Chipotle gave huge payouts to its CEO and shareholders, then blamed workers for price increases – here’s what’s really going on

Chipotle workers
  • Paul Constant is a writer at Civic Ventures and cohost of the “Pitchfork Economics” podcast with Nick Hanauer and David Goldstein.
  • In the latest episode, they spoke about Chipotle’s announcement to increase menu prices by about 4% to cover increased employee wages.
  • Constant points out, however, the price increase could be to cover the $24 million raise recently given to CEO Brian Niccol.
  • See more stories on Insider’s business page.

Last week, the “New York Times” ran a story about a small menu price increase at a fast-casual food chain. Written by Julie Creswell, the piece began, “Executives at Chipotle said on Tuesday that the fast-food chain had raised menu prices by about 4% to cover the cost of the increased employee wages.”

Headlined “Chipotle will increase its menu prices as labor costs rise,” this story is confusing for a few reasons.

Price increases and wages

Firstly, the New York Times is not traditionally in the business of reporting on price increases in restaurants. And a 4% increase doesn’t seem newsworthy at all – Chipotle CEO Brian Niccol admits in the last paragraph of the piece that the increase amounts to “quarters and dimes that we’re layering in” to existing prices.

So the only reason this story could possibly be considered worthy of the Times’s world-famous “All the News That’s Fit to Print” slogan is Chipotle’s claim that the price increases were directly caused by increased worker pay. The chain recently raised its starting wages to an average of $15 per hour – but only in a fraction of its restaurants. Creswell writes that the “pay increases apply only to [Chipotle’s] 650 company-owned restaurants; the vast majority of its nearly 14,000 restaurants in the United States are independently owned.”

So with all that information in mind, the hook of this New York Times story seems to be that Chipotle’s executives are blaming a tiny menu price-bump on a starting-wage increase that’s been enacted in roughly one out of 20 of its restaurants.

What’s disappointing is that Creswell seems to be repeating Niccol’s claims without doing any investigation into Chipotle’s finances. Chipotle never supports its claims that the price increase is due to wage increases, and Creswell never mentioned that Chipotle paid Niccol $38 million last year – an all-time high.

Joanna Fantozzi at Nation’s Restaurant News reports that Niccol’s 2020 salary was “set to be just $14.8 million but financial targets were waived in light of the company’s stellar performance during the pandemic.” So Chipotle’s executives gave its CEO a $24 million dollar raise, which means that Niccol earned “2,898 times more than the median Chipotle worker’s salary of $13,127.”

Why didn’t Chipotle’s board mention Niccol’s $24 million raise as a possible reason for its menu price increases? Creswell doesn’t say. She also doesn’t note that as of the first quarter of 2021, Chipotle was sitting on $1.2 billion in cash and equivalents.

The Times story also doesn’t mention that the company is now in the middle of a huge stock buyback campaign. Sakshi Agarwalla writes at Seeking Alpha that “In an effort to enhance shareholders’ value, [Chipotle] restarted its stock repurchase plans and have announced additional $100 million for stock buyback, bringing to a total $153.8 million repurchase plan. At the end of the first quarter, [Chipotle] repurchased 61.2 million shares worth $87.2 million.”

Stock buybacks and wealth transfer

You can learn more about stock buybacks in this week’s episode of “Pitchfork Economics” with special guest Senator Cory Booker, but the shorthand is this: Stock buybacks, which were illegal before 1982, have proven to be one of the most efficient mechanisms of wealth transferral from workers to the wealthy over the last 40 years. The richest 10%of American households own 84% of the stock in this country, and the top 1% holds about 38%. So Chipotle takes profits that could go to keeping menu prices low and employee wages high and instead hands them off to wealthy shareholders, no strings attached.

Despite the fact that Chipotle has dedicated nearly $200 million to executive and shareholder payouts in the last few months, the New York Times credulously reprinted the company’s claims that an average $15/hour starting wage in 650 restaurants is the reason why the company is increasing menu prices by 4%. To be clear, I’m only singling the Times out as an example here because they’re the gold standard of journalism – the truth is that a number of outlets repeated Chipotle’s claims without investigating the numbers.

The complete failure of many legitimate news sources to interrogate these claims should be a learning moment for business journalists. If you’re simply repeating the information given to you in a press release from a corporation’s PR department, you’re not in the news business – you’re volunteering for the company’s marketing campaign.

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Expiring unemployment benefits will boost job growth by over 150,000 in July and over 400,000 in September, Goldman says

A "now hiring" sign hangs in front of a Popeyes location
Businesses across the leisure and hospitality industry are trying to staff up as the economy reopens, but they’re having a hard time getting people to come work for them.

  • 25 GOP-led states are ending $300 weekly unemployment benefits early to get people back to work.
  • Goldman Sachs said it will boost hiring by over 150,000 in July and 400,000 in September.
  • BofA found the benefits are higher than average leisure and hospitality wages in those states.
  • See more stories on Insider’s business page.

Following an April jobs report that fell significantly short of expectations, 25 GOP-led states announced they would be ending unemployment benefits early to incentivize people to get back to work. Both Bank of America and Goldman Sachs partially agreed that doing so will ease the labor shortage, with Goldman projecting a resultant spur to hiring in the coming months.

Goldman’s Joseph Briggs wrote in a Friday note that the 25 states opting out of President Joe Biden’s $300 weekly unemployment benefits will boost job growth by 150,000 in July and over 400,000 in September.

Briggs cautioned that these job gains estimates are “highly uncertain” and “the peak monthly growth impact could exceed 800k if workers are as sensitive to generous benefits as prior academic studies estimate, or be as low as 100k if benefit reductions only modestly increase workers’ willingness to return to work.” 

