Why American Companies Suddenly Love Workers
Something interesting happens when the labor market tightens: Chief executives sing the benefits of higher wages, in unison.
In the past few months, several of America’s largest companies have come to the conclusion that they deeply value their workers and want to publicly celebrate their love of labor. A sample:
Walmart, the largest employer in the United States, announced across-the-board raises in February. In a letter to “associates” (the term Walmart uses for its employees), chief executive Doug McMillon said the move was a recognition of hard work, pledging that “there will be no better place in retail to learn, grow, and build a career than Walmart.”
Starbucks announced raises and increased benefits for more than 100,000 workers. In a letter to “partners” (the term Starbucks uses for employees), Chairman and CEO Howard Schultz framed his decision in the context of the most recent violent shootings. "Trust, after all, must be earned one human connection at a time,” he wrote.
JPMorgan Chase said it was it was raising wages for its lowest-paid workers, such as bank tellers, by 18 percent. In the opening paragraph of an op-ed for the New York Times, Jamie Dimon, the bank's chief executive, said it was the bank's civic duty to help its lowest-paid employees to combat "wage stagnation, income inequality, a lack of quality education, [and] insufficient training and skills development." (For comparative purposes, JPMorgan Chase calls its employees “employees.”)
McDonald's, Target, and T.J. Maxx have made similar announcements in the last year.
For one multinational corporation to have a conversion moment on wages and benefits might be an insignificant anecdote. But all at once, this feels more like a movement. Chief executives aren’t just raising wages quietly, announcing the bumps in inconspicuous internal memos. They’re trumpeting the wage increases as feats of national integration and human dignity.
What’s behind this?
First, the macroeconomics. Each of these companies had several years after the downturn to show their collective appreciation for low-skilled work, but they are all suddenly discovering their generosity in the same period. It’s not a coincidence: The labor market is tightening, and they have to pay their workers more to keep them from leaving.
This might be the age of abundance, but scarcity is still the most important economic concept. When jobs are scarce, corporations have power over workers. But right now, workers are scarce, and labor is feeling more powerful. As Conor Sen reported, the labor market for cheap service workers may be the tightest since the turn of the century. The number of Americans who voluntarily quit work hit a nine-year high in December 2015 (and is still as high as any point since the recession). Wage growth is at its highest rate in years, according to the Atlanta Fed, and it’s bolstered minimum-wage movements like Fight for $15.
The political context matters, too. The last year has been a parade of anti-elite and anti-globalization sentiment in the U.S. and around the world. The spillover effects have been unpredictable. Practically nobody believed that Donald Trump could win the GOP nomination. Bernie Sanders' revolution failed but also far surpassed most pundits' expectations. The betting markets were aligned against Brexit. Walmart, JPMorgan, and Starbucks are all multinational companies operating in a political environment that is growing hostile toward multinationals. Increasing the wages for a couple hundred thousand Americans does not obviate Trump, roll back Brexit, or guarantee favorable regulatory and tax-policy treatment in Washington. But the conspicuous moralizing in these chief executives’ memos and op-eds in unmistakable: These CEOs feel a tremor in the Earth, a cleaving of the public into hardened camps, and they are eager for voters and representatives to see them as being on the right side.
Finally, rising wages are an unalloyed good for workers. But it does not provide a bulwark against a downturn. The Atlanta Fed’s Wage Tracker hit a five-year high in September 2007. Two months later, the country was in the Great Recession. Companies love their workers now, but the world economy is fragile. One hopes this is a movement, not a moment.