I keep seeing in the news that employers are desperate for workers, so they are offering almost double the salary that they paid previously.*
So what happens to the poor slob who has been working there for a couple years now,( including covid)? Are they still getting paid minimum wage, while the new guy standing right next to them operating the ice cream machine earns double?
That’s my GQ question.
And now for a related question( less factual): Do you think these higher wages are going to become permanent? Or will they drop dramatically back down to minimum-wage level in just a few months from now, when the government handouts come to an end?
*(I’m thinking of fast food restaurant work, for example–where everybody knows the salary of everybody else on the shift, and the job interview was a 5 minute process, with no salary negotiation involved-it’s just take it or leave it. I’m not asking about professional work, where it often happens that one person earns more than his partner,because the salary negotiation was a time-consuming part of several interviews, and one person was more successful than his partner at demanding a higher wage.But neither of them knows the salary of the other)
I don’t think “government handouts” is what’s keeping people at home. Once the schools open and the daycares open and everybody gets vaccinated, people will start heading back to work.
But there’s going to have to some Middle ground between twice the pay and minimum wage in my opinion.
the GQ part of my question was about how two people doing the same minimum-wage job at a burger joint are getting wages that are so different.
The guy who’s been working for the past year (when the service was take-away only) is presumably still making the same $6 or $8 per hour. But the help wanted sign in the window now states proudly “now hiring–$15 per hour”. Have any of the big companies offered raises to their longer and more loyal employees?
If they haven’t, those employees are likely to move to any of the other places offering increased wages for new employees. Yes, there is a bit of a burden on the employee to find a new job, learn a new system, etc, but if enough do it (or threaten to do it) the company is going to raise the wages of the existing employees.
My guess is that giving raises to existing employees is needed to retain workers as well as attract new ones. Otherwise they’d just leave for another McJob where the wages are higher.
“Increases in minimum wage tends to result in junior (low-skilled) workers being overpaid relative to their senior (high-skilled) peers. Furthermore, senior employees may be underpaid relative to their junior peers. Thus, increases in minimum wage may result in the wage gap narrowing.”
Companies normally attempt to fight wage compression if it is significant over time (1-2 years) But may have to fix it more quickly if they begin seeing significant turnover from their more skilled workers.
Wages are subject to the economic rules of supply and demand, just like the prices of other goods. If there is a overwhelming increase in the supply of labor as the pandemic eases and people feel more comfortable going back to work, and unemployment benefits decrease, then you may see a drop in the wages offered.
I’m not fast food, but over the past year when the company offered higher initial starting wages they also raised the wages of those who had been here awhile, over and above the raises we’d normally get.
When the competition in our area raises wags ours also go up because otherwise people would quit in droves and my employer actually understands this.
Anecdotally, a few years ago, when the unemployment rate dropped below 5%, my employer (who compels all new hires to sign off on wage confidentiality, either pretending that we either won’t know that was struck down by SCOTUS in the 1930’s, or will know that management would find a creative way to retaliate anyway), had to raise the new hire attracting wage to $15/hour despite claiming only weeks earlier that doing so would ruin the company. All current employees making under $15 would be immediately brought up to that level, but not one cent higher. The only weird thing about this was that it was announced at a group meeting of all employees. The boss exposing himself needlessly to scorn, the employees voicing it in futility.
I’m sure this kind of thing happens occasionally somewhere, but it’s probably fairly rare because the employee making $8 isn’t an idiot and can read the sign and will either quit and go get a job somewhere else making $15 or (hopefully, if management aren’t complete idiots) just go to his boss and say “if you’re paying new people $15, I want $18. I’m a much better employee than whoever the new guy is going to be.”
The common case is going to be that the existing entry-level worker is going to get a raise and be paid as much as the new entry-level worker.
What I’ve seen at Amazon is the new rate reduces the gap between new hires and folks that have been there a while, then they gradually increase the gap again over the course of a year. A side effect of the high turnover rate is few people are around long enough to learn this, so you get a lot of initial screeching until those first few raises.
I think a lot of it is going to depend on the boss. Many, many years ago, when a $15/hr minimum wage was first starting to gain some traction, I did some back of the envelope math and told the owner at my store how much it would cost us per year to to bump everyone from our starting pay (at the time, IIRC $8/hr) up to $15. He replied, rightly so, that if I’m going to figure out that number, need to do it based on everyone getting a $7/hr raise because not only would everyone under $15/hr also have to get bumped up to at least $15, but it’s not fair that someone that started today would be getting paid the same as someone that started 5 years ago.
So, some places, if they’re going to voluntarily start new employees at $15, will someone compensate current employees so they don’t walk off the job.
However, I can imagine some employers will still start new employees at their normal starting wage, but offer them a sign on bonus. For example, if they offer new employees a $1000 sign on bonus (a little over a month, full time, at min wage), that might entice someone looking for minimum wage jobs to take a minimum wage job while at the same time not driving away their current crew.
In any case, it seems like, if they (employers? employees?) keep running with this, it could be the catalyst to a
$15/hr minimum wage.