Can retailers afford to keep paying associates less than $15 an hour?


Under Armour is the latest company to give its hourly retail workers a bump in pay.
The athletic brand will begin paying its hourly employees at least $15 per hour in the U.S. and Canada, a change that will impact 8,000 workers, according to CNBC. This will represent an increase of as much as 50 percent in some instances and will go into effect June 6. With 3,000 current open positions, the chain is planning other changes beyond the pay increase to attract talent.
Against the backdrop of a labor shortage, the number of big-name retailers paying hourly wages of $15 has continued to increase, although retailers were moving toward higher wages before the novel coronavirus pandemic.
Amazon.com and Costco currently pay employees $15 or more, according to Insider. Kroger touts its average hourly wage as having been $15 since 2019, a claim it made in response to Walmart’s February announcement of a wage increase for some workers.
Walmart’s move consisted of a wage hike to an average above $15, impacting 425,000 workers, according to NBC News. The region-dependent increases were slated to hit in March. The minimum starting wage for Walmart remains at $11. Target’s minimum starting wage, on the other hand, is $15.
Chipotle recently instituted a planned increase to $15 per hour for workers by the end of June, according to another CNBC article. McDonald’s announced a 10 percent pay increase at its U.S. company-owned stores and anticipates its average wage being $15 by 2024.
Starbucks and Home Depot are two other retailers that have recently made significant increases in their hourly wages.
While public interest groups were criticizing the federal minimum wage for being insufficient as far back as the early 2000s (when the wage was $5.15), the issue became more visible in the U.S. in the years leading up to the pandemic.
The federal minimum wage has remained at $7.25 since July of 2009, although President Joe Biden signed an April executive order that will raise the minimum wage for federal contractors starting January, 2020 from $10.10 to $15 and index it to inflation moving forward.
- Under Armour to raise hourly wages to $15 for more than 8,000 retail, distribution workers – CNBC
- Walmart to hike wages for 425,000 workers to average above $15 an hour – NBC News
- US labor shortage working against Biden’s economic goals – CNN
- Retail giants like Walmart, Amazon, and Kroger are firing shots over rivals’ minimum wages. Here’s who actually pays $15 an hour. – Insider
- McDonald’s raises hourly wages for company-owned restaurants – CNBC
- Big chains are raising pay and more retailers are likely to follow – RetailWire
- Minimum Wage – U.S. Department of Labor
- Report: U.S. rentals unaffordable to the poor – USA Today
- FACT SHEET: Biden-Harris Administration Issues an Executive Order to Raise the Minimum Wage to $15 for Federal Contractors – The White House
DISCUSSION QUESTIONS: What are the biggest factors hindering retailers’ current recruiting and retention efforts? Do you see paying a $15 an hour minimum wage becoming a necessity for retailers to compete in the labor market?
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32 Comments on "Can retailers afford to keep paying associates less than $15 an hour?"
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Founder, CEO & Author, HeadCount Corporation
Can retailers afford NOT to pay $15 an hour, should be the question. There’s no doubt that a $15 minimum will put pressure on all retailers, but as more big brands move in this direction, the harder it will be for others to not pay the minimum. I do believe that wage increases will continue to be a contentious issue, especially post pandemic where the opportunities for workers will be even more plentiful.
President/CEO, The Retail Doctor
Effectively the market is raising the minimum wage without the government. I don’t believe there are a ton of people waiting to apply for jobs solely because of unemployment benefits. I think most of the good employees already have jobs. The key is getting those parents who have had to stay home back in the workforce and, for now, looking at enticing people who have a job to take on a part-time job because of the wage increase. The pressure on all retailers to make margin should mean they will train those people they are paying $15 to create an exceptional experience and not bemoan the state of hiring right now. Business is good. Pay what you need to. Train them and hold them accountable. No Excuses.
Marketing Strategy Lead - Retail, Travel & Distribution, Verizon
With many retailers increasing their minimum wage to $15 and the current challenge to find new employees, most retailer will need to match the wages that other retailers offer. While the federal minimum wage hike may not get approved for some time, the marketplace will be the driving force for retailers to increase minimum wages.
Managing Director, GlobalData
There is a shortage of labor. Almost every retailer I’ve spoke to in the past month has a load of vacancies and is simply unable to fill them. They are offering perks, better pay, and bonuses to remedy this. Ultimately, better benefits and higher opening wages may be the only way to recruit and retain. However if this is the case it kind of negates the need for a federal minimum wage because the market is taking care of it without the need for government intervention.
Managing Partner, Advanced Simulations
Today the biggest hindrance is unemployment payments, which make it expensive to go back to work. In the near future, when these payments stop, it will become a “what is the going wage” issue. If every employer is paying $15/hour, you’ll have to pay that too. If lots of employers are paying less, then it won’t be a necessity. For now, labor competition is not being driven by wage levels per se but by government spending.
