”
“Rent in town is higher than it should be,” she said. “It does not make sense for a town of 5,000.”
According to the Living Wage Calculator developed by the Massachusetts Institute of Technology (MIT), an adult in Greene County with no children needs to earn at least $13.55 an hour to make ends meet.
An adult in Greene County with one child, however, needs $29.05 an hour, according to the calculator, which is based on typical expenses in a given area.
As part of the application process, Osborne asks applicants to list their current wage.
“The amount of $7s I’m seeing,” he said, “is still pretty high.”
By Andrew McGinn, Jefferson Herald
So, people don’t want to work, eh? Rich Osborne, owner of Greene Bean Coffee in Jefferson, has been inundated with applications after raising his starting wage to $15 an hour. “I’ve never seen a turnout like this to a job posting,” he said.By Andrew McGinn
JEFFERSON: Bold. Refreshing. Ethically sourced.
And that’s just the coffee shop owner.
Rich Osborne, who owns Greene Bean Coffee in downtown Jefferson with wife Reagan, said they “knew it was the right thing to do, the right direction to go” when they recently instituted a new starting wage for all employees: $15 an hour.
What they couldn’t foresee was how the move would upend the narrative that an ongoing labor shortage — one that has caused some businesses to limit hours — is the fault of people who “don’t want to work.”
The Osbornes in early July advertised their first opening for a full-time barista at the new wage of $15 an hour. On Monday, they received their 47th application.
No, that’s not a typo.
The applications, in fact, just keep pouring in. From all over. From Perry. Fort Dodge. Lake City.
“My jaw drops with every new one,” Rich Osborne, 45, confessed. “I can’t believe how many valid applications we’re getting.”
Sydney Roberts prepares a drink at Greene Bean Coffee. By raising its starting wages to $15 an hour, the local coffee shop has thrust itself into the debate about the cost of living and about whether the federal minimum wage should be much higher than the current $7.25 an hour.By Andrew McGinn
Before, Osborne explained, they might get between four and six applications for an opening.
“Two or three would be so poor quality,” he said, “they’d go to the trash.”
In the past, he’s even resorted to headhunting new employees.
With Iowa’s minimum wage still set at $7.25 an hour — a rate that went into effect on Jan. 1, 2008 — Osborne suspects he’s unlocked the secret to finding a wealth of quality applicants. So is it time for other businesses to wake up and smell the, well, you know?
“That’s why people don’t want to work,” Osborne said, pausing.
“For you.”
You know, there’s nothing quite like being roasted by a guy who roasts his own beans.
Customers are unlikely to notice the pricing change that enabled Osborne to bump his six existing employees (four of whom are full-time) up to $15 an hour. Coffee drinks such as lattes and mochas now cost a quarter more.
“We’re still one of the cheapest coffee shops out there,” he said.
The recent move thrusts the Osbornes and Greene Bean squarely into the center of an intense, often politicized debate about the cost of living and about whether the federal minimum wage should be much higher than the current $7.25 per hour.
“The (Facebook) posts we’ve made about wages are the only ones the Chamber hasn’t reshared,” Osborne observed. “There’s a lot to be said in silence.”
The federal minimum wage hasn’t been adjusted since July of 2009 — 12 years ago — when it was increased to $7.25 from $6.55. It’s the longest period in history without an increase, according to the UC Berkeley Center for Labor Research and Education.
Only Congress can raise the federal minimum wage, which the president must then sign into law.
A majority of states — 30 to date, plus the District of Columbia — have a minimum wage higher than the federal minimum wage, according to the Economic Policy Institute (EPI), and 45 localities have adopted minimum wages above even what their states mandate.
Iowa isn’t one of them.
In fact, according to the U.S. Department of Labor, of the six states bordering Iowa, only Wisconsin’s minimum wage is also set at the federal level of $7.25.
The next lowest is Nebraska, at $9. Illinois is highest, at $11.