Briggs noted that the states ending the benefits early account for only 29% of total outstanding job losses since the start of the pandemic, partly because those states imposed fewer economic restrictions during the past year, and the majority of outstanding job losses are in the states that haven’t changed reemployment incentives.

Goldman Sachs chart showing how expiring unemployment benefits could boost hiring in the coming months.
Goldman Sachs: UI benefit expirations could significantly boost hiring in the coming months, although the size of the impact is highly uncertain.

Given that the majority of job losses are in states that are not ending the benefits early, labor supply headwinds will stay in place until September, Briggs said, and since the earliest states aren’t ending benefits until after the June employment report reference period, the effect on official employment measures won’t be fully visible until the July report.

Goldman continues to expect the unemployment rate to fall to 4% by the end of the year.

Bank of America Research said states are ending unemployment benefits early in large part because the benefits are higher than leisure and hospitality wages.

BofA economist Stephen Juneau wrote in a Friday note that the benefits exceed the average weekly earnings for leisure and hospitality workers in all 25 of the states that are moving to cancel them, while as of April 2021, employment in that sector is down about 1 million from February 2020.

“Therefore, opting out of the $300/week added benefit could be enough to nudge unemployed persons back into the work force, alleviating some of the labor supply shortages, and helping to spur job growth over the coming months,” Juneau wrote.

Three charts from Bank of America: The first chart shows weekly UI payments compared to average leisure wages, the second chart shows average hourly leisure earnings, and the third chart shows a personal savings outlook.
Average weekly UI payments vs. average weekly leisure and hospitality earnings, via BofA Research.

Juneau also cited the growth in leisure and hospitality wages over the past few months and said that if those wages continue to rise, the incentive to stay on unemployment insurance would be reduced.

Insider previously reported that companies like Target, Starbucks, and McDonald’s have raised their minimum wages to help remedy the labor shortage and attract more workers to get back into the labor force, given that holding out for higher wages, along with pandemic health concerns, have been discouraging the return to work.

But while Juneau said ending the benefits early will help with hiring, Insider reported last week that the cuts have not gone into effect yet, and payrolls still sharply increased in May, suggesting the benefits are not as big a disincentive as Republicans argue.

Democrats have also disagreed that the benefits are a disincentive, even calling for continued unemployment benefits tied to economic activity beyond the pandemic. Vermont Sen. Bernie Sanders wrote on Twitter in April that we “don’t need to end $300 a week in emergency unemployment benefits that workers desperately need.”

But continued unemployment benefits are unlikely. Biden said in a speech last week that while the benefits have been effective thus far, “it makes sense” for them to expire in September.

“A temporary boost in unemployment benefits that we enacted helped people who lost their jobs through no fault of their own, and who still may be in the process of getting vaccinated,” the president said in brief remarks following the May jobs report. “But it’s going to expire in 90 days – it makes sense it expires in 90 days.”

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Levi’s CEO says Amazon’s ‘$20 an hour’ wages are forcing the jeans maker to rethink worker pay amid the tight labor market

Chip Bergh, President and CEO of Levi Strauss, participates in a panel discussion at the 2015 Fortune Global Forum in San Francisco, California November 3, 2015. REUTERS/Elijah Nouvelage
Chip Bergh, President and CEO of Levi Strauss.

  • Levi’s has a hard time finding workers when there’s an Amazon distribution center nearby.
  • CEO Chip Bergh told the AP that he’s “considering right now what we have to do with our wage rates.”
  • Amazon hired more than 500,000 people in 2020, and the majority of workers earn over $16 per hour.
  • See more stories on Insider’s business page.

Levi Strauss and Co. has been selling jeans for 168 years, but 2021 is proving particularly difficult for the company to find workers, thanks in large part to Amazon.

“There’s no question that labor is challenging right now,” said CEO Chip Berg in an interview with the Associated Press.

Even as Berg calls the Levi’s “aspirational company for a lot of people to work for,” he says the company is starting to face some headwinds when it comes to staffing its retail stores and distribution centers in the current labor market.

“We are considering right now what we have to do with our wage rates going forward,” he said. “Candidly, we have folks that are right around the corner from Amazon distribution centers and Amazon is not afraid to pay $20 an hour.”

Berg’s comments are the latest evidence that Amazon is establishing a new minimum wage in America.

Indeed, the Amazon effect on local labor markets has been measurable.

“One study showed that our pay raise resulted in a 4.7% increase in the average hourly wage among other employers in the same labor market,” CEO Jeff Bezos said in Amazon’s latest shareholders meeting, citing research from economists at UC Berkeley and Brandeis.

The actual federal minimum wage was last raised in 2009 and is still $7.25 per hour, while Amazon has had a $15 starting wage since 2018.

“When we set a $15 minimum wage we did so because we wanted to lead on wages and not just run with the pack,” Bezos said.

The decision certainly helped propel Amazon’s expansion, but the disruption from the pandemic kicked off an even more dramatic reshuffling of the labor market across industries from retail to food service.

Like Levi’s, apparel-maker Under Armour specifically cited Amazon as a catalyst for the company’s recent wage hike.

“The reality is from a competitive standpoint of hiring, we know that we compete not just within our industry for talent but also outside of the industry to places like Amazon,” Stephanie Pugliese, the president of the Americas region at Under Armour, told Bloomberg.

In 2020 alone, Amazon reported hiring more than a half million workers, the majority of whom earn more than $16 per hour, in addition to an extremely competitive benefits package.

And in May, the company announced it is hiring another 75,000 workers in fulfillment and logistics network across the US and Canada with a starting wage of $17 per hour and hiring bonus of up to $1,000.

As Miami chef Phil Bryant told The Washington Post, “If I can make $17 per hour at an Amazon warehouse but only $14 per hour as a line cook, a notoriously hot, stressful, intense job, why would I do that?”