President/CEO, The Retail Doctor
Sorry, while it makes for great anecdotal sharing — is an employee who would rather stay home and collect a check really someone retailers are going to build their businesses on? I don’t think so. The harsh reality is the economy is exploding with opportunity everywhere. The good ones have jobs and will be looking to add shifts due to higher starting wages.
Managing Partner, Advanced Simulations
Bob — come on down to Atlanta. Watch the nightly news. See all the people who are not going back to work until unemployment payments end in June. They are on TV every night saying it. It’s an economic decision for them and they are pretty open about telling the audience that. The governor is on TV all the time saying it. Business leaders from Atlanta (Home Depot, Delta, UPS) are saying it.
Editor-in-Chief, RetailWire
President/CEO, The Retail Doctor
I’m sure they are on TV saying it. Doesn’t make it true for everyone, everywhere.
President, b2b Solutions, LLC
One of the issues retailers face is they are competing for employees that in many cases can earn as much or more by collecting unemployment. Over the past couple weeks, I have talked with retailers and c-store industry consultants who talk about the difficulty in recruiting even when offering wages at or close to the “magical” $15 hourly rate.
In almost every case they talked about having no issues in getting people to complete an online application, but it is a different story when it comes to prospective employees showing up for an interview. One example given to me was that a retailer received 100+ applications but only two people showed up for an interview. Retailers’ belief is people are using their application to verify that they are seeking employment to allow them to collect unemployment.
What the retailers told you is the reality of what is happening at this time. But these Federal programs are ending in many states and will end everywhere in September. Not long now. Also turns off the significant Fraud that has happened with those programs due to the various states not properly vetting the claims causing various payments to be made that shouldn’t have and we are talking hundreds of millions of dollars across all the states (payments to overseas, duplicate payments, payments to people who don’t even exist) specifically through the PUA program — complete fiasco.
Principal, Retail Technology Group
First, let us not be taken in by the companies that tout paying an “average” of $15 per hour versus a “minimum” of $15 per hour. Next, let us agree that setting wages is a complex model with multiple factors affecting the outcome. Retailers today are battling the stimulus package. When those benefits end there will be downward pressure on the minimum wage. Conversely, in the customer-centric environment in which we claim to be operating, retailers need better quality (trainable) and loyal (longer-term) employees to service those customers. Geography, the local economy and the basic cost of living also affect determination of wages. Not to be forgotten is competition against other retail companies in the operating neighborhood. It will have a further effect on determining wages. Finally, the impact of wages on net profit may well determine the wages or how lean a retailer wants to operate. These factors all have to be weighed.
President, Spieckerman Retail
Labor shortages were at work before the pandemic but worker pay is the elephant in the room. Now, as retailers attempt to flex workforces up en masse, labor shortages are hitting hard. For a long time, retailers said they couldn’t afford to raise wages until they did. Now fast food restaurants are having to compete with the better wages that some retailers are offering. The hard truth going forward is that if you can’t afford to pay workers a living wage, you don’t have a viable business model. As more retailers step up, pressure will mount to fall in line. Sometimes competitive pressure takes care of complicated problems.
Professor, International Business, Guizhou University of Finance & Economics and University of Sanya, China.
Exactly, Carol. I have said this so many times. “The hard truth going forward is that if you can’t afford to pay workers a living wage, you don’t have a viable business model.” No business model should be predicated on making profits off the back of labor.
Managing Partner Cambridge Retail Advisors
Professor, International Business, Guizhou University of Finance & Economics and University of Sanya, China.
26 percent of the U.S. workforce will be 55 years old and older, compared to only 14 percent in 2002. That means that those retiring (approximately 10,000 per day) are leaving the workforce at a faster rate than those entering. The U.S. needs workers. With the growth rate hovering around 0.5 percent, the only answer is to increase immigration. Economic growth in mature countries is directly related to the population growth.
For retailers who can’t or don’t want to meet the offers of the larger retailers, they will never get the best and brightest workers. The leverage larger retailers have with wages, education, advancement and other perks may put smaller retailers in an untenable labor bind.
Principal, Cathy Hotka & Associates
It’s not a surprise that workers are unwilling to return to low-paying jobs that offer unpredictable hours and long and potentially pricey commutes, without affordable child care options. The savviest retailers will respond by investing in associates and doubling down on training. It’s already working for some.
Professor, International Business, Guizhou University of Finance & Economics and University of Sanya, China.
