Investing in Frontline Staff

Love it or hate it, we live in a society built by and for capitalism. This means that our economy is driven by and for profit. People who fuel the capitalist engine are the workers. Employees create, produce, and distribute goods and services. In return, the "bosses" or leaders of the companies that employ workers, reward them with money, or paychecks.

How do employers decide how much to pay our employees? Most leaders believe ourselves to be fair when it comes to how we treat and pay our employees. Our primary concern of employers is ensuring the company or organization's long-term success. Secondly, we also want to be well-rewarded for our hard work and sacrifice. And finally, we want to provide adequate, maybe even generous, compensation packages to our employees.

For years, our benchmark for pay rates to frontline staff has been minimum wage. If we were two to four dollars ahead of minimum hourly wage, we understood ourselves to be very generous. And that pay rate of two to four dollars above minimum wage used to be adequate to live simply in Portland.

Except. Except.

According to research cited by Metro done in 2016, "Between 2006 and 2015, rents in the Portland metropolitan area increased 63 percent. Renter incomes have not kept pace with those surging rents; in that same time period, renter incomes increased just 39 percent. The median renter income is also about half that of the median homeowner. A person would have to earn an hourly wage of $19.73 – approximately twice Oregon’s current minimum wage of $9.75 per hour – to afford fair market rent for a 2-bedroom apartment."

Minimum hourly wage in Portland is $11.25, as of this writing. It is slated to increase every year for the next several years, but minimum wage still will not come close to the $19.73 per hour currently needed to secure rental housing, according to Metro.

To dig more deeply into how and why we pay employees what we pay them, we must consider minimum wage. Because up to this point, minimum wage has been our unofficial guidepost for determining entry level pay. What IS minimum wage, really? Why was it invented? What is it's purpose?

According to Cornell Law School: "The national minimum wage was created by Congress under the Fair Labor Standards Act (FLSA) in 1938. Congress enacted this legislation under its Constitutional grant of authority to regulate interstate commerce. FLSA was a comprehensive federal scheme which provided for minimum wages, overtime pay, record keeping requirements, and child labor regulations. The purpose of the minimum wage was to stabilize the post-depression economy and protect the workers in the labor force. The minimum wage was designed to create a minimum standard of living to protect the health and well-being of employee."

In the past, hovering at or just above minimum wage was adequate to "protect the health and well-being" of employees. Not so anymore. Not even close.

If the purpose of the minimum wage was to "create a minimum standard of living to protect the health and well-being of employees", but it takes nearly $10 MORE per hour than the current minimum wage for workers to afford adequate shelter in Portland, employers face a difficult path moving forward in regards to pay rates.

Traditionally, wage analyses involve researching the industry average pay rates for each position. So, for entry level positions, leaders felt GOOD about their compensation packages because the wages were generally 2-4 dollars above Oregon's minimum wage.

But. What if a wage two to four dollars above minimum meant an employee had to make difficult decisions--renting substandard housing for a their family (like renting a garage or un-permitted basement). Does this pay rate "protect the health and well-being" of the employee? Would you want your child or parent living in an unpermitted basement or a garage?

Perhaps the employee finds an clean, updated, cheerful apartment or house to rent that costs a third of his or her monthly take home pay. Unfortunately, this house is in a suburb 40 miles outside of the Portland metro area, making for an average 1.5 hour commute each way. Not to mention unsustainable gas expenditures.

Neither of these scenarios protects the health and well-being of workers.

What then, is the path forward for the employer who wants to pay a wage that will actually "protect the health and well-being" of the employee by offering a twenty dollar hourly wage, but is AT LEAST $5 or more per hour away from that reality?

Begin by recognizing that, unless you have a million dollar salary you are willing to sacrifice like Dan Price of Gravity did when he created a $70,000 entry level wage, it is likely going to take you some deep thinking, creativity, and deep planning to create a sustainable hourly wage to "protect the health and well-being" of your employees.

Begin by looking at your financials with a new perspective. What might it look like if you centered wage increases, instead of uncontrolled growth? Instead of investing revenue in more production or expansion, what if you first invested it in wage increases for your front line workers?

Honestly assess the assumptions you have about the value of different kinds of work, and why you believe some people or jobs deserve significantly more? I would posit that the massive earning disparities we see between say a custodian and a manager have more to do with inherited negative implicit biases we have against physical and cleaning labor than it does about the TRUE value of the work being provided.

Seek counsel. Find others who have instituted $20 per hour entry level rates. If you can't find any, consider creating a work group of peers who are interested in finding new ways to approach how we compensate frontline employees.

Plan and experiment and collaborate. Over time, you will find a way forward to provide a TRULY living wage for ALL of your employees who live and work in the Portland metro area.