From McDonald’s to Chipotle, numerous companies in the US have been raising wages for workers at the bottom of the pay scale amid a labor squeeze facing the US services industry.
But now the competitive pressure to raise wages may be hitting higher-wage jobs.
Bank of America announced this week that it plans to raise the wages of its lowest-paid employees to $25 an hour by 2025, putting it on track to surpass its big-bank peers in minimum wage standard.
The bank, which has 174,666 employees in the US, said the raises are expected to impact 50,000 employees who work in jobs such as those in consumer bank, technology, operations, and staff support functions as well as other areas. The bank also said it is requiring all its US vendors to pay their 43,000 employees “dedicated to the bank” at least $15 an hour, according to the press release.
Last March, Bank of America raised its minimum hourly wage to $20, a year ahead of plan and more than double the US federal minimum wage. In 2010, the bank’s minimum wage was $11.30 per hour.
“A core tenet of responsible growth is our commitment to being a great place to work which means investing in the people who serve our clients,” said Sheri Bronstein, chief human resources officer at Bank of America, in a statement. “That includes providing strong pay and competitive benefits to help them and their families, so that we continue to attract and retain the best talent.”
Other banks have been raising their minimum wages as well. In 2018, JPMorgan announced it would increase pay from $15 to $18 per hour for 22,000 employees, including tellers and customer service representatives. A year later, Citigroup raised its minimum wage to $15 an hour. Last March, Wells Fargo announced it will raise wages between $15 to $20 an hour by the end of the year, depending on location.
Research shows that pay increases for lower-wage roles can cause a trickle-up effect. Employers paying just above minimum wage may feel pressure to increase wages to distance themselves from the competition and attract needed talent, says Daniel Zhao, a senior economist at Glassdoor. “This is about labor market fundamentals—if employers can’t find workers, they need to increase compensation to stay competitive,” he says.
That said, it’s difficult to say whether boosting pay for higher-income roles will be more widespread just yet. Many higher-wage industries avoided the severe layoffs of lower-wage sectors, and there’s been less recovery in demand for these workers, says Zhao. Finance and information are two industries with fewer job openings last March than before the Covid-19 crisis began. Bank of America may be feeling pressure to raise wages for its lowest paid workers, but there’s little evidence that it’s widespread throughout banking and related fields.
But, every time an employer raises pay, it helps pull up the wages for everyone else. In the long quest by labor advocates to raise the minimum wages of American workers, efforts have so far failed in Congress. But in narrower cases, whether that’s through local minimum wages or via big businesses, they’re seeing more success.