Chase, Target, and Starbucks Are Raising Their Minimum Wages. Is That Enough?

They’re not a good bank, but at least they’re slightly less predatory!

They’re not a good bank, but at least they’re slightly less predatory!

Today, Jamie Dimon, the chairman and CEO of JPMorgan Chase, wrote in the New York Times that Chase is giving its lowest-paid employees a raise:

Our minimum salary for American employees today is $10.15 an hour (plus meaningful benefits, which I’ll explain later), almost $3 above the current national minimum wage. Over the next three years, we will raise the minimum pay for 18,000 employees to between $12 and $16.50 an hour for full-time, part-time and new employees, depending on geographic and market factors.

A pay increase is the right thing to do. Wages for many Americans have gone nowhere for too long. Many employees who will receive this increase work as bank tellers and customer service representatives. Above all, it enables more people to begin to share in the rewards of economic growth.

This comes one day after Starbucks announced that their employees will get a raise ranging from five to fifteen percent, in the form of increased wages and stock awards. Of course, Chase and Starbucks are following a business trend; Target announced in April that they’re raising the minimum wage to $10 an hour, and Walmart raised their staff pay in January.

The reason why these companies are raising their wages is because the federal minimum wage — that’s $7.25, in case you’re not keeping track — hasn’t gone up since July 24th of 2009, an increase that passed through Congress way back in 2007. Inequality keeps expanding as profits trickle up to the top one percent and never come back down. Of course Chase, Starbucks, Target, and Walmart aren’t doing this because it’s the kind thing to do, or even the right thing to do. They’re doing this because it’s becoming impossible to hire good staffers on the minimum wage.

As soon as Dimon’s editorial was published this morning, though, the perennially wrong blogger at Forbes, Tim Worstall, misinterpreted the situation. As is custom, Worstall in a roundabout way attributed Dimon’s actions to the Invisible Hand of the Market:

… the real message is that economic policy in the United States is actually working. Unemployment is down around where we think full employment generally is and thus firms are having to raise wages and compensation in order to be able to attract the staff they want. This has been the aim of Federal Reserve policy all along and it’s fun when economic plans actually work, isn’t it? It’s also quite joyous to see one quite as nakedly capitalist as Dimon underlining that Karl Marx was in fact right about what improves the workers’ wages — that full employment.

Nice to see Worstall cheerleading for President Obama’s economic policy, but Dimon isn’t operating on behalf of the market; he’s a businessman playing a shrewd decision off for maximum publicity. And this latest announcement from Chase doesn’t mean what Worstall think it means — the market isn’t a sentient being that always hunts for equilibrium, and full employment does not lead to higher wages for everyone. This concept that the market, without government intervention, will eventually settle on a good minimum wage is at best lazy thinking and at worst a harmful delusion of animism.

The market will not decide on a minimum wage that benefits everyone. The market is made up of people making choices. Individual owners will figure out how little they can get away with paying, and minimum-wage workers will have to figure out how to survive on that. And as in all large groups of humans, there will be people who try to behave like good citizens and there will be people who prey on the lowest common denominator. Not everyone can work for Target or Starbucks; some will wind up employed by more predatory bosses.

And the thing is, those lowest common denominator employers are given an advantage in today’s market. As the South Seattle Emerald noted today, some REI retail employees are paid so little that they can qualify for food stamps. This means that other outdoor equipment outfitters who do pay their employees a living wage are not just competing with REI’s low wages, but also with a government subsidized program funded by taxpayers. REI’s dishonorable actions drag everyone else’s hiring practices down a little bit further.

As much as I appreciate these large business owners starting down a path to paying livable wages, it’s vital for the government to establish a reasonable floor. A minimum wage is absolutely necessary for the common good — by which I mean for workers and for businesses. It’s not a matter of fairness, it’s a matter of making sure the cheaters get caught and legal businesses don’t get penalized for following the rules. That’s not the market’s job. In fact, that’s why we have a government.

Paul Constant

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