Read the original article on Business Insider

Rising wages are a ‘feature,’ not a bug, of the post-pandemic economy, President Biden says

Biden economy speech Cleveland Ohio
U.S. President Joe Biden delivers remarks on the economy during a visit to Cuyahoga Community College in Cleveland, Ohio, U.S., May 27, 2021.

  • Wage hikes at large-scale employers are an encouraging sign for the economic recovery, Pres. Biden said on Thursday.
  • The increases are a sign workers are gaining bargaining power for the first time in decades, he added.
  • Biden noted there’s “more than ample room” to raise wages without driving inflation higher.
  • See more stories on Insider’s business page.

The wage hikes seen in recent weeks offer an encouraging hint of what the new US economy can look like, President Joe Biden said Thursday.

Large-scale employers have been raising their minimum wages as they look to attract workers through reopening. Companies such as McDonald’s, Amazon, and Under Armour have rolled out higher starting wages through May. The hikes appear to be in response to unexpected tightness in the labor market.

While millions of Americans remain unemployed, those on the sidelines are holding out for higher compensation before rejoining the workforce.

Republicans have blamed bolstered unemployment benefits for the labor shortage, saying they disincentivize jobless Americans from seeking work. Biden, however, sees a more encouraging trend behind the wage hikes. The raises “aren’t a bug” but “a feature” of the post-pandemic economy and show that workers are finally regaining bargaining power, the president said.

“Instead of workers competing for each other for jobs that are scarce, we want employers to compete with each other to attract workers,” Biden told a crowd in Cleveland, Ohio.

He continued: “That kind of competition in the market doesn’t just give workers more ability to earn a higher wage, it gives them the power and demand to be treated with dignity and respect in the workplace.”

Critics of the recent wage hikes have also deemed them a symptom of rampant inflation that could spark a new economic crisis. Stronger inflation typically does translate to higher pay, as workers demand greater compensation to counter rising prices.

Biden instead linked the raises to a reversal in long-stagnant wage growth. Worker salaries and wages have made up a smaller and smaller share of US economic output since the 1960s. At the same time, compensation for CEOs and shareholders has boomed.

Boosting compensation for workers at the bottom of the pay scale is long overdue and poses little risk to the recovery, the president said Thursday.

“We have more than ample room to raise workers’ pay without raising customer prices,” Biden added.

While several companies have announced their own wage hikes, the latest efforts to introduce a higher minimum wage at the federal level have so far failed. The Senate voted down an amendment to raise the federal wage floor in March, and lawmakers haven’t made substantial progress toward such a hike since. And with eight Democrats defecting from the party and voting against the proposal, such legislation faces an uphill climb at least until the 2022 midterms.

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Restaurant and retail owners have 2 options nowadays: stop treating their workers like garbage or stop having workers at all

Business owner with a sad emoji face for a head holding bags of money with a protesting supporting higher wages with an annoyed face emoji as a head on a green background.
“I made more money on unemployment than I did working at the bar because they only gave me lunch shifts and I was part time,” said Mark, a former bartender in New York.

  • Restaurant and retail staff have been underpaid and overworked for decades.
  • Government aid during the economic crisis has allowed workers in the industry to reassess going back to work.
  • Employer claims that people won’t come back out of laziness are increasingly laughable.
  • This is an opinion column. The thoughts expressed are those of the author.
  • Eoin Higgins is a journalist based in New England and Contributing Opinion Writer.
  • This is an opinion column. The thoughts expressed are those of the author.
  • See more stories on Insider’s business page.

Sean Earl is a 10-year veteran of the restaurant business who was out of a job when the coronavirus pandemic hit. He still doesn’t know if he’ll return to the industry – especially without the promise of worker protections and better conditions on the job.

“If I returned it would have to be somewhere with union representation or at least a co-op situation,” Earl said. “Some way of having better control over what happens in the workplace.”

I talked to Earl this week for a story highlighting the voices of service industry workers at my newsletter The Flashpoint. The piece pushed back against a number of recent articles featuring business owners blaming unemployment insurance and government aid for contributing to laziness on the part of staff to not return to their jobs.

Over and over again, the people I talked to told me that while the aid provided security and support at a crucial time, they weren’t passing up work just to sit around. Rather, they were looking at other options because of the service industry’s terrible working conditions and low pay.

“The pandemic kind of stripped away the illusion of fairness and equity in the industry,” said Sarah, a restaurant professional who is on her way out of the business and off to grad school.

Reassessing things

One of the first casualties of the pandemic last year was the service industry. With businesses forced to shut down due to health restrictions and few people willing to risk going out anyway, restaurants shuttered around the country and prepared to wait out the disease.

Stimulus and aid packages passed by the federal government under both former President Donald Trump and President Joe Biden delivered relief. In addition to aid for businesses, programs like the $600 weekly bonus COVID unemployment payments that came with the first stimulus were a huge help to workers forced out of their jobs by the shutdown.

It is true that for some service industry workers, what they made staying home was more than what they made at work. Indeed, that was part of the point of the pandemic aid; to keep people whole after losing their jobs to public health orders that were no fault of their own.

And now, as things begin to open back up, people are pushing for these benefits to be cut off – despite lingering health concerns and ongoing aid.

“There’s no reason for workers to come back to their old jobs earning the same poverty wages, especially since more than 100 million Americans remain unvaccinated, and there’s still a stable safety net in place until autumn,” writer and former restaurant worker Carl Gibson wrote for Insider on May 2. “It’s not that unemployed restaurant workers don’t want jobs – we just have more options now.”

The time off prompted a reevaluation of not only their role in the business but industry practices in general. The service industry is a notoriously harsh and unforgiving business that makes intense demands on staff for low pay and anarchic schedules.

“I made more money on unemployment than I did working at the bar because they only gave me lunch shifts and I was part time,” said Mark, a former bartender in New York. “They also over-staffed so there were fewer tips per person, I went from making $250-ish a week to a solid $600 a week from unemployment.”

