Could Covid-19 worker shortages create a minimum wage of $ 15, even without a new law?

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Companies facing a labor shortage are offering bonuses – and even higher starting salaries – to attract new employees. But will the changes last?

Much to the dismay of progressives like Senator Bernie Sanders (I-VT), a minimum wage of $ 15 has no chance of passing the United States Senate. For now, the federal minimum wage remains stuck at $ 7.25 an hour, where it has been since July 2009, even though it has been eclipsed by higher minimums in 29 states and the District of Columbia. and lost some of its purchasing power due to inflation. Workers earning just $ 7.25 an hour actually earned 18% less than their counterparts in 2009.

At the same time, the combination of Covid-19 dislocations and (Republicans claim) overly rich benefits in the $ 1.9 trillion US bailout package signed in March by President Biden – an insurance supplement – Federal unemployment of $ 300 per week plus these stimulus checks of $ 1,400 per person.[…]let some companies say they were facing a labor shortage. “We’re having a little trouble staffing our hotels,” Marriott’s new CEO Tony Capuano told TBEN last week, specifically pointing to leisure markets like Arizona and Florida, where demand is. already coming back. Marriott isn’t alone here: restaurants, other types of leisure businesses, and even construction companies say they have a hard time hiring.

This shortage has the potential to drive wages down, effectively raising the minimum wage. (Capuano has indicated that Marriott is in favor of raising the federal minimum above $ 7.25 an hour, Newsday reported last week.)

“Let’s be clear,” Sanders tweeted Friday. “The problem in America is not that the unemployed are getting an extra $ 300 a week in emergency benefits during a terrible pandemic. The problem is, too many employers in America are exploiting their workers by paying starvation wages with no benefits. “

After McDonald’s announced last week that it would increase hourly wages by an average of 10% for more than 36,500 workers in its company-owned stores (pushing the average hourly wage to $ 15 an hour by 2024) , a Facebook political group spread the news to its 31,000 followers with the message, “Looks like we just found a way to raise wages.”

Consumer giants Amazon, Costco, and Target have all voluntarily increased salaries in recent months to meet or exceed the $ 15 threshold as they grow and need to increase their workforce.

“For employers looking to recruit staff, offering decent pay and benefits is the only way to stay competitive in today’s market,” Mathieu Stevenson, CEO of Hourly Work Platform Snagajob, said in a Friday statement. . “This is basically the 2.0 conversation about the $ 15 minimum wage.”

Over-simplification of the sound bite? Perhaps. But William Rodgers, professor of public policy and chief economist at Rutgers’ Heldrich Center for Workforce Development and former chief economist at the US Department of Labor Shortage, he would expect the market to respond with growth. wages in sectors that have been hit hardest by the pandemic and are now trying to recruit staff, such as retail, hospitality and leisure.

Rodgers, for his part, is not convinced that the $ 300 a week benefit is the cause of the labor shortage – if there is one. He notes that the number of jobs in April, while disappointing, was not enough to constitute a trend. Only 266,000 jobs were added during the month, far less than economists expected and far less than the 916,000 jobs that were added in March.

A bigger factor than the extra $ 300, he says, are the child care and care issues posed by the pandemic. “I think there are a host of parents – especially moms – who have made the conscious decision at certain times of the pandemic to leave the workforce,” he says.

Millions of women left the workforce during the pandemic and the female participation rate in April was only 56.1% – before the Covid-19 crisis, the last time the rate was this low , that was in 1987. Likewise, the difficulty of working during the pandemic apparently hastened the decision of some baby boomers to retire. According to the Pew Research Center, 3.2 million more baby boomers reported being retired in the third quarter of 2020 compared to the same quarter a year earlier. This is more than double the number of retirees the previous year. (Surprisingly, there are around five million minimum wage workers aged 55 or older.)

Goldman Sachs analysts said in a note Thursday that the jobless-to-job vacancy ratio has now reached levels associated with much tighter labor markets – similar to conditions just before the pandemic, when unemployment was at historically low levels. low – even though a record number of Americans are still officially considered unemployed. Analysts attribute this pattern to a rapid reopening that is occurring even as labor supply is still constrained by both the $ 300-a-week unemployment supplement and virus concerns over the return. at work. The effect is most pronounced in low-paying, public-oriented sectors like leisure and hospitality and health and education, analysts found.

