What Constitutes a Fair Wage? Quiz

PDF page 180: The Center for Financial Services Innovation (CFSI) is a nonprofit, nonpartisan organization funded by many of the largest American companies to research issues affecting workers and their employers. Findings of CFSI studies indicate that employee financial stress permeates the workplaces of virtually all industries and professions. This stress eats away at morale and affects business profits. A recent CFSI report details data showing that “85% of Americans are anxious about their personal financial situation, and admit that their anxiety interferes with work. Furthermore, this financial stress leads to productivity losses and increased

PDF page 180: absenteeism, healthcare claims, turnover and costs affecting workers who cannot afford to retire.” The report also indicates that employees with high financial anxiety are twice as likely to take unnecessary sick time, which is can be expensive for an employer. The CFSI report makes clear that ensuring workers are paid a fair wage is not only an ethical practice; it is also an effective way to achieve employees’ highest and most productive level of performance, which is what every manager wants. In the process, it also makes workers more loyal to the company and less likely to jump ship at the first sign of a slightly better wage somewhere else. The concept of a fair wage has a greater significance than simply one worker’s pay or one company’s policy. It is an economic concept critical to the nation as a whole in an economic system like capitalism, in which individuals pay for most of what they need in life rather than receiving government benefits funded by taxes. The ethical issues for the business community and for society at large are to identify democratic systems that can effectively eradicate the financial suffering of the poorest citizens and to generate sufficient wages to support the economic sustainability of all workers in the United States. Put another way, has the real income of average American workers declined so much over the past few decades that it now threatens the productivity of the largest economy in the world?

PDF page 180: The Pew Research Center indicates that over the thirty-five years between 1980 and 2014, the inflationadjusted hourly wages of most middle-income American workers were nearly stagnant, rising just 6 percent,

PDF page 180: nonpartisan think tank, show the same stagnant trend. Contrast this picture with the wages of high-income workers, which rose 41 percent over the same years. Many economists, political leaders, and even business leaders admit that increasing wage and wealth disparities are not a sustainable pattern if the U.S. economy is

PDF page 181: Compare the twenty-year period of 1949 through 1968 with the fifty-year period from 1968 through 2017. The difference has created a sobering reality for many workers. In the nearly six decades since 1960, the inflationadjusted real minimum wage actually declined by 23 percent. That means minimum-wage workers did not even break even; the value of their wages declined over fifty years, meaning they have effectively worked half a century with no raise. In the following chart, nominal wage represents the actual amount of money a worker earns per hour; real wage represents the nominal wage adjusted for inflation. We consider real wages because nominal wages do not take into account changes in prices and, therefore, do not measure workers’ actual purchasing power.

PDF page 182: One positive development for minimum-wage workers is that state governments have taken the lead in what was once viewed primarily as a federal issue. Today, most states have a higher minimum hourly wage than the federal minimum of $7.25. States with the highest minimum hourly wages are Washington ($11.50), California and Massachusetts ($11.00), Arizona and Vermont ($10.50), New York and Colorado ($10.40), and Connecticut ($10.00). Some cities have even higher minimum hourly wages than under state law; for example, San Francisco and Seattle are at $15.00. As of the end of 2017, twenty-nine states had higher minimum hourly wages than the federal rate, according to Bankrate.com (Figure 6.9).

PDF page 182: One positive development for minimum-wage workers is that state governments have taken the lead in what was once viewed primarily as a federal issue. Today, most states have a higher minimum hourly wage than the federal minimum of $7.25. States with the highest minimum hourly wages are Washington ($11.50), California and Massachusetts ($11.00), Arizona and Vermont ($10.50), New York and Colorado ($10.40), and Connecticut ($10.00). Some cities have even higher minimum hourly wages than under state law; for example, San Francisco and Seattle are at $15.00. As of the end of 2017, twenty-nine states had higher minimum hourly wages than the federal rate, according to Bankrate.com (Figure 6.9).

PDF page 182: One positive development for minimum-wage workers is that state governments have taken the lead in what was once viewed primarily as a federal issue. Today, most states have a higher minimum hourly wage than the federal minimum of $7.25. States with the highest minimum hourly wages are Washington ($11.50), California and Massachusetts ($11.00), Arizona and Vermont ($10.50), New York and Colorado ($10.40), and Connecticut ($10.00). Some cities have even higher minimum hourly wages than under state law; for example, San Francisco and Seattle are at $15.00. As of the end of 2017, twenty-nine states had higher minimum hourly wages than the federal rate, according to Bankrate.com (Figure 6.9).

PDF page 183: earn only about 80 percent of what men with the same job titles earn. Data from the EEOC over the five years from 2011 through 2015 for salaries of senior-level officials and managers (defined by the EEOC as those who set broad policy and are responsible for overseeing execution of those policies) show women in these roles earned an average of about $600,000 per year, compared with their male counterparts, who earned more than

PDF page 183: $800,000 per year. That $200,000 difference amounts to a wage gap of about 35 percent each year. The same is true in mid-level jobs as well. In a long-term study of compensation in the energy industry, researchers looked at the job of a land professional—who negotiates with property owners to lease land on which the oil companies then drill wells—and found evidence of women consistently getting paid less than men for doing the same job. Median salaries were compared for male and female land professionals with similar experience (one to five years) and educational background (bachelor’s degree), and men earned $7000

PDF page 183: $800,000 per year. That $200,000 difference amounts to a wage gap of about 35 percent each year. The same is true in mid-level jobs as well. In a long-term study of compensation in the energy industry, researchers looked at the job of a land professional—who negotiates with property owners to lease land on which the oil companies then drill wells—and found evidence of women consistently getting paid less than men for doing the same job. Median salaries were compared for male and female land professionals with similar experience (one to five years) and educational background (bachelor’s degree), and men earned $7000

PDF page 184: until at least 2059, with projections based on recent trends predicting dates as late as 2119. These are aggregate data; thus, they include women and men with the same job, or similar jobs, or jobs considered to fall in the same general category, but the data do not compare the salary of a secretary to that of a CEO, which would be an unrealistic comparison. Equal pay under the law means equal pay for the “same” job, but not for the “equivalent” job. Those companies wishing to avoid strict compliance with the law may use several devices to justify unequal pay, including using slightly different job titles, slightly different lists of job duties, and other techniques that lead to different pay for different employees doing essentially the same job. Women have taken employers to court for decades, only to find their lawsuits unsuccessful because proving individual compensation discrimination is very difficult, especially given that multiple factors can come into play in compensation decisions. Sometimes class-action lawsuits have been more successful, but even then plaintiffs often lose. Can anything be done to achieve equal pay? One step would be to pass a new law strengthening the rules on equal pay, but two recent attempts to pass the Paycheck Fairness Act (S.84, H.R.377) and the Fair Pay Act