But now that many of these workers have been able to step back from an industry where low pay and abusive practices were the norm these businesses face a challenge: improve working conditions or shut down.

Tall Tales

As the country has begun to reopen, some politicians and pundits are claiming that staff are uninterested in returning to work because they’re lazy. Signs on windows of shuttered businesses or temporarily closed outlets claim that people aren’t willing to come back because they’d rather sit back and do nothing.

The media has helped spread this narrative, too. Articles from NPR, Fox News, and others have portrayed business owners as hard on their luck victims of circumstance who just can’t catch a break. Workers – if they’re included in the stories at all – are presented as shiftless, careless louts who aren’t thinking of what’s best for the company’s bottom line.

The reality is different, Lucas, a former Uber Eats driver, told me.

“We’re sick of being called lazy bums because we’re sick of thankless, s—-paying jobs,” Lucas said.

Rather, Lucas and other workers I spoke to said they are finally asserting themselves after years of mistreatment and becoming more selective and holding out for incentives-or even considering leaving altogether if things don’t change. That’s what happened two weeks ago at a Dollar General store in Eliot, Maine. Three out of four of the store’s employees walked off the job and quit over the weekend due to their pay and the company’s disrespectful mistreatment. Two of them, Brendt Erikson and Hannah Barr, put signs up on the store’s door explaining why they quit, putting the blame squarely on Dollar General for the company’s disrespectful treatment of employees and low wages.

Erikson told me he wanted people to know that he and his comrades didn’t leave their jobs because they were lazy.

“You’ve probably seen on Twitter those signs on businesses that are closing due to understaffing because people don’t want to work,” Erikson said. “I have been thinking about those signs a lot lately. And I wanted to make a retort to those signs that actually told the truth of why people weren’t going to work there anymore.”

Best practices?

Despite claims that businesses are scrambling to attract workers, in many cases owners simply aren’t offering incentives for employees to return to customer-facing positions – as Ary Reich, a floor member at the National Museum of Mathematica in New York, told me.

“Less than a month after lockdown, after keeping us on to help them fix their broken website, they laid all eight of us off,” Reich said. “Since then we’ve received emails letting us know we all can have our jobs back if we want them, but they are not interested in raising our pay.”

That shows a misunderstanding of the power dynamic at play now – workers are able to decline offers to come back to their jobs without losing income for the first time in decades. Bosses who expected new workers to crawl back begging for jobs no longer indisputably have the upper hand in negotiations. So their attempts to strong arm staff back into the poor conditions and insufficient pay are falling flat.

Given this dynamic some restaurant owners are deciding to try and bring in newer, less experienced staff rather than rehire seasoned professionals – leading to more instability.

“A lot of folks I know in the fine dining world are struggling because many places closed during the pandemic and some are re-opening but instead of hiring back their old staff they are trying to hire new staff for less money or less front-of-house staff,” said Earl. “Which means more front-of-house will do more work for the same or less money.”

How well that’s working for the owners varies, but it seems clear from their complaints that staffing remains a concern.

Lessons learned…. maybe

But not everyone in the industry is willfully ignoring the new reality. Joseph Tiedmann, who works as an executive chef in New Orleans, told Eater’s Gaby del Valle this month that restaurants need to figure out how to change the business to pay people better and make the business a more desirable destination for workers.

“We need to make this an attractive business to work in,” said Tiedmann. “At the end of the day, it’s all about being able to do more for your employees.”

It still remains to be seen whether or not the owners of restaurants and other service industry businesses will end what’s effectively a capital strike and invest in their workforce.

But there is one simple trick to getting people to want to come and work for you, as Pittsburgh’s Klavon’s Ice Cream Parlor discovered: offer people more money. The outlet more than doubled its starting pay from $7.25 an hour to $15 an hour and saw immediate results.

“It was instant, overnight,” the parlor’s general manager Maya Johnson told the Pittsburgh Business Times. “We got thousands of applications that poured in.”

Restaurant owners have a choice to make. They can provide incentives for people to return to work in what’s still a dangerous, fraught time for staff to be in forward facing roles – or they can continue to try to shame workers into returning to their jobs. The former works, the latter doesn’t. Owners should take heed of that lesson and pay their staff more, not only because it’s the right thing to do but because it’s the path forward for the industry’s survival.

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A sociologist explains how Joe Biden’s jobs plan will give child and home care workers the support they need

personal care aid
Over 85% of the 3.6 million people employed as home care workers are women.

  • Joe Biden wants to use his job and infrastructure plan to strengthen childcare and long-term care.
  • The care economy in need of support is disproportionately made of women and people of color.
  • These workers deserve to be valued, as they are essential to families, communities, and the economy.
  • See more stories on Insider’s business page.

A fiery debate has erupted over the definition of “infrastructure.”

Does it mean roads, broadband, and other physical structures included in the traditional meaning of infrastructure? Or should it have a broader definition that includes other important parts of the economy, such as workers who care for children, older adults, and people with disabilities?

President Joe Biden prefers the latter meaning and wants to use nearly one-fifth of the $2.25 trillion of spending in his jobs and infrastructure plan to expand and strengthen child care and home-based long-term care.

As a sociologist who has studied the paid-care workforce for over 15 years, I know how critical it is to the US economy – as the COVID-19 pandemic has made quite plain. The problem is, these workers have long been undervalued, primarily because of who they are.

Read more: The pandemic has prompted a childcare crisis – here are creative ways employers can help working parents on staff juggle it all

Who’s in the caring economy

A broad definition of the care economy includes health care, child care, education, and care for older adults and people with disabilities.

The number of people doing this type of work has exploded over the past 70 years, driven by an aging population, expanding medical technologies, and the large-scale entrance of women into the paid labor force. My calculations show that in 2018 more than 23 million workers – almost 15% of the US labor force – worked in the care sector, up from just under 3 million in 1950.