For whatever reason – the $ 300, the challenge of child care, the fear of Covid-19 – workers’ wage expectations are also rising, especially at the lower end of the pay scale. Goldman analysts point out that the New York Fed’s measure of the self-reported average acceptance wage – the lowest wage a worker says he accepts for a new job – has risen 21% since the fall for earning workers. less than $ 60,000 per year. For workers earning more than $ 60,000, salary expectations have remained consistent with those of previous years. Goldman analysts say the gap shows how low-income workers are gaining bargaining power in the workforce with that extra $ 300 a week in UI benefits.

Of course, one could also reasonably argue that the need to pay for child care while the children are coming home from school and the feeling that taking a job carries a risk to health are also factors that affect their health. could increase the minimum wage that a worker will accept.

Whatever the cause, workers’ higher salary expectations appear to be producing results as companies ramp up hiring. Amazon said Thursday it would offer signing bonuses of $ 1,000 in select locations as part of a move to hire 75,000 workers at an average wage of $ 17 an hour, $ 2 more than the consumer giant’s usual $ 15 starting salary. This comes on top of the company’s announcement last month that it would raise wages to $ 3 an hour for more than half a million workers, at a cost of more than $ 1 billion. dollars for the company.

Convenience store chain Sheetz announced last week that it would raise wages by $ 2 an hour for all of its 18,000 employees. It will also pay employees an additional $ 1 per hour until September as part of its “summer incentive program.” The Jimmy John’s sandwich chain will be offering signing bonuses at some of its stores, the the Wall Street newspaper reported, as is the convenience store chain Wawa. Chipotle announced last week that it was rolling out referral bonuses and raising workers’ wages.

Olive Garden owner Darden Restaurants said earlier this year he would raise wages from around 20% of his hourly workers to at least $ 10 an hour, including tips. The national minimum wage for tipping workers is only $ 2.13, but many states have higher minimums. Other employers are getting more creative: Delaware’s Dogfish Head Craft Brewery is offering a case of beer to new employees, according to the New York Times, and a McDonald’s restaurant in Florida was paying $ 50 to applicants who came forward for interviews last month, Insider reported.

And in what appears to be an acknowledgment that workforce reluctance isn’t all about pay, pharmaceutical giant AbbVie says it will help eligible employees cover childcare and learning costs. remotely. Taco Bell is increasing benefits – including 12 weeks parental leave and four weeks paid vacation – for general managers, according to Restaurant Business.

There is more than anecdotal data to suggest that in some ways, market forces are driving wages up. Experts from the Bank of America said on Friday that while wages overall are rising in the United States (the average annual wage for a job posting was $ 50,150 in April from a pandemic low of 47,400 $), the service sector has recently seen higher wage growth as demand. is back in force and restrictions on businesses are lifted.

But market forces, while potentially powerful in the short term, do not necessarily guarantee lasting change the way a statutory minimum wage increase would. Goldman Sachs analysts expect the mismatch between labor supply and demand to persist through the summer – and raise wages by more than 3% in the near term – but subside in mid-September in most of the United States. This slowdown in wage growth could come even sooner given the growing number of Republican-led states announcing the end of the $ 300 weekly supplement.

“I would rather go for giving UI benefits to people and then forcing employers to increase wages and allowances to attract and retain workers,” Rodgers says. But even if it pushes up wages across the board, a rising tide doesn’t always lift all boats. Rodgers adds that despite booming economic growth in the Trump era, prosperity was not shared among all groups. “You must have [government] institutions… to ensure that the economy is fair in the sense of non-discrimination, to put an end to structural racism, to fight against structural sexism. ”

Further reading

Amazon hires 75,000 workers, offering $ 1,000 signing bonus in select locations (TBEN)

Sanders urges Biden administration to prevent Red States from cutting some federal unemployment benefits, even if governors so wish (TBEN)

Cities can use their federal stimulus to cover up to $ 25,000 in risk premium for groceries and other essential workers (TBEN)

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