Raising the minimum wage can do more than put more money in the back pocket of workers. It can, in some ways, change their lives.
Amazon announced Tuesday it will raise its minimum wage to $15 an hour from Nov. 1, giving hundreds of thousands of U.S. workers a pay raise. The federal minimum wage has been at $7.25 since July 2009 and, according to The Wall Street Journal, starting pay for U.S. workers ranged from $10 per hour to $14 per hour.
“We listened to our critics, thought hard about what we wanted to do, and decided we want to lead,” said Chief Executive Jeff Bezos. “We’re excited about this change and encourage our competitors and other large employers to join us.”
Amazon’s move is an indication that the public wants an increase in minimum wages, said Jonathan Schleifer, executive director at The Fairness Project, a nonprofit that advocates to raise the minimum wage in the U.S. through ballot initiatives. This will have an “incredibly profound” effect on the lives of 350,000 people who work at Amazon AMZN, -1.65% he said.
U.S. Amazon employees were paid approximately $34,000 per annum last year, although the median annual salary for an Amazon employee is closer to $28,446 per annum including global wages, according to Securities and Exchange Commission filings. To put that into context: United Parcel Service Inc. UPS, -0.40% has reported median compensation of $53,433.
“Individual companies doing the right thing is great, but it is no substitute for policy affecting low-wage workers,” Schleifer added. “The success of ballot initiatives in recent years shows workers and businesses all know we need to increase minimum wage. Politicians seem to be the last people in America who haven’t gotten that message.”
Kathy Ortega, a fast-food worker in Arizona said after the minimum wage was raised by a 2016 ballot initiative she can spend more time with her family and no longer has to tell her children to wear multiple layers of clothing to bed at night because she can now pay her heating bills. “An extra $2 an hour makes a world of difference,” she said in a video for The Fairness Project. “It gives me a stepping stone.”
Having more money for utilities and rent seems like an obvious benefit, but other impacts are more difficult to measure, Schleifer said. Nearly $6 billion in wage increases have gone to workers in states like Arizona and Colorado after ballot initiatives raising wages passed there in 2016.
Here are some of the less-seen effects such raises can have.
Keeping former prisoners from reoffending
Higher wages keep ex-convicts from returning to prison, a working paper from researchers at Rutgers University in New Jersey and Clemson University in South Carolina found. A minimum wage increase of 50 cents reduced the probability that men and women would return to prison within a year by 2.8%, the study showed.
The increased minimum wage reduced recidivism rates for people convicted of property and drug crimes, the crimes most commonly associated with people returning to prison but did not have an effect of violent crimes. The availability of state-based Earned Income Tax Credits also have major effects on recently-released prisoners: when it was increased by 5%, the likelihood of recidivism was reduced by similar rates.
Improving mental health
Raising the minimum wage can have long-term public-health implications, including improving mental health. Raising the minimum wage was nearly as helpful as taking an antidepressant for improving the mental health of workers, a U.K. study published in Health Economics in 1999 found. “In effect, raising the minimum wage may be like putting antidepressants in the water pipes serving millions of low-wage workers,” one analysis of the study read.
Reducing employee turnover rate
Minimum wage positions have some of the highest turnover rates of any job and this can be costly for employers. When an employee leaves after a short time period, the employer has to pay to train a new employee, who is initially likely to be less skilled or efficient than someone who has spent more time on the job, said Ben Zipperer, an economist at think tank the Economic Policy Institute.
“This is a huge deal for low-wage industries,” he said. “As the labor market gets tighter, it’s going to be harder for these companies to fill low-pay jobs.”
A number of fast-food restaurants, including Sonic SONC, -0.07% Chic-fil-A, and MCD, -0.89% have recently raised employee minimum wages, citing cost-cutting in the long run and improved customer service. “We’ve got the 90-day turnover down to a really good level,” McDonald’s chief executive officer Steve Easterbrook said on a 2015 earnings call after an increase in wages. “That’s where hidden costs can sometimes come in if the turnover gets out of hand.”
Increasing safety on the job
Frequent turnover can also lead to safety issues, Zipperer noted. If entry-level employees have to be repeatedly trained on the job, they are more likely to make mistakes. That can be particularly troubling if they work in areas where safety is a concern, including the aviation industry, nursing, food safety, and transportation, a study from the UC Berkeley Labor Center said.
“Evidence indicates that higher wages leads to reduced turnover and better performance by employees, which in turn leads to a safer and more secure environment for both airport employees and the public,” the study said.
In an effort to increase safety, New York’s Port Authority Board of Commissioners unanimously decided in September to increase the minimum wage by 2023 at JFK International, LaGuardia and Newark Liberty International airports. Workers at these airports will see increases of $2 to $4 per hour and are now on a path to earning at least $19 an hour, the highest minimum wage target set by any public agency in the country.
“The safe and efficient operation of the Port Authority’s airports hinges on a stable, motivated, engaged workforce which can enhance overall security efforts and assist customers in an experienced, knowledgeable and positive fashion,” Port Authority executive director Rick Cotton said.
Reducing child neglect cases
Increasing the federal minimum wage by $1 would result in 9.6% or 9,700 fewer cases of child neglect and additional decreases in cases of physical abuse, an August 2017 study published by Indiana University concluded. Policies that increase the income of the working poor have substantial positive effects on children’s welfare, especially young children, said Lindsey Rose Bullinger, a researcher on the study and assistant professor at Indiana University’s School of Public Affairs.
“Money matters,” Bullinger said. “When care givers have more disposable income, they’re better able to provide a child’s basic needs such as clothing, food, medical care and a safe home.”
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