Economy

Tight Labor Market Forces Minimum Wage Up to $15 an Hour for More Workers

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When candidate Joe Biden proposed raising the federal minimum wage from $7.25 an hour to $15, it seemed like pie in the sky. When labor unions demanded the same, the big employers ignored them.

But then came the pandemic, and everything changed. As the economy reopened, employers encountered unexpected labor shortages. They raised wages, they offered signing bonuses, and without Congressional action, the de facto minimum wage, writes Michael Sasso in BloombergBusinessWeek:

The push for a $15 federal minimum wage may have stalled in Congress, but Covid-19 is helping steer the U.S. ever closer toward a key objective of labor unions and their allies in the White House and on Capitol Hill.

An analysis of jobs posted from spring 2019 to spring 2021 from a sampling of cities shows many service-sector industries crossed above a $15 starting wage during the period, often by significant margins, according to Emsi Burning Glass, an analytics firm that tracks job postings to glean labor market insights. The trend seems to have gathered steam in the recovery from the Covid recession, with several large employers, including Walmart, Target, Best Buy, and Chipotle Mexican Grill, bumping up starting or average hourly pay to $15 or more. Amazon.com Inc. recently announced it was boosting average starting wages for open logistics jobs to $18 an hour.

Ten states, plus D.C., have passed laws that will incrementally raise their minimum wage to $15 over several years. Campaigning for the presidency, Joe Biden proposedraising the federal minimum wage, currently set at $7.25 per hour, to $15, but his administration would be hard-pressed to marshal enough votes in Congress—even among Democrats—to make that a reality.

That some companies are targeting $15 specifically suggests they’re signaling that they’re treating employees more fairly, which still represents something of a victory for the union-backed “Fight for $15” campaign, says Ben Zipperer, an economist at the left-leaning Economic Policy Institute (EPI). In Los Altos, Calif., Smith.ai, a 330-person business that handles customer support for companies, recently raised its starting wage to $15 an hour, purposely choosing that rate in part because of all the attention on the issue. “I think people are looking at $15 as the new normal, kind of the new standard,” says co-founder Aaron Lee. “As we bump up to $15, we see a lot more applicants.”

The tight labor market has empowered workers to demand higher pay and improved conditions. The number of job vacancies exceeded new hires by 4.3 million in July, the most in data going back to 2000. Meanwhile, workers’ average hourly earnings climbed 0.6% in August, twice as much as forecast.

The article includes a graph showing that, before the pandemic, about 1/3 of workers earned less than $15 an hour. Now that proportion is down to 20% and may continue to drop.

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