While the overall care economy is dominated by women, the two areas that are the focus of Biden’s plan – child care and home care – are even more so. I found that over 85% of the 3.6 million people employed as home health workers, personal care aides, and nursing assistants are women. These people meet the health care needs of older adults and disabled individuals and also provide assistance with daily living activities like bathing, dressing, and eating.

The share of the 1.3 million child care workers who are women is even higher, at about 93%.

Both job categories are also disproportionately made up of people of color and immigrants. For example, 30% of home health and personal care aides are Black and 26% are immigrants. Among child care workers, 24% are Hispanic and 22% are immigrants.

Why care work is ‘essential’

The pandemic has shown just how essential this workforce is to the US economy, as well as to families and communities.

Care workers, broadly speaking, made up fully half of all those deemed “essential critical infrastructure workers” at the beginning of the pandemic by the Department of Homeland Security. This designation was used to identify workers who “protect their communities, while ensuring continuity of functions critical to public health and safety, as well as economic and national security.”

In effect, it meant they could continue to go to work despite state lockdowns, risking their own health and that of their families.

But Americans also saw their importance in their absence. The pandemic forced many child care centers across the country to shut down, while many home-based nannies and personal care aides were let go because of COVID-19 concerns and precautions.

In the absence of these care workers, the media was full of stories about the crushing burdens faced by working parents – mostly mothers – trying to simultaneously manage caring for children at home. And older adults isolated at home suffered from lack of access to formal home care support as families struggled to meet their needs.

Perhaps the most striking indication that not just families but economic activity depends on paid care is the millions of women, particularly mothers of young children, who have dropped out the labor force because they had to care for a child or someone else.

This is why government officials and policymakers recognized reopening schools to in-person learning and supporting child care centers as critical to enabling the opening of the rest of the economy.

In other words, just as businesses and communities cannot function without bridges and broadband, the same can be said about having a solid paid care infrastructure in place.

The devaluation of care work

But this workforce has long been devalued, perhaps most clearly demonstrated by their wages.

My own research shows that the historical development of the paid-care sector has relied on a gendered narrative of care as a “natural” characteristic of women that has created and justified low wages.

Care workers overall earn 18% less than other essential workers, such as police officers, bus drivers, and sanitation workers, after controlling for the usual factors that depress wages, such as gender, years of education, and depth of work experience.

And the workers targeted by Biden’s plan are at the low end of this devalued sector, with some of the lowest wages in the US labor market. In 2020, the average annual salary for home health care and personal care aides, for example, was $28,060, and for child care workers it was $26,790. These are near poverty wages, barely exceeding the federal poverty threshold of $26,200 for a household of four.

Care as a public good

There’s another reason to think about paid care work as a part of infrastructure: Both are what economists call a public good.

Every business and worker gains when there are good roads and public transportation to ferry people around. But the benefits are so dispersed that the private market usually can’t cover the costs to maintain them. This has negative impacts on the economy as a whole if not offset by public investment.

Similarly, when children receive high-quality child care, they benefit – but so do their families, their parents’ employers, their own future employers, and their future partner or children. The benefits are significant but dispersed.

But unlike traditional infrastructure, there has been little government support for this kind of work, reflecting its economic and societal devaluation – and on top of that, women often fill in any gaps in paid care infrastructure with unpaid work.

If Biden’s plan becomes law, the invisible human infrastructure that supports America’s families, communities, and economic activity would finally be valued for what it is.

Mignon Duffy, associate professor of sociology, University of Massachusetts Lowell

The Conversation
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Senior Democrats ditch their backdoor proposal for a $15 minimum wage, throwing pay hike in doubt in $1.9 trillion stimulus package

Bernie Sanders Chuck Schumer Ron Wyden
Sen Bernie Sanders speaks at a news conference alongside other top Democrats.

  • Senior Democrats tossed out a backdoor plan to raise the minimum wage to $15 an hour, per a person familiar with the decision.
  • The proposal was ditched as Democrats appeared reluctant to finalize a complex plan that could delay stimulus passage.
  • Experts said the backup plan risked being inefficient at raising hourly wages.
  • Visit the Business section of Insider for more stories.

Senior Democrats are abandoning their backdoor $15 minimum wage proposal, leaving a wage hike in doubt as they scramble to enact a $1.9 trillion stimulus plan within two weeks.

Sens. Bernie Sanders (I-Vermont) and Ron Wyden (D-Oregon) were in the midst of drafting a plan to levy a 5% tax on the payrolls of large corporations that don’t compensate workers below an unspecified wage. It would be paired with tax credits to incentivize small businesses to raise their employees’ wages.

The senators ditched their proposal. According to a person familiar with the decision, finalizing the plan and getting every Democrat onboard imperiled the passage of the legislation before the expiration of enhanced unemployment insurance on March 14 for millions of Americans.

The Washington Post first reported the development.

Sanders and Wyden came up with the alternative after the Senate parliamentarian ruled on Thursday evening that a $15 minimum wage provision in the rescue package did not clear the strict guidelines of the reconciliation process. The move blocks the measure from moving ahead under the process Democrats are using, which needs 51 votes in the Senate to bypass Republicans.

Experts said the backup plan risked being inefficient at raising hourly wages. Arindrajit Dube, a professor of economics at the University of Massachusetts, Amherst, wrote in an email to Insider that “the devil is in the details.”

Dube noted that most minimum wage workers don’t work for large corporations, so the plan may encourage those businesses to accelerate outsourcing to third-party contractors to avoid the tax.

“For these reasons, any tax-based minimum wage scheme should be broad-based in my opinion, in contrast to proposals from Senators Sanders and Wyden as I understand them,” Dube said. “Senator Wyden’s tax incentive to small businesses are also unlikely to be very effective and will largely go to employers who are already paying higher wages.”

