Banks are joining the ranks of employers who are bumping up their minimum salaries to adjust to new minimum wage increases spreading across the country. Yesterday, we reported that your Starbucks latte is more expensive thanks to price increases that will go towards paying for a new 5-15 percent wage increase.
Now, JPMorgan Chase just announced that 18,000 U.S. employees will get a raise over the next three years. Employees earning the current lowest pay will see a bump up from $10.15 an hour to a range of $12 to $16.50 an hour for part-time, full-time, and new employees depending on geographic and market factors. For example, the new base pay in cities like Seattle, Los Angeles, and Washington, D.C., would increase to $15 per hour by 2019 while in San Francisco and New York it would be $16.50 per hour by 2019.
This comes in direct response to political pressure from campaigns such as the Fight for $15 and efforts by states and cities to raise their minimum wages. These are pretty significant increases.
The company’s president, Jamie Dimon, in a New York Times op-ed announced the news:
WAGE stagnation. Income inequality. A lack of quality education. Insufficient training and skills development.
Issues like these have led approximately two-thirds of Americans to believe that the next generation will be worse off than the last. And it is true that too many people are not getting a fair opportunity to get ahead. We must find ways to help them move up the economic ladder, and everyone — business, government and nonprofits — needs to play a role.
At JPMorgan Chase, we’re starting by giving thousands of employees a raise.
Wages have gone nowhere for too long as Dimon rightly identifies, but that is a result of feeble economic growth following the recession. We wonder what may happen in the case of a future downturns?
Employer-driven wage hikes for workers will be celebrated. However, the greatest investment our economy can make is providing workers access to training and skills development, especially for those in low-skill jobs that are at risk of disappearing as companies increasingly turn to automation.
Earlier this year, JP Morgan Chase announced 300 closures (5 percent) of its banks as part a $1.4 billion cost-cutting plan. They, like other banks, are moving away from the traditional bank teller to automated services because tellers, who typically earn the lowest wages, handled just 40 percent of bank deposits in 2015 compared to 90 percent in 2007 and those transactions are increasingly costly compared to the alternatives as Detroit News reports:
At Chase Bank, the company is moving toward the branch of the future, which will be smaller and have automated kiosks. It also is flipping the staff makeup at branches, so now there will be more financial advisory jobs and fewer transactional jobs.
Teller transactions are now among the most expensive for banks to process. It costs JPMorgan roughly 65 cents each time a deposit is made through a teller, more than eight times the cost to process an ATM deposit. Deposits through a smartphone costs the bank three cents.
JPMorgan Chase can absorb these wage increases – at least in the short-run. How may they adjust in the future to smaller bottom lines? We may see increased fees or the end of costly programs that customers enjoy. However, it’s the low-skilled workers who will suffer if they aren’t able to adapt.
In addition, JP Morgan can afford such significant pay increases for their workers, but not everyone else can. Minimum wage increases have different effects in larger and smaller companies and the impact on small businesses is not negligible. Just under half of small business owners recently surveyed were against a minimum wage increase, with 46 percent of owners saying it would hurt their business.
News of a bigger paycheck is an early Christmas present to many JP Morgan workers, but they and others would do well to think about how they can be prepared for the future.