Minimum Wage - Why Do Companies Pay Low Wages?
What Do We Think?
Why do establishments pay an unsustainable salary to their employees? I have noticed this in my city and it's everywhere. Wouldn't the establishment lose employees and gain less profit if their employees are not happy with the pay? -- Asked by sayus2884
What Is the Right Salary to Pay?
How much to pay employees is a crucial question facing employers at any time in history, but always more important in times of economic downturn and recovery. Simply put, most workers desire the highest wages possible and most employers seem to wish to pay as low a rate of wages as possible. At least that it how it seems to many workers.
At one time, an American worker could enter the workforce after high school or college graduation, secure a job, and enjoy salary raises every year on the basis of number of years worked. Each year brought a salary increase, whether a work review was conducted or not. Many employees stayed with the same company until retirement and may have received a company pension along with Social Security Retirement benefit. Unfortunately, this is not longer the case.
In the 1990s, many companies switched to a Continuous Improvement scheme of work, with merit salary increases based on worker performance and production. Employees that had enjoyed yearly raises previously saw them decline to a 2% or 3% increase per year, followed by some years of no increase as all if their work performance did not warrant a raise. Increased number of years on the job did not guarantee raises and promotions.
Temporary Employment Agencies offered a new way to hire workers without handling taxes, payroll deductions, and benefits and many companies switched to using a large percentage of temporary employees. Beginning a job as a temp is a good way to try out a position and can lead to full-time employment, but not always and some temps make no more than federal minimum wage in any position.
In the 2010s, it seems difficult for the majority of job seekers to secure long-term full-time employment at high wages. In fact, the living wage or sustainable wage necessary for a workers to support himself or herself is far above federal minimum wage.
What Is a Living Wage?
From the Living Wage NYC website in 2013:
NYC operates on existing legislation signed by Mayor Bloomberg that defines a living wage in New York City as a minimum of $10 per hour with benefits, or $11.50 per hour without benefits.Although this does not sound like enough money to me in a city were rents are in the thousands of dollars monthly, these are the actual figures for a single person in the city.
Our current US Federal Minimum Wage as of July 24, 2009 is $7.25/hour. IN 2014, President Barack Obama raised the federal minimum for federal workers to $10.10/hour.
In certain cases, State Minimum Wages may be paid instead of the federal minimum during a training period and sometimes to youth workers. State minimums can be less than the federal minimum and to find minimum wages in each state, click on State Minimum Wages.
Living wages currently paid in different cities can be found here: Living Wage Calculator.
What Is Entry Level Employment?
Entry level jobs for job candidates with no work experience after high school and sometimes after college are not meant to be lifelong careers. They are a first step in an overarching career that will likely include more than one job and in the 2010s, probably several jobs.
The proverbial first job in a non-union company is in a lower pay range than jobs requiring more experience and additional skills sets, and sometimes additional college degrees. In an entry level job, a worker proves what he or she can do and from a set of accomplishments on the job, may move up a career ladder of increased responsibilities and salary as well as new job titles.
It usually would be foolish for a non-union company to pay entry level workers very high salaries or wages, because employment turnover is generally high at the entry level for reasons having nothing to do with money. In addition, entry level jobs do not require the advanced skill sets and education needed on many intermediate and higher level jobs.
- While do employees quit their jobs? See Why employees quit and Employee motivation.
- How about teachers? See Why teachers often quit.
- But what causes employees to be fired most often? See Why workers are fired.
For the high school graduates, an entry level job may be paying only Federal Minimum Wage.A student that has worked part-tine for a company during summers before graduation would likely start full-time with that company at a bit higher hourly wage. College grads that have worked internships may be able to receive higher wages in full-time occupations for the same company as well.
A worker will prove for all to see, which positive qualities she or he has on this job. Workers will also demonstrate a range of soft and hard job skills. Soft skills are those like following directions 100%, effective communication, time management, punctuality, problem-solving skills, mathematics and English proficiency (or bilingual skills), and several others. Hard skills are skills like being able to use Microsoft Office Suite applications, to perform data entry, to operate a multi-line telephone system, to use a FAX machine or copier, drive a forklift, and numerous others.
At the entry level, mid-career, and later career points, workers are best advised to keep advancing their skills and learning new ones. One drawback in hiring older workers, for instance, is the belief that none of them can use technologies like smartphones, laptops, desktop computers and peripherals, iPads, etc. Other skills can also help one secure and maintain employment. See Ongoing Professional Development.
Today's reality is that many high school and college graduates will not immediately receive the high salaries that they desire. One trend I noticed in Ohio in the mid-1990s was that salaries for job listings of positions requiring a Master's Degree dropped by $10,000 per year. After July, 2009, I noticed that entry level salaries in my region dropped a little again in order to help compensate for a higher Federal Minimum Wage. In fact, the higher minimum wage closed down several business in my city.
A Small Business Example
When the minimum wage increase of Summer 2009 went into effect, one fairly busy fast food restaurant cut employee hours to compensate. This is because that employee wages are the easiest cost to control in such an operation - by reducing the workforce and cutting hours, seeing to it that no one workers as much as 35 hours weekly, because this is the threshold point for Workers Compensation premiums to be assessed, ensuring that no full-time positions exist, and several other methods.
The lunchtime complement of staff needed in this restaurant included two in the grill/fryer area, two cashiers inside and one or two people in the drive thru area, along with one manager. This amounted to 6 or 7 workers. After the minimum wage increase, the staff was cut to one in back, one to handle both the inside counter and drive thru operations and one manager - three people. Eventually, the owner needed to raise food prices and add another front end person, but service was rather slow. I suspect that raises stopped for crew and assistant mangers as well.
As costs increase for any business, part of the increase is passed on to customers, but employees may also be cut. Workers that are saved are often those that show the best skills and results in their entry level positions. Either that, or companies go with temporary workers to reduce costs and/or reduce benefits for the most reliable full-time employees.
Reality is that entry level works must surpass expectations of employers on the job and continue to improve their results and skills. This likely the best way to gain additional wages and benefits within the same company. Maintain these work habits and keep your eye open to better opportunities elsewhere. See Work reviews and Transfers.
What Wages Are Usual and Customary?
- How to Benchmark Your Salary and Negotiate a Raise
It is important in preparing for an employment interview not only to research the company to which you are applying, but also to determine the specific salary range that is usual and customary in your...
- How to Negotiate Your Salary
The American Association of University Women found that men are over four times as likely to negotiate a salary for a new job as are women.
© 2012 Patty Inglish
More by this Author
This is a look at the highest paid jobs advertised in American from 2010 - 2012. Some are still at the top. Some others of the most highly paid job titles in America may not be advertised at all. They may be within the...
What are the highest paid jobs in America and how available are they on any given day? A workforce development professional takes a look and shares the results.
After writing resumes, cover letters, and job applications, candidates hope to interview well, impress the hiring officer, and secure the job. Here's what to avoid saying during the interview.