The move slashes the odds of a wage increase becoming part of the stimulus plan, with little time left to draft legislation that would comply with the budget reconciliation process.

Still, Democrats such as Sen. Sherrod Brown of Ohio, chair of the Senate Banking Committee, say they will find a way to bump the federal minimum wage, which hasn’t increased from $7.25 an hour since 2009.

“Democrats are united in giving a raise. We’re going to raise wages,” he told NBC’s “Meet the Press” on Sunday. “We’re going to find a way to. It’s just too important not to.”

Read the original article on Business Insider

How the fight over ‘hero pay’ for grocery workers reveals chain stores’ massive corporate greed

Grocery store worker, low-wage
A grocery store worker inspecting meats while wearing PPE during the pandemic.

  • Paul Constant is a writer at Civic Ventures and a frequent cohost of the “Pitchfork Economics” podcast with Nick Hanauer and David Goldstein.
  • In this week’s column, Constant talks about the ‘hero pay’ raises some stores like Trader Joe’s and Kroger adopted last year.
  • Kroger later blamed this raise for store closures, despite paying out billions in profits to the company’s shareholders.
  • Visit the Business section of Insider for more stories.

Last March, when lockdowns began, grocery store workers and delivery drivers were rightfully hailed as heroes of the pandemic. Even as restaurants and bars closed to stop the spread of coronavirus, grocery store employees risked their health, and the health of their families, to keep Americans fed while white-collar workers transitioned to home offices. From the very beginning of the pandemic they put on homemade masks to stock shelves, ring up customers, and keep the supply chain working when everything else shut down.

At the beginning of the pandemic, public respect for grocery workers was overwhelming and unanimous

Rodney McMullen, the chairman and CEO of the Kroger chain of grocery stores, was effusive in his praise: “Our associates have displayed the true actions of a hero,” McMullen wrote in a press release, acknowledging his staff for “working tirelessly on the frontlines to ensure everyone has access to affordable, fresh food and essentials during this national emergency.”

McMullen backed up his words of support for the heroes on his staff with a bold policy: Kroger, the largest grocery chain in the nation and the second-largest retailer after Walmart, announced on March 31, 2020 that it would “provide all hourly frontline grocery, supply chain, manufacturing, pharmacy and call center associates with a Hero Bonus – a $2 premium above their standard base rate of pay, applied to hours worked March 29 through April 18.”

Kroger’s Hero Bonus pay program eventually ended in May, two months into the pandemic. But the pandemic has continued unabated, and grocery store workers continue to live with a very high risk of COVID-19 infection. A Kroger-owned Fred Meyer grocery store in Seattle had an outbreak infecting 10 workers in December, for example. 

Although the risks for grocery workers are still very high, the hero talk has all but disappeared

And so has the hero pay: Kroger employees from around the country report on Indeed that baggers at Kroger grocery stores earn an average of $9.28 an hour, while cashiers report pay of $10.53. (Bear in mind, too, that those average wages are likely inflated due to cities like Seattle and New York City that embraced a $15 minimum wage .) According to nearly 37,000 employee reports, Indeed said, “Few people think they are paid fairly at Kroger Stores.” In exchange for putting their health on the line for a full year in thankless public-facing jobs, many Kroger workers earn wages that don’t even lift them above the poverty line. 

This year, leaders began to demand that grocery stores pay their employees extra during the pandemic. Lawmakers in Long Beach and in Seattle, among other cities, passed a $4-per-hour hazard pay bonus for workers at large grocery store chains. 

The laws brought some much-needed attention back to workers who have disappeared from the public consciousness, and that pressure seems to have worked: After Seattle’s City Council approved hazard pay, grocery chain Trader Joe’s responded by temporarily raising worker pay around the country by $4 an hour. 

This is great economic news for everyone: not only are workers being rewarded for performing tasks that white-collar workers would never do, but those workers also have extra money in their pockets, which they’ll spend in their communities – including at grocery stores. 

How Kroger responded very differently than Trader Joe’s

In both Long Beach and in Seattle, Kroger issued press releases announcing that they were closing two stores, blaming the hazard pay for the closures. 

I suspect the situation in Long Beach is similar, but since I live in Seattle I can better speak to the closures here. The two QFC grocery stores that Kroger is closing in Seattle are small, underperforming stores in upscale, walkable neighborhoods that have other – most would argue superior – grocery options nearby. (The other thirteen QFC stores owned by Kroger in Seattle will remain open, as well as Kroger’s three Fred Meyer stores inside Seattle city limits, where the hazard pay applies.) 

And, at least one of the targeted Seattle QFC locations had already been slated for redevelopment in the near future. In other words, it seems likely that Kroger could be exploiting stores that were failing before the pandemic to make the point they really want made – if city councils elsewhere try to raise wages, Kroger will continue to hold their employees’ lives and livelihoods hostage in order to keep wages low and profits sky-high. 

Giant corporations love to use splashy intimidation tactics like this to create fear-inducing headlines which help to peel support away from worker protections. But make no mistake: Even though Kroger’s press releases suggested that the grocery business relies on “razor-thin” profit margins, Kroger has been making a ridiculous amount of money during the pandemic. 

Because people have been working and eating at home over the last year, Kroger has boasted of record-breaking profits. For the first two quarters of 2020, reports the Detroit Free Press, its net earnings nearly doubled “to more than $2.031 billion compared with $1.069 billion in the same period of 2019.” 

In the third quarter of 2020, Kroger announced operating profits of $792 million

And with grocery spending in Washington state up by double-digit percentages since the beginning of the pandemic, it seems highly unlikely that hazard pay is the tipping-point expense that forced Kroger to pull the plug on these stores.

