Higher minimum pay reflects growing shift among American companies to offer a living wage
The call for a minimum wage increase is growing louder across the country as many small businesses desperate to rebound from the coronavirus pandemic are struggling to hire back their old workers.
Unemployment benefits and stimulus checks gave many out-of-work Americans the time and financial cushion to reconsider their careers, and despite employers hiring again, some workers remain hesitant to come back to the same low paying jobs.
Over the past year, the recovery from layoffs and lockdowns has been painfully slow, and now that workers are demanding better pay, many employers have been forced to rethink business models that would maintain profitability and at the same time offer a living wage.
While many employers debate the issue and still claim they cannot afford to pay more, at least one small businesses in Pennsylvania previously struggling to hire new workers has found success by raising its minimum wage from $7.25 to $15 an hour.
Jacob Hanchar, the co-owner of Klavon’s Ice Cream Parlor in Pittsburgh, says his store was able to fill 16 open staff positions “practically overnight” after announcing the new pay rate.
Klavon’s received “well over 1,000 applications” for job openings, and 250 applications came in from Facebook alone, he said.
In an interview this week with MSNBC’s Stephanie Ruhle, Hanchar said the wage increase has ultimately helped his business by reducing the number of workers who often leave for better pay, thus limiting his expense of finding and retraining new employees.
“Especially in the restaurant business, turnover is a big issue,” he said. “The other issue is burnout, a lot of people work two or three jobs and now they’re just working one job, so people are showing up on time now, they’re reporting to work in a better mood. Customer service has improved. Things like that, that you don’t always account for.”
Ruhle asked if the pay increase had caused any new financial strain for the business because it essentially doubled the payroll, and Hanchar said he hasn’t “noticed a difference in our bottom line.”
“From a top line perspective we have more people coming into our shop as a result of us raising our wage because people want to support a business that’s taking care of their employees,” he said. “Also our costs are going down as a result of less turnover, and we have not raised prices, so at the end of the day I have not noticed a difference in our bottom line.”
Companies boosting pay
Klavon’s move toward paying a living wage reflects a growing market shift to lure employees back to the workplace.
Uber and McDonald’s are offering higher pay along with other large private employers such as Amazon, Costco, Target and Walmart, which already have boosted base wages to $15 an hour.
Bank of America said Tuesday it would boost its minimum wage to $25 an hour by 2025. The bank raised its minimum to $15 in 2017 and $20 in 2019.
Under Armour is also boosting its minimum wage for thousands of its hourly workers to $15 per hour, a move designed to keep the brand competitive in attracting in-demand store and warehouse workers.
Meanwhile, the national minimum wage remains $7.25 an hour.
Increasing the minimum wage across all industries has been a push by Democrats for several years. President Joe Biden campaigned on raising the Federal minimum wage to $15 an hour from its current level of $7.25. The proposal did not make it into the $1.9 trillion economic relief package that passed earlier this year, but Democrats have pledged to push for a minimum wage increase in a bill later this year.
In March, U.S. job openings rose 8% to a record 8.1 million, but overall hiring rose less than 4%, according to government data.
Factors keeping workers at bay
Low wages are not the only reason workers are not coming back.
Health concerns and child care responsibilities seem to be the main reasons holding workers back.
In April, at least 25% of U.S. schools weren’t offering in-person learning, forcing many parents to stay home, said Heidi Shierholz, a senior economist who researches low- and middle-income workers with the Economic Policy Institute. And health concerns could gain new urgency for some workers now that the U.S. Centers for Disease Control and Prevention has said fully vaccinated people can stop wearing masks in most settings.
Shierholz added that unemployment benefits are designed to give workers the time to find jobs that are better suited to their abilities.
“We want people well-matched to their skills and experience,” she said. “That’s what helps the economy run better.”
Higher pay for workers can push up inflation, which jumped in April as the economy struggled with widespread shortages of raw materials and parts amid a faster-than-expected reopening. If companies are forced to raise prices to cover the cost of higher wages, that could slow the recovery and reduce Americans’ purchasing power.
For now, most economists see labor shortages as likely to be temporary.
As more Americans are vaccinated, fewer will worry about getting sick at work. Schools should reopen in September, freeing more parents to return to work, and the extra $300 in unemployment aid is also set to expire in early September. Those steps should bring more people into the job market.
Information provided by The Associated Press was used to supplement this report.
ArLuther Lee is a visual editor and occasionally covers national and world news for The Atlanta Journal-Constitution. He holds a bachelor's degree in journalism from The University of Florida and has been a journalist for more than 25 years.