$15 wage becoming a norm as U.S. employers struggle to fill jobs
Economic research has found that when a large company raises pay, nearby employers feel compelled to follow suit.
Research & Development
The signs and banners are dotted along suburban commercial strips and hanging in shop windows and restaurants, evidence of a new desperation among America’s service-industry employers: “Now Hiring, $15 an hour.”
It is hardly the official federal minimum wage — at $7.25, that level hasn’t been raised since 2009 — but for many lower-skilled workers, $15 an hour has increasingly become a reality.
Businesses, particularly in the restaurant, retail and travel industries, have been offering a $15 wage to try to fill enough jobs to meet surging demand from consumers, millions of whom are now spending freely after a year in lockdown. And many of the unemployed, buoyed by stimulus checks and expanded jobless aid, feel able to hold out for higher pay.
The change since the pandemic has been swift. For years, and notably in the 2020 presidential race, labor advocates had trumpeted $15 an hour as a wage that would finally allow low-paid workers to afford basic necessities and narrow inequality. It struck many as a long-term goal.
Now, many staffing companies say $15 an hour is the level that many businesses must pay to fill their jobs.
“That number is not a coincidence,” said Aaron Sojourner, an economist at the University of Minnesota. “It’s the number that those activists and workers put on the table 10 years ago, and built a movement towards.”
Even so, millions of Americans are still earning less than $15 an hour. The nonpartisan Congressional Budget Office calculates that even by 2025, roughly 17 million workers will remain below that level.
Yet at ZipRecruiter, the number of job postings on the site that are advertising $15 an hour has more than doubled since 2019, said Julia Pollak, labor economist for the company. The proportion of jobs that offer 401(k) retirement accounts, flexible scheduling, signing bonuses and other benefits has risen, too.
The National Employment Law Project, an advocacy group for low-income workers, calculates that 26 million people, or about 16% of workers, have received higher pay because of all the state and local minimum wage increases since 2012, though often to less than $15 an hour.
The increases have disproportionately benefited Black and Hispanic workers, the report found. Historically, higher minimum wages have been found to reduce racial wage gaps.
The $7.25-an-hour federal minimum wage has now gone the longest stretch without an increase since it was first introduced in July 2009. Labor Department data showed that last year, only about 250,000 people — fewer than 0.5% of all workers — earned that wage.
Many employers are having to pay more to keep up with larger companies, including Amazon, Costco and Target, that have announced their own pay raises to $15 or more. More recently, Under Armour, Southwest Airlines and Best Buy have adopted $15 wage floors.
Economic research has found that when a large company raises pay, nearby employers feel compelled to follow suit. A study led by Ellora Derenoncourt, a Princeton University economist, found that companies in local markets that compete with Amazon, Target or Walmart generally responded by matching their wage hikes dollar-for-dollar. Derenoncourt’s research also found that when companies seek to match the pay offered by their large competitors, they often end up employing fewer people, though the impact is relatively small.
Some economists argue that a federal minimum wage increase to $15 an hour — more than double the current minimum — will cost jobs. The CBO, in its most recent assessment, said that it would mean 1.4 million fewer jobs by 2025. Yet the CBO also found that as many as 27 million people would receive pay increases.
One factor that’s helping fuel higher wages is a change in outlook among many lower-paid workers, millions of whom were laid off when COVID-19 first erupted in the spring of 2020. Some who worked at grocery stores, restaurants or hotels now don’t want to return to those jobs — at least at the same pay.
And three rounds of stimulus checks, plus a $300-a-week federal unemployment benefit, have made it easier for them to turn down jobs that don’t pay enough. Pollak, at ZipRecruiter, notes that with the extra unemployment benefit, jobless aid on average pays about $625 a week — equivalent to about $15 an hour.