After signing the nation’s first federal minimum wage into law in 1933, President Franklin D. Roosevelt harkened back to a promise he had made in his inaugural address: Nobody would starve on his watch. He spoke of workers experiencing “more than a bare subsistence level” instead enjoying the “wages of a decent living.”
Some back in the 1930s saw the very idea of a minimum wage as setting America on the road to calamity. The National Association of Manufacturers asserted that it was the first step toward “communism, bolshevism, fascism, and Nazism.” The opposition to the minimum wage has not quieted much since then. Because of this, in the eight decades since the Fair Labor Standards Act, the federal minimum wage has climbed from $0.25 an hour to $7.25—an increase nowhere near the growth of prices or productivity. Adjusting for inflation, minimum wage workers made about 46% more in 1968 than they do today, which is why Congress has now been debating an increase to $15.
Aspiration recently became part of this debate when we announced that we are raising our companywide minimum wage to $25 an hour this year. I will admit this was not an easy decision to make, and I considered it from multiple vantage points.
I weighed it through the prism of economic justice and fairness, remembering the daily stress and worry that hung over the small apartment where I grew up as the son of recent immigrants who struggled daily with the challenges of making ends meet. Through that lens, $25 isn’t just a minimum wage—it’s a living wage, and paying it is just the plain right thing to do.
I thought about the decision from a public policy standpoint. Recent research has shown the minimum wage would be more than $20 if it had kept pace with productivity increases among American workers. Prominent investors like venture capitalist Nick Hanauer and Joe Sanberg (my Aspiration cofounder) have made strong arguments that raising the minimum wage is critical to America’s economic growth. When people have more money in their pockets, they spend that money in ways that lead to more jobs and more opportunity.
However, I ultimately had to look past all of that. As Aspiration’s CEO, my job is not to make decisions based on my personal sympathies or political views, but to do what is best for our company’s customers, employees, and shareholders. A major increase in pay, for more than a third of our workforce of over 200 people, has a direct impact on our expenses as we build profitability. We are in a hypercompetitive industry, facing off against gigantic banks who have all the money in the world to outspend us. Every dollar we spend raising our wages and salaries is a dollar we cannot spend elsewhere—on reaching new customers or building new technologies and products.
It was through this lens that I decided a $25 living wage was indeed in the financial best interests of our business. Raising our minimum wage is not only the right thing to do for our employees and community; it is ultimately in the best interests of our company.
To build our business and serve our customers, we need to hire and retain the best employees. That’s why everyone who works at Aspiration is given an equity grant that makes them a part owner of the company. Today’s smartest companies know that in order to grow and thrive they have to act responsibly—toward their customers, their community, their employees, and the environment. Research has shown that companies with strong practices toward their people and the planet end up outperforming their peers.
It’s not just pay. Companies in the top quartile for racial and ethnic diversity are 35% more likely—and companies in the top quartile for gender diversity are 15% more likely—to have financial returns above their respective national industry medians, according to a study by consultancy McKinsey & Co. Another study found that corporations that are actively managing and planning for climate change secure a 67% higher return on investment than companies who refuse to disclose their emissions.
There are many reasons America should raise its minimum wage. For business leaders, this decision is not just about our obligation to do right: It’s also about the bottom line. The costs of paying employees fairly can be substantial. The costs of failing to do so are even greater.
Andrei Cherny is cofounder and CEO of Aspiration.
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