This story first appeared in the December 6, 2013 issue of WWD. Subscribe Today.
That’s the debate being waged as corporations and workers square off over an increase in the minimum wage. The movement to close the income disparity gap in America gained steam Thursday as fast-food workers and labor groups protested in 100 cities in front of many restaurants calling for higher wages. The protests came a day after President Obama proclaimed raising the minimum wage a top domestic priority. More than 50 members of Congress recently wrote a letter to the chief executive officers of five of the largest fast-food companies urging them to raise wages for their workers.
The push for higher wages is not limited to U.S. shores. It has also taken off overseas in low-wage countries where workers have staged mass protests and strikes, calling for wages they can survive on. Bangladesh, the third-largest apparel supplier to the U.S., instituted a higher minimum wage of $68 a month for the garment industry, which took effect on Sunday. Cambodia also increased the minimum wage in May to $80 a month from $61 a month, although workers are still seeking a bigger increase in the mandated wage rate.
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In the U.S., the debate seems to have reached a new crescendo.
“We know that we’re going to have a greater…portion of our people in the service sector, and we know that there are airport workers and fast-food workers, and nurse assistants and retail salespeople who work their tails off and are still living at or barely above poverty,” Obama said in a major economic speech. “And that’s why it’s well past the time to raise a minimum wage that in real terms right now is below where it was when Harry Truman was in office.”
In his State of the Union address in February, Obama pledged to raise the federal minimum wage to $9 an hour by the end of 2015 from the current $7.25, and more recently he has supported legislation introduced by Sen. Tom Harkin (D., Iowa) to increase the minimum wage to $10.10 in three phases and provide for automatic annual increases linked to changes in the cost of living.
But gridlock in Washington, which led to a 16-day government shutdown in October, has prevented many such policy priorities from advancing. Despite the intransigence, Senate Majority Leader Harry Reid (D., Nev.) recently pledged to put a minimum wage hike bill to a vote by the end of the year. Its prospects in the House are far less certain.
In the absence of Congressional action, several states have moved independently to raise their state wage rates. New York passed a three-step wage increase in April that will boost the rate to $8 an hour in 2014, $8.75 in 2015 and $9 in 2016. California Gov. Jerry Brown signed legislation in September that will raise that state’s minimum wage rate from the current $8 an hour to $10 an hour by 2016. New Jersey voters approved a constitutional amendment in November to raise their minimum wage by $1 an hour to $8.25 on Jan. 1, with future increases pegged to a cost of living increase, and on Tuesday, the City Council in the District of Columbia took a preliminary vote to increase the minimum wage to $11.50 an hour. The bill must clear another vote before advancing to Mayor Vincent Gray’s desk.
The broad move to increase the minimum wage in states and at the federal level has directly impacted retailers in the U.S., but some have not shied away from the debate.
Wal-Mart Stores Inc. — long a target of unions accusing the retailer of paying substandard wages — has seen renewed pressure from the AFL-CIO, the United Food & Commercial Workers union, MoveOn.org, United Students Against Sweatshops, Interfaith Worker Justice and other groups to pay associates a minimum of $25,000 a year and provide full-time work.
“A majority of our hourly associates are full time and we are proud of the opportunities we provide to our associates,” said Brooke Buchanan, senior director of corporate communications at Wal-Mart, in a phone interview on Thursday. “Less than 1 percent make just the minimum wage and our average salary is $12.81 an hour.”
In 2007, Wal-Mart was a leading advocate of a federal wage hike, when Congress passed the first wage increase in a decade. The federal minimum wage increase, signed into law by President George W. Bush, lifted the wage in stages to $7.25 from $5.15 an hour.
“We believe it’s a worthy discussion and a discussion that needs to be had,” said Buchanan. “In California, when that proposal went through, we didn’t disagree with it, we didn’t come out against it. The same is true with the latest minimum wage increase in D.C. We want to be part of having the conversation to open the dialogue with government officials and fellow business leaders.”
David French, senior vice president of government relations at the National Retail Federation, said minimum wage increases have a direct impact on retailers’ ability to hire.
“Service-sector jobs in general are one of the few places where there has been job growth by any objective measure, but the net result of a higher minimum wage would slow or even reverse job gains in those sectors,” French said. “There is no question in places like California or New York where the local government has raised [or voted to raise] wages that there has been a consequence.”
French said minimum wage rate increases at the federal level force retailers to raise wages paid to employees making more than the minimum wage, as well.
“There is a phenomenon known as wage compression that has an impact,” French said. “I would also say the federal proposal has an annual cost of living escalator built in, which is a very challenging public policy decision and could be inflationary and very harmful to the ability of employers to create jobs in the future.”
But Stuart Appelbaum, president of the Retail, Wholesale and Department Store Union, recently noted in a report analyzing the law that it has boosted the economy and led to more job creation. The union was part of a coalition this year that pushed for passage of the Fair Wages for New Yorkers Act, a law that applies to new economic development projects and commercial developments that receive taxpayer support in the city. “At a time of rising poverty and growing income inequality, the campaign quickly became a movement for economic justice,” Appelbaum said in the report. He called the law the “most far-reaching and robust living-wage legislation in the country.”
The year-old law covers more than 12,000 new jobs in New York City across a range of projects and provides a living wage, currently set at $10.20 an hour with benefits, or $11.75 an hour without benefits, he noted.
“The sky has not fallen,” Appelbaum said. “Nothing was lost. In fact, plenty has been gained. Our business climate is as strong as before, and we are all better off with a higher-wage economy. Thousands, not hundreds, of jobs will continue to be covered and more will be created. That means skeptics who said this legislation would have little impact have also been proven wrong. This legislation has real teeth. It proves that outdated notions of economic development are no longer acceptable.”
The union is part of the Retail Action Project, which has protested what it calls “a crises of underemployment” for retail workers. “Workers struggle not just with shrinking hours, but also unpredictable schedules that change with little notice,” RAP said in a policy statement. “Scheduling practices affect how much retail workers take home in pay, whether or not they receive health benefits, and workers’ ability to balance life and work. We can’t afford to be short-changed by this important job creating industry — it’s time for family-sustaining jobs in retail.”
The group staged a protest at a Juicy Couture store in Manhattan in April regarding the practice, which then-corporate parent Fifth & Pacific Cos. Inc. denied.