Despite steep wage increases, low-wage workers in the US still have a lot to do

Every day you see people in need on the streets of New York. — © Digital Magazine

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Fast food workers in Manhattan have demonstrated for $20 an hour: Demand unthinkable before the Covid-19 pandemic has become commonplace as companies with short-term jobs offer massive wage increases but do nothing to close a gaping gap in income.

Wage pressure comes from several sources, including an unusually tight labor market and pandemic-related childcare issues, and chronically underpaid workers unwilling to return to pre-pandemic conditions.

Employers were forced not only to raise wages but also, in some cases, to offer better health insurance and bonuses.

“The country’s top employers have realized that they need to raise wages to zero if they want to attract reliable workers to help them get through this period of great uncertainty,” said Gregory Dacko, chief economist at Ernst & Young Parthenon.

Apple, in announcing an increase in the minimum hourly wage to $22, said in a statement, “Supporting and retaining the best team members in the world allows us to deliver the best, most innovative products and services to our customers.”

The tech giant said it provides “a wide range of benefits” for full-time and part-time employees in addition to industry-leading wages.

Higher wages could also help Apple in its efforts, like Amazon, to thwart unionization efforts.

Apple’s $22 hourly minimum represents a 45 percent increase from the company’s 2018 low, according to the group.

– Gaining the loyalty of workers –

In the summer of 2021, facing severe labor shortages, several major companies including Amazon, Target, and Chipotle increased their base hourly wage above $15, more than double the federal minimum of $7.25, and that figure hasn’t changed. since 2009.

Employees of a McDonald's restaurant in New York on May 27, 2022;  Once upon a time, demands by some Manhattan fast food workers for a minimum hourly wage of $20 would have been unthinkable.

Employees of a McDonald’s restaurant in New York on May 27, 2022; Some Manhattan fast food workers’ demands for a $20 hourly minimum wage were once unthinkable – Copyright AFP Ishara S. KODIKARA

Bank of America announced this week that it is raising the hourly low to $22, with that figure rising to $25 by 2025.

In the U.S., the biggest pay rises have been for the lowest paid workers — people who, in the age of Covid, have not been afraid to make their demands known.

A pedestrian walks past a man looking for handouts on Fifth Avenue in New York; despite recent wage increases by some employers, sharp income inequalities persist. — © AFP

While wages were boosted at all levels, only the lowest-paid workers saw increases large enough to offset today’s high inflation, said Mahir Rashid, an economist at Oxford Economics.

In other words, he says, “Even at higher incomes, most consumers are actually seeing wage cuts in real terms.”

– Deceptive pay raises –

So, even if the increase may seem significant – especially for restaurant and hotel workers – workers in this sector still earn less than the national average wage.

“The increase looks huge, with some workers going from $7 to $10, $10 to $12, $12 to $15, or even $15 to $20,” Dacko said.

And yet, he added, “$15 an hour is $30,000 a year, which is significantly less than the average (in the US) salary of $50,000 to $60,000.”

Moreover, the increase can be a one-time affair.

“It is unlikely that these wage increases will continue to rise at a steady pace over the next year,” Rashid said, even if some companies raise wages from time to time in an attempt to attract skilled workers.

He added that growth is bound to slow down as more and more people return to work.

As the labor market opens up, workers’ bargaining power will decrease, Dako said.

“Unfortunately, I don’t expect these gains to be sustainable in the long term because we haven’t seen an increase in the federal minimum wage,” said Elise Gould, an economist at the Economic Policy Institute, a US think tank.

She predicted “a decisive slowdown in wage growth.”

In a study published last month, she noted that the average wage rose by 4.4 percent in the first year of the pandemic in the US, but fell by 1.7 percent in the second year.

And despite recent increases, “wage levels remain highly unequal in the US labor market, with disparities across workers in wage levels, gender, and race/ethnicity remaining stark,” Gould writes.

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