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For the first time in decades, earnings grow faster for low-wage workers

Abramson pays his employees at ECI stores about $ 3 more per hour than they were two years ago, and now offers a pension plan. The bump doesn’t just keep its businesses on staff, it attracts better employees, including some who have been exhausted by stressful jobs in education and healthcare. “As a company that is surviving the pandemic,” he said, “we are more adaptable now. “

In the past year, the lowest-paid workers have seen their incomes rise by around 8%, according to a new To analyse by Arindrajit Dube, economist at the University of Massachusetts at Amherst. While 5.5% of this gain was absorbed by inflation, those in the bottom third of the salary scale (taking into account occupation and worker demographics) saw their incomes rise in average, while in the top 70% they declined. .

Over the summer, for example, those earning $ 15 an hour saw their wages increase by about 1%, which explains inflation, while incomes fell by 0.2%. for those earning $ 30 an hour.

“It’s striking,” said Dube, “because it’s pretty much against the grain of the past 40 years where we’ve seen wage growth be the exact opposite.”

And it is particularly noteworthy that this is happening during a pandemic that has wreaked havoc on many employers who are raising wages, he said, including those in retail, hospitality and transportation. Workers are quitting their jobs at an all-time high, especially in lower-paying industries, as safety and childcare concerns persist. Early retirements are on the rise and the number of immigrant workers is falling. Some people are also rethinking their priorities.

“There’s a sense in which people who had particularly bad jobs, if you will, are less likely to want to stay there, and that creates that pressure,” he said.

Overall, real average hourly earnings, which represent inflation, have declined 1.2 percent over the past year, according to the Bureau of Labor Statistics. But wage growth “has accelerated considerably” in the past six to eight months, according to a Conference Board poll released Wednesday. And it is expected to continue to climb.

Employers are expected to raise wages 3.9% next year, the highest rate in 14 years, the nonprofit business group reported. This jump is due to an increase in wages for new hires – especially for those under 25 and workers who have changed jobs – and inflation, which has increased at the highest rate in nearly 30 years. year. Persistent labor shortages will likely drive wage growth above 4% until next year, the board said.

Some of the increases at the bottom of the earnings scale are due to the increase in the minimum wage. In Massachusetts, the minimum of $ 13.50 will drop to $ 14.25 on Jan. 1 and to $ 15 in 2023. Yet about half of American workers earn less than $ 20 an hour, according to the organization in nonprofit Living Wage for US, but 80% of the population live in a place where the salary needed to pay for housing, health care, child care, and other expenses to support families is more than that .

In Massachusetts, 92% of the population resides in a county where a family of four needs an annual family income of at least $ 100,000 to live with a “basic level of decency,” according to Living Wage for US, which has just launched a certification program. for employers who pay a living wage. But less than 44% of the state’s households earn that much.

A higher salary for those who need it most could be a silver lining for the pandemic, which has wreaked havoc among many immigrants and people of color in lower-paying jobs – provided it increases enough, a said Zeynep Ton, professor at MIT Sloan School of Management and co-founder of the Good Jobs Institute.

“The wages are sticky,” she said. “Once you raise them it’s very difficult to go back. “

Raising wages can also improve job performance, forcing companies to view workers as more valuable and give them more responsibility – and treat them with more respect, Ton said. But planning more regular hours is also essential.

“I think the workers are finally fed up,” she said. “They are used like robots.

Several national employers have announced wage increases in recent months. Amazon offers a starting salary of $ 18 to $ 22.50 an hour – versus $ 15 – for warehouse and transportation workers, and Costco just moved up to $ 17 an hour, after rising to $ 16 in February. Starbucks, CVS, and Walgreens all increase base pay to $ 15 an hour.

At Bank of America, the entry-level salary was $ 15 an hour when Ajna Angjeliu started as a cashier in Boston in 2019. Since then it has increased several times and hit $ 21 in October.

“It created a trusting relationship between me and the company,” said Angjeliu, 22, who now assists clients with their accounts and studies part-time at Boston University, while helping his parents pay. the bills. “I know this organization is a business that will help me grow.”

Bank of America branch manager Tilan Perera has seen interest in jobs grow as entry-level salary increases.Pat Greenhouse / Globe Staff

Tilan Perera, the branch manager at 100 Federal St., where Angjeliu works, found that interest in jobs increased as wages rose. “There are more people applying,” he said.

The bank plans to hire 5,000 people this quarter and increase starting salaries to at least $ 25 an hour by 2025.

Small employers are also increasing wages. More than three-quarters of owners in a recent National Federation of Independent Business survey said they had already increased their pay or were planning to do so soon, the highest percentage in 48 years. David Weaver, chairman of Compensation & HR Group in Burlington, said wages are increasing mostly at the entry level, with quick service restaurants, grocery stores, retail stores and banks announcing higher hourly wages in the range from $ 17 to $ 21.

Yet soaring inflation means these increases may not mean much.

It’s sort of a vicious cycle, said Christopher Carlozzi, Massachusetts director of the National Federation of Independent Business. “A lot of the price increases that consumers are seeing are the result of wage increases due to labor shortages. “

At Whole Foods Market in the Boston area, starting wages went from $ 15 to $ 16 an hour this fall, and employees above received a 50-cent raise. Workers also get an extra $ 2 an hour until early January, and overtime and Sunday pay are doubled.

A local employee, who asked not to be identified because he was not authorized to speak to the media, said he made $ 19.20 an hour after the increase and $ 38.40 on Sunday . “It’s a teacher’s salary,” he said, noting that a client told him she could apply because the Sunday rate is higher than what she earns as a teacher. nurse.

The 50-cent increase doesn’t make a big difference to him, but the extra Sunday pay means he can work fewer days. That will likely change in January, however. “It’s a little depressing,” he said.

Fred Goff, managing director of Cambridge-based job platform Jobcase, said employers love to brag about pay increases, but when you consider how many of them are temporary, and how much the cost of the life has increased – and how high some corporate profits are. hovering – it sounds hollow.

“There are a lot of people who want to be applauded for raising wages from $ 13 to $ 15 an hour,” he said. “Don’t do me a favor if you’re just keeping up with inflation.”


Katie Johnston can be reached at [email protected] Follow her on twitter @ktkjohnston.



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Rodney N.

The author Rodney N.