Bank of America announced Tuesday that its new U.S. minimum hourly wage is $24 per hour, more than three times the federal minimum wage. It’s also just the latest step in the company’s goal to increase its minimum wage to $25 by next year.
“With the increase, the minimum annualized salary for full-time employees in the U.S. will rise to nearly $50,000,” said the company in a press release. “The increase applies to all full-time and part-time hourly positions in the U.S.”
Here’s why this move is important.
While inflation has made prices creep higher in recent years, the minimum wage hasn’t increased in 15 years. According to the Center for American Progress , that means it has 30% less purchasing power than when it was set at $7.25 and $2.13 for tipped workers in 2009 . Compared to its peak value in 1968, the value of the U.S. minimum wage is down by 40% as of this year. Since 1968, the minimum wage has decreased by more than $2 an hour even as productivity has continued to increase, said Indeed .
“This has gone on for so long that the value of a full-time job paying $7.25 per hour is no longer enough to comfortably surpass the extremely low bar of keeping someone out of poverty, as defined by the already outdated and insufficient federal poverty guideline,” said the Center for American Progress.
Someone working full time for the federal minimum wage would make $15,000 per year. A chart of annual household expenses published last week by GOBankingRates did not find a state where they were under $62,000 per year. That’s a bit closer to the $63,795.13 average wage index reported by the Social Security Administration for 2022 .
In 2021, Drexel University’s Center for Hunger-Free Communities released a report titled “Minimum Wage is Not Enough” that said employees working full-time at minimum wage cannot afford basic necessities, such as food, housing, transportation, childcare, and healthcare in any location across the U.S. Per the report, an estimated 247,000 people earned exactly the federal minimum wage in 2020 and 865,000 received below the federal minimum in mostly tip-supplemented roles.
“The most common misconception about minimum wage workers is they are primarily teenagers working summer or high school jobs,” said the report. “However, in reality, teens aged 16 to 19 make up only about ten percent of workers making minimum wage or less. Almost half of front-line retail workers are 35 or older.”
Women make up 67% of the workers making minimum wage or less, according to Drexel’s report. These women usually work in home care, child care, food service, hotel accommodations and retail.
Finances are tight for many who are making more than minimum wage, even some who may have recently received a raise. Late last year, Bankrate released survey results that indicated 60% of Americans said their incomes haven’t kept up with increases in household expenses and more than half of those who received a raise said it didn’t keep up with inflation.
This April, a survey from Data for Progress found that more than 80% of Democrats, Independents, and Republicans believe that the current federal minimum wage is not enough for a decent quality of life. According to the World Economic Forum , living wage policies that aim to make sure wages can provide for basic expenses are attracting growing interest around the world. However, the Congressional Budget Office noted that increasing the federal minimum also comes with challenges.
“Raising the minimum wage would increase the cost of employing low-wage workers,” it explained. “As a result, some employers would employ fewer workers than they would have employed under a lower minimum wage.”
As the minimum wage has lost purchasing power, companies who pay workers low wages have turned a profit, said Drexel. Of the top 50 low-wage employers in 2012, 92% made a profit. At those companies, the average executive made $9.4 million in compensation annually.
“From 1978 to 2019, the typical worker’s compensation grew by just 18%, while CEO compensation grew by 1,322% during the same period,” said the report. “This is only possible by keeping worker compensation low to increase profits.”
According to Indeed, the “National Retail Federation and National Federation of Independent Businesses have argued that significant minimum wage increases would lead to less hiring, limited business growth and decreased consumer demand.” However, it also said that Main Street Alliance and Business have argued that a wage that “more accurately reflects the cost of living would contribute to more satisfied employees, more opportunities for business growth and an increase in spending.”
Bank of America already had one of the highest minimum wages in the country at $22, per the Good Jobs Institute . It has been steadily increasing its wages from $15 over the past seven years. A second-quarter report released this summer showed that the company still managed to improve its year-over-year revenue .
“Providing a competitive minimum wage is core to being a great place to work – and I am proud that Bank of America is leading by example,” said Sheri Bronstein , chief human resources officer for Bank Of America.
In addition to their wages, 97% of Bank of America employees have received awards beyond regular compensation. These are mostly in the form of Bank of America restricted common stock. The company also offers 16 weeks of paid maternal leave, a sabbatical program, personalized support for employees’ critical life events and opportunities for career growth.
“To help employees learn new skills and advance in their careers, Bank of America offers an award-winning onboarding, education and professional development organization called The Academy at Bank of America,” said the company, which has been recognized as a top place to work in the U.S. “Building on this employee resource, The Academy also provides free education to individuals in local communities to help advance their career growth and success.”
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