Big corporations are accelerating the push towards higher minimum wage
As the U.S. economy rebounds from the ravages of COVID-19, the country’s biggest corporations find themselves in need of workers, putting upward pressure on pay.
Retail giants, fast-food chains, and ride-hailing companies are offering higher wages and cash payments. Referral and signing bonuses, rarely needed before to fill entry-level, low-wage jobs, are now commonplace. These incentives represent a slow but steady march toward a goal that lawmakers and labor activists have pursued for years, with limited success: a higher minimum wage, approaching $15 an hour.
McDonald’s Corp. announced Thursday it will raise hourly wages by about 10%, bringing the average wage at its restaurants to more than $13 an hour. Chipotle Mexican Grill Inc. said earlier this week it will set hourly starting wages at $11 to $18. Target Corp. and Costco Wholesale Corp. have increased theirs to $15 and $16, respectively.
McDonald’s is hiring 10,000 new employees at its company-owned stores over the next three months alone, and Walmart Inc. brought half a million people on board last year. Chipotle is hiring 20,000 workers across the U.S., and Target needs workers for the 30 to 40 stores it will open this year.
Amazon.com Inc. also upped the labor market ante Thursday by announcing plans to hire 75,000 people in the U.S. and Canada at starting pay that will average more than $17 an hour. New employees will get hiring bonuses of $1,000 and those fully vaccinated for COVID-19 will get additional $100.
Amazon is betting the pay and bonuses will help it meet stepped-up e-commerce demand tied to the pandemic. Delivering products more quickly requires Amazon to build facilities closer to big cities, where labor costs are higher.
To get drivers back to ride-hailing gigs, Uber Technologies Inc. and Lyft Inc. are giving out cash bonuses for referring new drivers. In April, Uber said it would earmark an additional $250 million for near-term pay incentives, and that drivers in cities like Chicago and Philadelphia are making more than twice the hourly minimum age. Lyft said some of its drivers are bringing in at least $40 an hour.
The wage hikes come amid an intensifying debate about why companies are struggling to hire workers despite the fact that millions of Americans remain out of work. Last month, the U.S. economy added 266,000 jobs—far short of the 1 million that economists had forecast. At the same time, the number of job openings is surging and business surveys show employers are increasingly unable to hire enough workers to meet demand as the economy rapidly reopens.
The total value of retail sales, while little changed from March, were at a record $619.9 billion in April, according to data released Friday. The figures support economists’ forecasts for strong household spending for the remainder of the year. While consumers may begin shift more of their spending money to services such as entertainment and travel as pandemic fears dissipate, elevated savings built up during the pandemic should also underpin retail demand.
While some executives and Republican lawmakers say generous unemployment benefits during the pandemic are deterring potential applicants, many economists say there are a variety of factors and the mismatch is temporary. Ongoing health concerns, child-care responsibilities and the combination of low pay and unreliable hours offered in many service-industry jobs may also be contributing.
“It’s gotten very tough to hire workers and tough to hold onto them,” said Mark Vitner, senior economist at Wells Fargo & Co. “And I think it’s going to stay that way.”
For Walmart, boosting average wages rather than the starting pay rate is a calculated gamble to entice enough workers while not taking the big hit to profits that a minimum-wage hike would entail. Keeping its minimum wage at $11 an hour presents a “ladder of opportunity” for employees to earn more as they climb the ranks, Walmart Chief Executive Officer Doug McMillon has said.
Wage laws are sorely lagging the market. Federal minimum wage of $7.25 per hour was last raised in 2007. Inflation and competition for workers has made that benchmark—the minimum pay in 20 states—all but meaningless since few people are willing to work for that amount.
While labor activists have been pushing for a $15-an-hour minimum wage, and President Joe Biden is implementing a $15 wage floor for federal contractors, the nation may hit that figure even without a government mandate, said Michael Skordeles, a senior U.S. macro strategist at Truist Financial Corp.
Companies increasingly are concerned about issues of social justice and are sensitive to criticisms of how much their corporate officers make when compared with the average worker, he said. So, they’ll likely bump up wages just to get ahead of any potential criticism.
“That was largely shrugged off in the past, and I don’t think it’s as easily shrugged off anymore,” Skordeles said.
As long as workers remain in such high demand and enhanced jobless benefits remain, employers may need to bump up wages even higher than $15 an hour, according to Wells Fargo’s Vitner. As more Baby Boomers retire, that could give workers even more leverage in the coming years, he said.
“They are all over 55, and labor force participation falls off after 55, and it may be that we’re going to see that the returns to labor catch up relative to the returns to capital,” Vitner said.
Rising wages may also add to inflationary pressures. As employers’ costs rise, consumer prices are more likely to follow suit, stoking an already heated debate. Fed officials have said price pressures from pent-up demand and bottlenecks will likely prove temporary, but many others expect the pickup in inflation to prove more lasting.
—With assistance from Elizabeth Dexheimer, Spencer Soper and Matthew Boyle.
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