Sadly, when talking about unemployment insurance, the attitude seems to be “take any job.” But people make rational decisions. Sometimes the low paying jobs on offer, as you described, don’t cover the cost of commute, childcare and, of course, the cost of living. If someone nets more out of unemployment insurance than it costs for them to go to work, it is not a problem with too much unemployment insurance but a structural problem with the basic economy.
Principal, Cathy Hotka & Associates
Amen. That isn’t “laziness” — it’s a logical approach to the market.
President, SSR Retail LLC
Working in retail is not easy: unpredictable hours; working nights, weekends, and holidays; working on the front lines with a sometimes hostile public. Paying these folks $15 per hour doesn’t come close to paying them what they’re worth – but it’s a step in the right direction.
Chief Strategy Officer, Hoobil8
Partner, Fortium Partners
The short answer is yes retailers will have to match the market wage. Basic economics will play a role in this situation. Generally, for a business to survive its total expense must be less than its total revenue. Increased individual wages must be offset by other expense reductions or revenue must increase by higher prices or more transactions.
There is nothing magic about $15 an hour. Regardless of the number, when it raises the general level of compensation it will require all retailers to adjust their pay scale to acquire employees.
The calculus of physical labor, e-commerce, automation, and number of stores will require retailers to change their business model. This is not new. Retailers have been changing their business model since their beginning. The difference is the rate of change required has accelerated.
Content Marketing Strategist
Attractive wages and non-financial perks like health benefits give generous retailers an edge among scarce talent. Labor costs are expensive, especially in tandem with a year of massive expenditures for tech and logistics.
Now a $15 minimum wage is starting to emerge as a necessity to keep leading retailers competitive. More retailers will pay these rates to keep up with rivals, as we witness the corporate equivalent of peer pressure.
Vice President, Strategic RelationsHamacher Resource Group
Honestly, ensuring that associates have a living wage is only part of the equation. Recruiting, training, and retaining employees needs to be the focus.
That said, if a $15 an hour wage is required — whether government-directed or not — retailers will need to optimize their operation to afford that investment. But again, if retailers cannot recruit or properly train associates, they certainly won’t be retained. This is a major pinch point across the retail landscape. I’m eager to see the creative ways retailers will address this issue.
President, The Treistman Group LLC
As the economy grows there will be new opportunities for workers to find employment that provides wages that they can live on. Working three jobs to barely, if at all, be able to afford necessities is no longer an enviable situation. People want to work and they want to afford what they need to stay healthy. Typically that means housing, food and medical costs. I think the pandemic has made many realize how close to the brink many citizens are. Look at the long lines at food banks, for example. As long as the media highlights how people can provide for themselves and their families through employment with companies that wish to sustain their own growth and efficiency, retailers and other companies will fall into line and learn how to be successful while offering their employees the opportunity to manage their life’s needs.
Principal, KIZER & BENDER Speaking
Product Marketing Manager, Tecsys
To attract the best people to work in their stores, the market is indicating that retailers will need to increase their wages and benefits. For retailers with deep pockets, this won’t be an issue. For others, it could be the difference between being profitable, breaking even or losing money. It seems the writing is on the wall for where wages are going, which means retailers on the margins will need to find ways to stay competitive. This means looking for savings in sourcing, supply chains, rent, tech, etc. and increasing foot traffic, conversion rates and sales per square foot.
President, Co-founder, RetailWire
I agree: the cost of childcare is a massive problem and is threatening economic recovery. If retailers want to get the best workers, they should do whatever they can to offer childcare benefits and support legislative efforts at the state and federal level.
Contributing Editor, RetailWire; Founder and CEO, Vision First
The pandemic gave retail associates prestige, value and through “hero” pay a living wage while they kept the flow of goods flowing in our communities despite safety concerns and confrontations with customers. Retailers have been under-investing and and under-valuing associates for years. The pandemic has exposed retail as an undesirable place to work at the current pay rate.
CFO, Weisner Steel
There’s really no uniformity in “minimums” across the country, since the cost of living varies so widely (never has been, probably never can be). If $15 is the figure in Backward, XZ, then the effective minimum is probably $18 in Dallas and $20-25 in NYC, etc.
That having been said, there will always be people willing to work for rock bottom. The questions really are what kind of people are they, and is it actually a sustainable model to have your business dependent upon them?
Professor of Food Marketing, Haub School of Business, Saint Joseph's University
The $15 per hour wage is the new ante. It is the minimum benefit a retailer can offer. The challenge is, what other benefits beyond a minimum wage can a retailer offer to insure that it has a differential advantage when hiring and retaining staff? Simply paying the new minimum is no guarantee of hiring new employees. Retailers need to concentrate on those non-monetary needs of employees, like time off to attend school, family leave, health insurance, vacation, etc. In addition, the shameful federal minimum wage needs to be increased immediately.