$18 starting wage touted to employers as a big plus

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A new program encouraging Indianapolis employers to pay workers at least $18 an hour is based on the concept that spending more on payroll results in lower staff turnover, higher productivity and happier employees.

The Indianapolis Airport Authority, National Bank of Indianapolis and Mays Chemical Co. are three of 24 local employers participating in the Good Wages Initiative launched April 25 by not-for-profit EmployIndy.

Today’s historically low unemployment and a worker shortage didn’t exist when planning for the Good Wages Initiative began. Now, companies are raising their minimum wage—to $20 an hour in the case of Verizon, Fifth Third Bancorp and other big corporations—largely to entice people to enter the workforce.

Marie Mackintosh

Marie Mackintosh, chief strategy officer for EmployIndy, said the Good Wages Initiative hopes to certify many more Indiana employers that meet the criteria of paying at least $18 an hour and offering health insurance to full-time employees.

“We’re celebrating businesses that are choosing to pay their employees at a certain wage,” Mackintosh said. “They see the value in it from a business perspective and often from a community and human perspective, too.”

Indianapolis resident Rainy Holt, who’s worked for Boys and Girls Clubs of Indianapolis and athletic apparel retailer Finish Line, said she agrees with the Good Wages Initiative idea that higher-paid employees are more satisfied with their work situations.

“If you can pay your employees a little bit more and give them a few more incentives, you will have career-long employees,” she said.

This summer, Holt plans to move to California to be closer to relatives. She’s hoping to find work at a not-for-profit.

EmployIndy defines a living wage in Indianapolis as $18 an hour, based on a 2018 Brookings Institution report titled “Advancing Opportunity in Central Indiana.” In San Diego, where Holt grew up, the living wage for one adult with no children is $23.06 an hour, according to data from the MIT Living Wage Calculator.

“Looking for a job in California has been pretty interesting,” Holt said. “‘Oh, you want to pay me $19 an hour? In California?’”

The Good Wages Initiative is not formally associated with Develop Indy’s inclusive incentives program, which debuted in 2020 with a requirement that employers pay at least $18 an hour to be eligible for tax breaks.

But the goals of the two programs are aligned, said Susanna Taft, deputy director of Develop Indy.

Taft said most employers understand Develop Indy’s wage requirement that’s tied to tax abatements and training grants.

“The $18-an-hour wage floor weeds out some of the companies that in the past would have been a good fit,” Taft said. “But we are narrowing our scope, and the business community has been fairly responsive to it.”

Rainy Holt, who works at the Wheeler-Dowe Boys and Girls Clubs of Indianapolis, says, “If you can pay your employees a little bit more and give them a few more incentives, you will have career-long employees.” (IBJ photo/Eric Learned)

The cost of higher pay

When wages are on the rise, inflation can be an unwelcome side effect.

Federal Reserve Chairman Jerome Powell expressed concern about the “extremely, historically” tight job market during an International Monetary Fund panel discussion on April 21. Because more than 11 million jobs are open nationwide, it’s an employee’s market in which companies are paying more to fill roles.

Inflation persists, in part, because increased labor costs are passed to customers in the form of higher prices.

Cassandra Faurote

Cassandra Faurote, who advises companies on competitive compensation as founder of Indianapolis-based Total Reward Solutions, said she didn’t anticipate customer service jobs at Verizon and other companies reaching $20 an hour.

“Moves to $15 and $18 were because of living-wage conversations, proposed federal minimum wage legislation and scarcity of talent,” Faurote said. “When that happened, it drove manufacturing up to $20, $22 or even $25. If we have big companies moving to $20 [for retail jobs] it makes me wonder, ‘What’s the next move of manufacturing?’ And when will this stop?”

According to a 2021 analysis of data from the U.S. Bureau of Labor Statistics by New York-based AdvisorSmith Solutions, business services was the sector with the biggest average hourly wage increase from May 2019 to May 2021. Retail, medical services, automotive sales and construction rounded out the top five.

The average hourly wage for private-sector workers in the two-year period increased 9.9%, from $23.36 an hour in May 2019 to $25.67 an hour in May 2021.

The federal government raised the minimum wage to $7.25 an hour in 2009, and the current stretch of 13 years stands as the longest era without an increase since a minimum wage was mandated in 1938. What began as 25 cents an hour in the Great Depression grew steadily to $5.15 an hour in 1997, when a 10-year pause in hikes ensued until $5.85 an hour was adopted in 2007.

Faurote said an increase in the federal minimum wage is inevitable.

“We all know nobody’s paying $7.25 anymore,” she said. “I don’t know anybody that’s paying much under $12 or $13. And if they’re getting people at that, I don’t know how.”

Meanwhile, small businesses might find it difficult to attract and retain high-quality workers when large companies in similar industries set $20 an hour as a minimum wage, Faurote said.

“It’s likely to result in more stealing of employees by larger firms that can afford the higher pay rates,” she said.

A $20-an-hour wage also might not be enough to lure people who left the workforce during the pandemic, Faurote said.

“People are at home because they like the flexibility and the balance they have,” she said. “I’m not sure $20 an hour is going to drive any more bodies into the workforce.”