And while Kroger isn’t willing to pay the “heroes” its leadership loves to praise in press releases, the corporation happily opened their wallets for shareholders this year, paying out a dividend of 18 cents per share

Last year, Kroger said in a press release, “We have returned approximately $6.4 billion to shareholders via dividends and repurchased shares [also known as stock buybacks] since the beginning of fiscal 2017.” As thanks for returning obscene profits to shareholders, CEO W. Rodney McMullen received $21 million in total compensation in 2019, an increase of 76% over the year before and 798 times the median annual Kroger employee salary that same year. 

McMullen wasn’t the only one who received hero pay a year before the pandemic, ExecPay noted: “In 2019, six Kroger executives received on average a compensation package of $8.7 million, a 46% increase compared to previous year.” 

While Kroger can find plenty of money for its CEO, its executive team, and its shareholders, the corporation picks up its toys and heads home when city lawmakers ask it to increase pay for the frontline workers who have been putting their lives on the line so that Kroger can boast about their unprecedented profits. 

The math is clear: Kroger’s coffers are more than full enough to reward its employees for their essential work in the midst of a global pandemic. McMullen and his executive team apparently prefer to keep that “hero pay” for themselves.

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The $15 minimum wage poses a major hurdle for Senate Democrats as they race to pass the $1.9 trillion stimulus

Joe Manchin
Sen. Joe Manchin on Capitol Hill.

  • Senate Democrats face a major hurdle: how to pass a $15 minimum wage.
  • Two Democratic senators already say they oppose it, jeopardizing its path ahead.
  • A Senate parliamentarian ruling will decide whether it can be included in the final stimulus plan.
  • Visit the Business section of Insider for more stories.

Senate Democrats want to enact a new $1.9 trillion rescue package within weeks, but one major hurdle stands between them and the bill’s final passage: whether it will include a $15 minimum wage increase.

Once the House approves the legislation and sends it to the Senate, the wage provision is likely to spark some clashes among Democratic senators. The minimum-wage increase in the Biden rescue plan would be phased in over five years and eliminate tipped wages. 

Sens. Joe Manchin of West Virginia and Kyrsten Sinema of Arizona have both said they oppose the measure. The resistance of these two lawmakers imperils the measure  even if it clears all the hurdles required of a reconciliation package (the strict budgetary procedure that Democrats are employing to bypass Republicans). A looming ruling from the Senate parliamentarian will likely pose obstacles.

“There might be a few other Democrats with pretty significant concerns about the minimum wage increase,” Jim Manley, a former senior Democratic aide, said in an interview. “No matter how the parliamentarian rules, I’m not sure the votes are there in the Senate to increase the minimum wage to $15 an hour.”

The Senate parliamentarian serves as a neutral arbiter of reconciliation, a process that will allow Democrats to approve a bill with a simple majority of 51 votes in the upper chamber instead of the usual 60. Reconciliation requires every provision of a bill to be related to the federal budget, or else the parliamentarian can toss it out.

If the minimum wage doesn’t survive this process, that could complicate Democrats’ swift timeline for approval, targeted for mid-March. But even if it does survive, in an evenly divided chamber where Vice President Kamala Harris can break ties, every Democrat must support the final package.

Sen. Bernie Sanders, chair of the Senate Budget Committee with jurisdiction over reconciliation, told reporters on Tuesday a ruling may come in the next day or two. Progressives like Sanders are championing the measure as a boon to low-paid workers.

$11 an hour versus $15 an hour

The federal minimum wage hasn’t been raised from $7.25 since 2009, and labor advocates say a bill should lift wages for essential workers and others putting themselves at risk in the pandemic.

“To say that we can support jobless workers, teachers, caregivers, and medical professionals without supporting workers earning $7.25 an hour isn’t just bad policy, it’s inhumane,” Elizabeth Pancotti, policy director of Employ America, said on Twitter. “Economic relief must include raising the minimum wage.”

But Republicans argue that raising wages during a pandemic would cause employers to shed jobs. Some Democrats share those concerns as well.

“I think small business has got to be kept in mind, and I think there are a number of different variations that are being proposed that help insulate the impact in terms of small business,” Sen. John Hickenlooper of Colorado told the Wall Street Journal.

A report from the nonpartisan Congressional Budget Office indicated the $15 minimum wage plan would cause 1.4 million job losses, but lift 900,000 people out of poverty. 

There is some GOP support to raise wages. On Tuesday, Sens. Mitt Romney and Tom Cotton introduced legislation to raise the minimum wage to $10 over four years once the pandemic is over. They would also tie it to mandatory use of the E-Verify program so employers can keep tabs on the immigration status of their workers.

“If we don’t have the $15 proposal as part of reconciliation, we’ll need to sit down and work on a bipartisan proposal,” Romney told reporters on Tuesday. “And we’re open to considering other people’s points of view.”

But many Democrats are eager to press ahead on their own without Republican votes. Sanders recently expressed confidence that the pay bump would clear the stringent reconciliation process and garner enough Democratic votes for passage.

“I think we’re going to pass it as it is,” he told reporters on Monday. “The Democrats are going to support the president of the United States and the overwhelming majority of the American people want to pass this Covid emergency bill.”

But that’s not holding back some Democrats from pitching ideas about a lower wage increase in the final legislation. Manchin told reporters on Monday evening he would try to offer an amendment to the legislation.

“I would amend it to $11,” he said. “We can do $11 in two years and be in a better position than they’re going to be with $15 in five years.”

The $15 minimum wage enjoys strong public support. Over 60% of respondents in a new Insider poll published Tuesday would definitely or probably support a $15 minimum wage. 

Read the original article on Business Insider

How to respond to the 5 most tired, trickle-down arguments against the $15 minimum wage

fight for 15 minimum wage protest
Demonstrators participate in a protest outside of McDonald’s corporate headquarters on January 15, 2021 in Chicago, Illinois.

