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Minimum or Living Wage?

There is a lot of discussion going on at the moment about whether the minimum wage needs to be raised.  Currently the Federal minimum wage is $7.25.  Some states and cities have enacted their own minimum wage standards with the highest currently being $9.32 in the state of Washington and $10.74 in San Francisco, respectively.

There are a lot of pros and cons to the concept of the minimum wage and I don’t plan to go into them here.  The initial impetus for the minimum wage was to protect workers and to make sure they were not being exploited by their employers.  The first federal minimum wage statue was enacted in 1938 setting the wage at $0.25 per hour (approximately $4.10 per hour in 2014 dollars).  It was last raised in 2009 from $6.55 to the current $7.25.  Interestingly enough, the minimum wage had its highest purchasing power in 1969 when the wage was $1.60 per hour ($10.64 in 2014 dollars).

However, to muddy the concept of wages is the idea of a “living wage”.  The living wage is considered the minimum income someone needs to meet their basic needs – shelter, clothing, and food.  The wage level would obviously vary depending upon location but a general rule of thumb, according to Wikipedia, is that a living wage is somewhere between $3 – $7 above the federal minimum wage.  Many cities, such as the above mentioned San Francisco, are implementing their own minimum wage as a living wage and some cities, such as Austin, Texas, are linking a living wage (currently $11 per hour) to construction projects that receive building incentives from the city.

Regardless as to where you come down on the issue of mandated wages, I think that the resurgent discussion of the issue, and the current talk of income disparity in the U.S., highlights a broader question: What is the right thing to do for our employees?

Because labor expense is a controllable cost it is often the first thing that is reduced (through cutting headcount or freezing wages) when trying to increase profits.  I think it is justified when the company is having economic difficulty (and I admit that we have sometimes had to freeze wages in the past) because, in the larger picture, it is important that the company survives so that everyone has a job – regardless of the wages.

However, I think that reducing or flat-lining pay just for the sake of increasing corporate profits is the wrong thing to do.  A team functions so much better when its members have some sense of financial security and are not having to worry day to day about putting food on their family’s table.  Does this mean that everyone should be able to afford a private jet?  Of course not.   But I believe that it is CMSI’s responsibility to its employees to provide the opportunies for them get ahead in life and not require them to stay in the same place or fall behind.

This is a goal that we are striving for at CMSI.  Everyone that we hire starts at more than the minimum wage.  We want to have our wages more towards the living wage end of the range rather than the minimum wage end.  Are we as successful as we would like to be?  No.  But we are constantly trying to provide more benefits (income, health care, saving, opportunities) as we can.  We think that not only is this is the right thing to do, but by looking after our employee’s financial well being, we are improving our client’s success and our company’s opportunity for profits.