More than a paycheck

To be certified by EmployIndy as a Good Wages Initiative participant, an organization needs to voluntarily set a minimum wage of $18 an hour and offer health insurance to full-time employees.

According to the Pew Research Center, 43% of people who quit jobs in 2021 cited a lack of benefits, such as health insurance and paid time off, as influencing their decision.

EmployIndy executive Mackintosh said workers are more satisfied in their work environment when they’re compensated with a livable wage and benefits. She cited lower turnover—which carries a cost of $3,500 per entry-level worker, according to the Washington, D.C., area’s Society for Human Resource Management—and higher productivity as reasons for employers to participate in the Good Wages Initiative.

Apex Benefits, a consulting firm that advises companies on employee benefit programs, is one of the initial 24 employers certified as part of the Good Wages Initiative.

Stephanie DiBlasio

Stephanie DiBlasio, vice president of human resources and administration at Apex, said all 70 employees at the company were paid at least $18 an hour before the company became certified.

“We want current and future employees to have resources they need to be successful, inside and outside the workplace,” DiBlasio said.

Mackintosh described North Carolina initiative Just Economics as a national leader in recognizing employers who pay a livable wage. More than 400 organizations have been certified by Just Economics since 2008.

DiBlasio said that level of participation in the Good Wages Initiative could make a difference throughout Indiana.

“When companies can pay their employees better wages and retain workers, I think it helps the brand of the state and it helps the brand of the employer groups,” DiBlasio said.

The Good Wages Initiative is off to a promising start, Mackintosh said, by including 24 employers of various sizes in multiple industries.

More than $275,000 in wage increases for 2,900 employees accompanied the program’s launch. The $275,000 includes wage increases from certified employers who set $18 an hour as the minimum wage in the past six months plus wage increases pledged by two not-for-profits—hunger-relief organization Second Helpings and Newfields art museum and gardens—on track to become certified by March 31, 2024.

EmployIndy, founded in 1983 as the Indianapolis Private Industry Council, is the workforce development board for Marion County. Board appointments are the responsibility of the mayor. The Good Wages Initiative is supported by a Lilly Endowment grant of $180,000.

For information about participating in the Good Wages Initiative, employers can visit employindy.org.•

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14 thoughts on “$18 starting wage touted to employers as a big plus

  1. It is pretty ridiculous that a non-profit organization like this is trying to tell for profit businesses that is in their financial best interest to pay employees $18 an hour. Those businesses are all about what is in their financial best interest. If that means $18 or more per hour, they will do exactly that. They don’t need lectures from these people.

    1. Non-Profit and For-Profit entities regularly partner on workforce ideas and initiatives. Through the career readiness services non-profits provide, they’re often the source of employees for many businesses. Hopefully this reduces turnover and gives them an “ear to the street” on the needs of the communities that these employers serve.

      Of course employers can ultimately “do what they want,” but that’s not working out too well these days.

    2. The reason why it’s not working out so well is because employers are competing
      with government subsidy programs.

  2. Why is it not thrilling that someone would want $15, $18 or $21. “They’ are individuals, human beings with lives and livelihoods, with families, with housing, with needs. Is it Schadenfreude that individuals receive a pay hike so that they can at least keep up with inflaction. Bear in mind many and, correspondingly, their families do not have benefits. Why the negative sentiment for hard-working people.

  3. Well, this will certainly get inflation under control. What a complete clown show and zero understanding of how the real world works.

  4. How do you expect small businesses to pay $20/hour? Easy, we increase costs, lose sales due to increased product cost and then reduce staff to meet the reduced demand for product. Then we go out of business because we can’t compete with large corporations that are netting billions which include government subsidies.

    Simple economics. Increased wages increases the cost of goods and services. Look at restaurants and the grocery stores. They had to increase wages for employees to retain employees. With the increased cost of transportation and wages, everything cost more. Who won?

    Want small businesses to offer medical insurance? Offer me an affordable option. We dropped insurance and moved everyone to the marketplace. It was less expensive for the employee and they received better insurance. Once again, the large corporations get much lower rates while small business pays an inflated cost, making it unavailable.

    1. Couldn’t agree more. You sound like a small business owner yourself. The pressures on small business are only going up. Let’s not make them worse.

    2. Agree. This is a recipe for increasing inflation. Inflation leads to higher interest rates. No one wins.

  5. Businesses have other cost/overheads they pay other than payroll. Trumps tax cuts helped many businesses and it made it possible to pay employees their long over due raises with healthcare. Good employees you want to keep. If you can do the right things for your employees they will do right by you.
    But with higher taxes, healthcare, rent, insurance and utilities and more its hard on these small businesses.
    All this adds up

  6. Brace for the inflation death spiral. The higher wages will be passed on to consumers which negates the higher wages. Small businesses, service businesses, restaurants, and retail operations can’t compete with large companies offering higher wages because the profit margins are too small. This ends up in a lack of workers for entry-level jobs and the result is bad service, shortened hours or closing due to lack of workers. If a company finds entry-level workers at the higher wages, then it will raise its prices and the impact becomes higher wages but less purchasing power. This is not speculation; this is what is happening now. How does the government try to control inflation – raise interest rates to cool the economy. It is a monster that feeds upon itself and kills the economy.

    1. It is truly baffling that more people – especially those making policy – do not understand this basic premise.