Three neighboring states — Minnesota ($10.08), Missouri ($10.30) and South Dakota ($9.45) — have their minimum wage indexed for inflation, according to EPI, meaning they’re automatically adjusted annually for increases in prices.
In Iowa, on the other hand, outgoing Republican Gov. Terry Branstad in 2017 signed legislation into law that nullified local minimum wage ordinances in Johnson, Linn, Polk and Wapello counties, and preempts local governments from establishing a minimum wage higher than the state minimum wage.
To address the “severe workforce shortage” that has gripped the state’s employers this spring and summer, Republican Gov. Kim Reynolds instead took aim at pandemic-related unemployment benefits.
In her May announcement ending Iowa’s participation in federal unemployment benefit programs, effective June 12, Reynolds said extra pandemic-related payments to jobless individuals were “discouraging people from returning to work.”
Osborne, however, believes the pandemic did something to workers — it gave them leverage.
“We may be loyal to our jobs, but our jobs aren’t loyal to us,” he said, recalling how many employers nationally dumped their workers just days into the COVID-19 pandemic. “People maybe have discovered their worth.”
The Osbornes opened Greene Bean Coffee eight years ago, in part as a hedge against the unpredictable nature of modern work.
The Osbornes may have been in the vanguard of remote-workers when they decided to relocate to Jefferson from “overpriced” Colorado following RAGBRAI one year, but Rich Osborne is acutely aware that his other job as a senior support engineer for the tech giant Oracle isn’t guaranteed for life.
He’s already endured a couple of acquisitions in his tech career.
“They stopped giving away watches at 15 years,” he said. “I got a $20 gift certificate to Amazon.”
Osborne said raising starting wages at Greene Bean Coffee to $15 an hour has “been on our radar for a long time.” It was in 2012 that striking New York fast-food workers started the movement known as Fight for $15.
President Joe Biden campaigned last year on raising the federal minimum wage to $15 an hour.
Opponents, though, are equally as vocal, including the U.S. Chamber of Commerce, which has warned that raising the federal minimum wage to $15 could result in as many as 3.7 million workers losing their jobs. The U.S. Chamber says it’s not opposed to raising the minimum wage — just not to $15.
The Economic Policy Institute counters that a single adult in any part of the U.S. needs an income of at least $31,200 — a job making $15 an hour — to achieve an adequate standard of living.
“I hope people realize that $15 an hour is only 30 grand a year,” Osborne said. “For what you’re asking them to do, even that doesn’t seem enough.”
He said he recently put the question to friends in Des Moines.
“If I offered you a job for $30,000 a year and not too many great benefits, would you take it?” he asked.
There were no takers, he said.
For what it’s worth, EPI points out that had the minimum wage been raised at the same pace as productivity growth since the late 1960s, the minimum wage would now be more than $20 an hour.
EPI also notes the public cost to a low federal minimum wage, citing data that nearly half (47 percent) of families in states without laws to raise the minimum wage to $15 rely on at least one public support program because they don’t earn enough — a cost to federal and state taxpayers of $107 billion a year.
Keygan Barber, a Greene Bean barista and the assistant manager, suspects that the state’s ongoing “labor shortage” is more of a wage shortage. “People have realized they don’t have to work for peanuts,” she said.By Andrew McGinn
Keygan Barber, the assistant manager at Greene Bean, said the “cost of living is way higher than $7.25.”
“Rent in town is higher than it should be,” she said. “It does not make sense for a town of 5,000.”
According to the Living Wage Calculator developed by the Massachusetts Institute of Technology (MIT), an adult in Greene County with no children needs to earn at least $13.55 an hour to make ends meet.
An adult in Greene County with one child, however, needs $29.05 an hour, according to the calculator, which is based on typical expenses in a given area.
As part of the application process, Osborne asks applicants to list their current wage.
“The amount of $7s I’m seeing,” he said, “is still pretty high.”
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