JP Morgan Chase is raising its internal minimum wage from $10.70 per hour to $12.00 per hour. Jamie Dimon, chief executive of JPMorgan Chase, writes in The New York Times:
A pay increase is the right thing to do. Wages for many Americans have gone nowhere for too long. Many employees who will receive this increase work as bank tellers and customer service representatives. Above all, it enables more people to begin to share in the rewards of economic growth.
It sounds super noble, and it is. JP Morgan Chase has every right to pay its employees whatever it wants to, as long as it is equal to or above the mandated minimum wage in every state. Chase's change to increase training and provide opportunities for employees at lower income levels is laudable.
Starbucks just announced a wage increase of 5 to 15 percent for its employees--coming in October. That sounds all kinds of awesome, except that it has also been quietly cutting hours, by up to 50 percent. A 5 percent wage increase doesn't quite cover the money lost by dropping half your working hours.
Of course, Walmart made headline news by raising its wages back in February, upping the average full-time rate to $13.38 per hour.
These raises sound fabulous, and they are for the employees who get them. They aren't so fabulous for the morale of the people who have worked long and hard to reach those wages and find their brand new co-workers making the same amount. Walmart, for instance, didn't raise the wages of people who were already making higher amounts, causing long-time, loyal employees to feel unloved and unappreciated. The Economist remarks:
Walmart has had some difficulty with the move. Long-serving staff who already earn more than $10 are miffed at missing out on a bumper rise. A section of Reddit, an online message board, for Walmart employees is filled with complaints. "I'm mad at the company...for invalidating 15 years of my hard work," writes one.
So there's that. Because the raises at Chase and Starbucks have just been announced, we'll have to wait to see how those go, but I suspect they will run into the same problems. It's one thing to give a raise to your bottom-rung employees; it's quite another to give a raise to every employee in the business so that it's "fair."
The interesting thing about these wage hikes is that the government is not forcing them on these big companies. Walmart, undoubtedly, feels pressure from many organizations, including unions who would love to organize Walmart staff. Chase is probably finding that its low wages limit its employment pool.
The reality is, when you raise wages you get a better talent pool. Years ago (1999-2000), I worked for a retail organization that is always on Fortune's Top 100 Companies to Work for: Wegmans. I focused on making sure we paid our employees more than all our competitors. While former CEO Bob Wegman was a truly good boss (I have nothing but praise for him), he also recognized that he got the best employees when he paid the best wages.
Wages can rise and fall without government intervention. Companies compete with each other for talent. And raising wages at one big company can have a ripple effect on other companies. That's how the free market works. When Walmart raised wages back in 2015, TJ Maxx and other stores followed suit. Why? It's not nobility. It's simple economics.
If Walmart pays $10 an hour and its competitor pays $9, who would want to work at the competitor? Well, some people would because they like the work better, but you'd see people fighting for the higher-paying jobs and the lower-paying companies would have both increased turnover and a limited employment pool--as the only people available would be those who were incapable of obtaining a higher-paying job. Turnover is a lot more expensive than a pay increase.
But beware any big corporation that doesn't advocate for simply raising internal wages. When big companies start to clamor for an increase in the federally (or state) mandated minimum wage, their reasons are no longer noble. It's because they know that they can handle a wage increase, but not all their competitors can. It's self-serving.
These wage increases indicate that the free market can and will make things better for employees as the economy increases. Let's let the free market do its job and see wages rise.