A one-two punch to knock-out low pay for good.
‘No business which depends for its existence on paying less than living wages to its workers has any right to continue in this country.’ So said President Franklin D Roosevelt in 1933 and yet in 2014 some 3.3 million US workers were paid the federal minimum wage of $7.25 an hour ($15,080 a year) or less.
An acceptable living wage today is considered to be $15 per hour, yet there are 51 million jobs that pay less, so the federal government (taxpayers) spends $227 billion on welfare effectively subsidising low pay. If the minimum wage had kept pace with the sixties it would be over $20 now.
There is progress, but it is slow - at least half the States in the U.S. have a minimum wage over the federal level; and two states, California and New York, are phasing in $15 per hour. But we can’t wait. We can't continue the cycle of extreme hardship and unfulfilled lives as people try to exist on immorally low wages, holding down several jobs just to provide the basics. How can the process of moving to a higher wage economy be sped up? The good news is that the minimum rate could be raised to a $15 across the nation now. With a three-year phase in period - it is affordable, practical and we would *all* benefit.
One strategy to attacking low pay is to set a fair pay policy throughout the pay scale. Ending below minimum wage at the 'low end' should be implemented while also capping excessive pay at the 'top end' of an organization. By addressing the bottom and top simultaneously should help reduce a negative impact on profit. Combined with the increased productivity, reduced absenteeism, increased quality of work and reduced recruitment costs associated with fair pay, a cycle of socially sustainable and commercially viable pay can begin.
Raising the minimum wage to $15 per hour would inject about $450 billion into the US economy each year, according to venture capitalist and reformer Nick Hanauer. It would give more purchasing power to millions of poor and lower middle class Americans, and would stimulate buying, production and hiring. By not paying employees a living wage, it is taxpayers who are picking up the tab.
An example of hard-pressed taxpayers subsidizing businesses that pay low wages can be found with Wal-Mart.....Wal-Mart employs 825,000 people who earn less than $25,000 per year -- wages that leave many, and their families, below the poverty line and forced to use food stamps; food stamps which they then use to purchase basic necessities from -- guess where from? -- you got it! Wal-Mart. Americans for Tax Fairness used a 2013 study by the US Committee on Education and the Workforce to show that Wal-Mart’s low wage policy costs US taxpayers an estimated $6.2 billion in public assistance including food stamps, Medicaid and subsidized housing. Imagine if the company instigated a strategy of socially sustainable pay -- for example, if the recent investment by Wal-Mart in share repurchases of $6.6 billion was redirected toward human capital, it could mean a raise of $5.13 per hour for their lowest paid workforce. Also - redirecting the $3 billion dividend payments to the Wal-Mart heirs, who already control more wealth than 40 per cent of Americans combined, would amount to a raise of $2.38 per hour for Wal-Mart’s low-wage workers.
Wal-Mart is merely one example of companies are not taking bold, smart steps toward socially sustainable and commercially sound wage practices. The American fast food industry - because of woefully low wages - effectively ’outsourced‘ $7 billion in annual labor costs to taxpayers. McDonald’s alone accounted for $1.2 billion of that outlay. Yum Brands came in at a distant number two, with its Pizza Hut, Taco Bell and KFC subsidiaries costing $648 million in benefit programs for workers each year.
Instead of paying for the burden created by low pay through increased taxes, let's instead us our tax system to incentivize businesses to pay living wages. In October 2014, the Economic Policy Institute calculated that by raising the minimum wage to just $10.10 per hour, 1.7 million Americans would no longer rely on public assistance, *and* the projected rise in consumer spending would provide a net increase in GDP of $22.1 billion, creating roughly 85,000 new jobs. Imagine the positive effect once it reached $15 per hour! Implementing a $15 per living wage across the country now (phased in over the next three years) would not only give up 30% pay rise to millions of workers, it will also save the taxpayers billions, boost economic growth and create even more jobs. A fresh rethink in pay scales and tax incentive has the potential to turn practice of low pay on its head. And EVERYONE WINS.