When they took power, Democratic leadership didn’t waste any time working toward Joe Biden’s campaign promise to raise the federal minimum wage to $15 an hour. This is great news for all Americans – even if they earn more than minimum wage. It would put more money in the pockets of nearly 40 million American workers, and those workers would then spend that money in their local communities, creating even more jobs with their consumer demand. 

But take it from someone who lived through the Fight for $15 in Seattle and a successful effort to raise Washington state’s wage to one of the highest in the country: As soon as people begin seriously discussing the adoption of a higher minimum wage, the opponents will make themselves known. 

The arguments against the wage are always basically the same, but in the days since Seattle adopted the $15 minimum wage, a growing body of evidence has mostly laid those objections to rest. Here, in one place, are the most frequently asked questions about the minimum wage, with links to studies that debunk the most pernicious anti-wage claims.

MYTH: Raising the minimum wage will kill jobs

Not at all. Published in 2019, the single most far-reaching study on the minimum wage examined “138 prominent state-level minimum wage changes between 1979 and 2016 in the United States,” only to find that “the overall number of low-wage jobs remained essentially unchanged over the five years following the increase.” 

In other words, the gold-standard study, using 40 years of data from around the United States, found that basically no jobs were lost when the minimum wage went up. Additionally, 70 years of Department of Labor data from 1938 to 2009 do not show any correlation between federal minimum wage increases and job loss.

MYTH: Raising the wage will blow a hole in the federal budget and increase government debt

This question is based on the same trickle-down assumption that raising wages kills jobs that we debunked in the first question. The claim is that once the wage goes up, those droves of newly unemployed people will require government benefits to survive, thereby increasing government expenditures and lowering the number of working people paying taxes into the system. 

On the contrary, a brand-new paper out this month by UC Berkeley economist Michael Reich projects that if the Raise the Wage Act is fully implemented in 2025, it “would have a positive effect on the federal budget of $65.4 billion per year,” largely through payroll taxes, FICA, and other sources. The math here is simple: When more people make money, they pay more in taxes – generating roughly $650 billion in government revenue over the course of a decade.

But raising the wage doesn’t just increase tax revenue – it also elevates workers out of poverty, getting them off government assistance. Another study released earlier this month projects that if the Raise the Wage Act is implemented by 2025, “annual government expenditures on major public assistance programs would fall by between $13.4 billion and $31.0 billion.” 

Many millions of workers in the United States are paid so little that they need the Supplemental Nutrition Assistance Program, aka “food stamps,” to get enough food on the table to survive. Moving the federal minimum wage to $15 would annually save somewhere between $3.3 and $5.4 billion in SNAP funds alone. 

Taxpayer money that right now subsidizes low-wage employers through government assistance programs could instead be put toward infrastructure, education, or other pursuits.

MYTH: If you raise the minimum wage, robots will take your jobs

Trickle-downers love to claim that raising the minimum wage will only encourage employers to purchase fleets of robots who can do the jobs more affordably. These claims are absurd on their face; from the cotton gin to the Ford assembly line to the ATM, automation is always happening. It’s disingenuous to suggest that employers aren’t always seeking ways to streamline their businesses, no matter what wage they’re paying. 

Yet even though the march of progress automates whole swaths of the workforce,  Americans continue to work in ever-greater numbers. Automation generally takes the most unpleasant and unsafe tasks off the backs of American workers, but there’s always more work to be done.

One of the most specific automation claims is that if McDonald’s franchisees are forced to pay $15 an hour, then they’ll simply replace their cashiers with touchscreen ordering kiosks. That’s not true. A new study from Princeton found that “Higher minimum wages are not associated with faster adoption of touch-screen ordering.” In other words, there’s no correlation between the adoption of automation and the minimum wage.

MYTH: If you raise the minimum wage, the cost of groceries and burgers will skyrocket

There’s zero evidence that this is true. Here in Seattle, a 2017 University of Washington study kept tabs on the prices of 106 items across six different grocery chains in the city, before and after the wage went up. They found that the wage increase “did not affect the price of food at supermarkets.” 

A study by the Upjohn Institute also found that price increases were “much smaller than what the canonical literature has found,” and that those small increases in costs were restricted to the month that the wage went into effect, meaning that costs don’t creep up in the years and months after a wage is passed. 

And anecdotally, customers in high-wage cities like Seattle and Los Angeles can confirm that you can still get a double cheeseburger for $5 or less at your favorite fast-food chain

MYTH: If you raise the minimum wage, employers will just move their business somewhere with a lower wage

This is probably the most easy minimum-wage myth to debunk. All you have to do is check the data in one state that raised the wage against a neighboring state that did not. 

The Federal Reserve Bank of New York observed the effects of one such increase in counties along the New York/Pennsylvania state line when New York raised its wages. They found no adverse employment effects in counties on the New York state side of the border, meaning that New York employers didn’t lay off workers and move to take advantage of Pennsylvania’s lower wages. 

After the wage went up business continued as usual – only the New York workers were making significantly more per hour than their Pennsylvanian counterparts. 

It’s telling that the Fight for $15 has lasted almost a decade, but the questions that people have raised in opposition to the wage have stayed the same – even as a huge body of evidence has revealed that raising the wage is good for everyone. Once you manage to debunk these common untruths and misconceptions about the minimum wage, it always helps to follow up with a positive attribute of raising the wage. 

It would lift millions of working poor out of poverty, it would increase wages for a large number of workers who already earn more than the minimum wage, and it enjoys bipartisan support, with nearly two-thirds of all Americans favoring a $15 minimum wage. 

As workers in cities and states around the country have already learned, building a stronger, more inclusive economy for everyone – not just a wealthy few – is a tremendously appealing idea.

Read the original article on Business Insider