The motivation wasn’t entirely altruistic. Since WWI, employers figured they could keep unions out by giving employees virtually all of the wage and benefits they would have gotten from joining unions. Even without that concern, though, the leadership of the company considered it part of their job to strike a balance between the other demands on the business and the needs of employees. They were one of the important stakeholders in the business, along with customers, shareholders, and the community around them.
There is no doubt that shareholder activism as well as court cases sympathetic to shareholder interests pushed publicly-held companies to pay more attention to maximizing stock prices. But when exactly did the shift in corporate attention in the direction of shareholder concerns lead to virtually ignoring the needs of employees?
Let’s be clear about the wage levels that are associated with not having enough to eat. A family of four with one breadwinner is eligible for food stamps if they earn less than $2500 per month. That is the equivalent of a $15 per hour job and a 40 hour work week. The government has determined that full-time workers earning less than that do not have enough money to feed their families on their own. If that breadwinner earns less than $16 per hour, they are also eligible for Medicaid assistance to provide healthcare. Depending on where they live, that breadwinner is also eligible for subsidies to help pay for housing.
Jobs paying $15 per hour are not the concern, though. Those are routinely seen as good jobs now. The concern is those jobs paying at or around the minimum wage, $7.25 per hour or only $1160 per month for a full-time job. About 1.6 million workers in the U.S. are paid at that level, and a surprising 2 million are actually paid less than that under various exemptions. If you are an employer paying the minimum wage or close to it, the Government has determined that your employees need help to pay for food, housing, and healthcare even if they have no family and no one to look after but themselves. As we’ve been reminded this season, many of those workers also need help from families and coworkers to get by.
No doubt the reason low-wage companies continue to pay low wages is because there are plenty of workers willing to take jobs at those wages, and the need to pay more to avoid the risk of being unionized is largely gone. But “can” and “ought” are not the same thing. Nothing about the minimum wage implies that it is morally ok as long as you pay at least that much. It simply says that the government will prosecute you if try to pay less than that level.
A longstanding principle in all developed countries including the U.S. is that labor is not like a commodity where taking advantage of the market to squeeze down prices is a fact of life. Employees have human rights that do not disappear when they enter the workplace. Even in business law, principles like the “mechanic’s lien” say that employees should be paid before other creditors because they are more vulnerable than businesses and do not get profits to compensate them for risks.
One of the things that I find surprising is how many companies that pay poverty-level wages or thereabouts to their employees spend a good deal of effort to be good corporate citizens in other areas. They try to make their operations “green,” lessening their impact on the environment, some even sponsor anti-poverty programs in Africa, and so forth. They just don’t seem very interested in the poverty among their own workforces.
Board of directors are responsible for making the trade-offs among stakeholders of businesses. If you are a member of the board of directors of a company that pays its workers so little that they need government subsidies to survive, isn’t that a little embarrassing? Most of these companies want to refer to themselves and their employees as a kind of family, but what kind of family allows its members to go hungry? And what prevents you from doing something about it?
For research on why higher wages are good for companies as well as employees, the editors of Harvard Business Review also recommend:
Why “Good Jobs” Are Good for Retailers by Zeynep Ton
The Case for Paying People More by Justin Fox
The High Cost of Low Wages by Wayne F. Cascio