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Worker Pay and the U.S. Presidential Elections

Jesse Nishinaga

A wage that you can survive on.

Equal pay for equal work.

Fairness around executive pay.

These all sound like pretty reasonable things to work toward as a society. In fact, the first two are fundamental human rights that, according to the Universal Declaration of Human Rights, should be universally protected.

So how is it that the U.S., the world’s largest economy, continues to find these issues so hard?

Many American families working in low-wage jobs are still struggling to make sufficient income to afford the basic necessities. According to the MIT Living Wage Calculator, the minimum wage does not provide a living wage for most American families. A typical family of four, for instance, needs to work nearly four full-time minimum-wage jobs to earn a living wage.

Gender and racial wage gaps also continue to persist. American women, on average, still make only 80 cents for every dollar earned by men. Among racial and ethnic minorities, the wage gap is even worse. For example, African American and Hispanic women today earn 71 and 61 cents for every dollar earned by men, respectively.

And then there’s the issue of fairness around executive pay. According to a study by Glassdoor, the average ratio of CEO pay to median worker pay in 2014 was 204 times. Other news related to executive pay have surfaced since then, such as the most recent controversy surrounding executive pay increases at a company that in the same period raised the price of EpiPen, a life-saving drug that many Americans rely on but increasingly cannot afford.

With the U.S. presidential election fast approaching, what are the major political parties saying about these issues? Looking at the latest platforms of the two major political parties, answers vary.

On the one hand, the Republican Party states in its platform that the minimum wage is an issue that should be handled at the state and local level. The Republican Party generally argues that minimum wage hikes reduce profitability for business owners and act as a disincentive to hire new workers. This party also often argues a broader point – that more laws and regulations is not the answer when there are already laws in place that just need to be better enforced. This may explain why this party does not explicitly mention a position in its platform on many of these issues.

The Democratic Party, on the other hand, provides more details in its platform. On minimum wage, the Democratic Party declares that the current minimum wage is a starvation wage and must be increased to a living wage; and calls for a raise in the federal minimum wage to $15 an hour (up from $7.25 an hour). This party also describes its position on equal pay for women and urges specific legislation to be passed into law, including the ratifications of the 1972 Equal Rights Amendment and the Convention on the Elimination of All Forms of Discrimination Against Women.

Neither parties, however, mention a position on fairness around executive pay in their respective platforms. This could be explained in part by the fact that a law was recently passed to address this issue. Starting in 2017, U.S. federal securities law will require all public companies to disclose the ratio of the compensation of its CEO to the median compensation of its employees. Time will tell whether this disclosure will actually lead to greater fairness.

So why should companies care about these issues?

For one, with mounting political attention on these issues, higher expectations and reporting requirements will likely come forth and companies will need to understand what they are and meet them. Getting a good grasp of these issues will help companies prepare for this increasingly probable future.

Secondly, having a point-of-view and ultimately being on the right side of these issues will help companies reduce turnover and attract and retain talent. Workers want to find meaning and dignity in their work, and part of this – most of us would presume – is being treated fairly and equally, especially when it comes to their wages.

And thirdly, companies have the opportunity to engage proactively with stakeholders and help shape viable solutions, which can lead to competitive advantage. Several companies, such as Costco, are already experiencing some of the business benefits from proactively engaging on these issues. By providing its hourly workers with wages that are significantly higher than its competitors, Costco benefits from lower turnover costs and shrinkage (employee theft), not to mention a more loyal and productive workforce.

So what does this all mean for us in corporate responsibility? What should practitioners do?

  • Diagnose the problem. How systemic are these issues within the company? Who’s being affected by these issues and to what degree? What are the opinions of key stakeholders on these issues? What additional data should be gathered? Companies should consider all these questions to understand the underlying challenges that are preventing their organizations from achieving pay equity and fairness.
  • Set bold targets. Once a diagnosis is made, create a plan that outlines how these issues will be addressed over time. Companies should consider setting bold improvement targets and holding themselves accountable for achieving them.
  • Report progress. Companies should consider using reporting standards such as the Global Reporting Initiative (GRI)’s Sustainability Reporting Guidelines to report where they are on these issues today and how they envision success to look like in the near future. The GRI’s G4 Guidelines specifically offers practical guidance and standard disclosures for minimum wage, equal pay, and executive compensation.

 

With growing attention on these issues both in our politics and in our everyday discourse, there may not be a better time for corporate responsibility practitioners to help start the conversation and assess where their respective companies stand on these issues.

And over time, as companies move boldly on these issues, we can recognize them for leading the charge in helping achieve basic fairness and equality for all workers.

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