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

Discussion
Photo: RetailWire
May 25, 2021

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.

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?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"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."
"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."
"The $15 per hour wage is the new ante. It is the minimum benefit a retailer can offer."

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32 Comments on "Can retailers afford to keep paying associates less than $15 an hour?"


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Mark Ryski
BrainTrust

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.

Bob Phibbs
BrainTrust

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.

David Naumann
BrainTrust

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.

Neil Saunders
BrainTrust

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.

Dr. Stephen Needel
BrainTrust

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.

Bob Phibbs
BrainTrust

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.

Dr. Stephen Needel
BrainTrust

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.

George Anderson
Staff
The total weekly benefit in Georgia with the $300 from the federal government comes to a $574 top payment for the unemployed for up to 24 weeks. The state is eliminating that as of June 26. Seems like a $15 an hour pay rate (not exactly living large) would address that. As for economic decisions, it’s important to remember that many of those hit hardest when the pandemic came were women, who share an oversized burden compared to men when it comes to childcare. I have not been seeing much from states or employers who pay low wages when it comes to stepping up to make sure kids do not become societal casualties here. The unemployment benefits complaint isn’t a question of whether the government is being too generous (no one is getting rich with the $300 temporary increase), it is whether retail business leaders have the insights and foresight to create compensation models that demonstrate that all the platitudes about their employees – AKA their most valuable assets – are real or just happy… Read more »
Bob Phibbs
BrainTrust

I’m sure they are on TV saying it. Doesn’t make it true for everyone, everywhere.

Steve Montgomery
BrainTrust

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.

storewanderer
Guest
3 months 29 days ago

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.

Bob Amster
BrainTrust

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.

Carol Spieckerman
BrainTrust
Carol Spieckerman
President, Spieckerman Retail
3 months 29 days ago

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.

Gene Detroyer
BrainTrust

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.

Ken Morris
BrainTrust
I think we need to start paying associates a living wage. We need to make retail a career and not a transition to something else. You can’t afford to raise a family on $7.25 an hour. I believe full time associates earning a living wage with benefits and a chance for advancement will increase retail productivity and profits. Costco is a perfect example of retail altruism being a win for the customer, the associate and the company. This may be the perfect time to introduce technology like RFID. Many retailers are implementing RFID for inventory management but we are at an inflection point where RFID costs have dropped to pennies per chip — and many top suppliers are embedding them in the factory and the price of people is going up. Many RFID use cases at store level are now possible to speed up checkout, protect product from theft, speed markdowns, etc. So for wages, retailers are at the mercy of macroeconomics, but one of their key options for counterpunching is at the micro level:… Read more »
Gene Detroyer
BrainTrust

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.

Cathy Hotka
BrainTrust

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.

Gene Detroyer
BrainTrust

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.

Cathy Hotka
BrainTrust

Amen. That isn’t “laziness” — it’s a logical approach to the market.

Jeff Weidauer
BrainTrust

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.

DeAnn Campbell
BrainTrust
This issue is incredibly complex, raising wages won’t fix the problem if the end result is seeing too many business fail, and yet today’s cost of living far exceeds wage progression. Low wage jobs were originally designed to offer teenagers and college kids part time income while attending school and living at home. The wage was low because the work didn’t require advanced training or skill and the worker presumably didn’t have to cover their own living expenses. Every QSR, grocery and retail store built their business around this low wage model. Asking them to change their business model overnight can mean bankruptcy — especially for smaller businesses. But conversely, this model is 20+ years old and desperately needs change. We’ve had three recessions and a pandemic, the cost of college has exploded, and more people than ever use low wage jobs as their primary income source to survive. We are going to need a multi-pronged approach to solve this problem. Government funding for businesses to phase in higher wages, more consideration about “can” vs… Read more »
Jlauderbach
Guest

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.

Lisa Goller
BrainTrust

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.

Dave Wendland
BrainTrust

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.