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Retail is plagued with workers making less than $15 an hour, despite employers' rising profits

Rising wages fail to keep up with inflation
MoneyWatch: Wage increases fail to keep pace with inflation 02:40

Thousands of workers in food service, hospitality and retail are still making below $15 an hour, including the majority of workers at big-box stores and discount retailers. That low wage stands in contrast to employer who rake in vast amounts of profit, according to a new survey from the left-leaning Economic Policy Institute.

The survey gathered hourly wages reported by employees at more than 60 companies, including Dollar General, McDonald's, Starbucks and Walmart. EPI analyzed the responses and found that 89% of McDonald's workers make below $15, while 92% of Dollar General workers also make below $15. The survey data suggests that states should increase their minimum wage, EPI said.

"Low wages are a defining feature of the U.S. labor market, and the service sector in particular," Ben Zipperer, an EPI economist, said in a statement. "Low pay is not limited to mom-and-pop stores — it is also widespread in big box stores, restaurants and grocery stores that often have high CEO pay and revenue." 

About 63% of Starbucks workers make below $15. At Walmart, 51% of workers also make below $15, according to the EPI survey, which was conducted between March and November last year. The survey, which drew more than 20,000 responses, also notes companies where a majority of workers earn above $15 an hour, including Amazon, Costco and UPS. 

Walmart increased its minimum wage to $12 an hour last September, the Wall Street Journal reported. Dollar General did not respond to requests for comment on its wages.

De facto wage standard — $15

The U.S. has seen a tight labor market over the past two years as employers have tried to entice workers to come back from coronavirus pandemic lockdowns. Seen as a deal sweetener, $15 an hour has become the de facto wage standard among companies competing to hire new staff, the Associated Press reported

McDonald's announced last year that it plans to raise its minimum wage to $15 an hour by 2024 at company-owned locations, while Starbucks is expected to roll out a $15-an-hour minimum wage this summer. 

But the EPI survey, released Tuesday, suggests that not everyone has been offered the new standard pay. 

"Wages are far too low for far too many workers in the service sector, millions of whom staffed the front lines during the pandemic," Harvard University public policy professor Daniel Schneider, who helped conduct the survey, said in a statement. "But these data also show that higher wages are more than possible. They are already a reality for workers at some of the largest firms in the country." 

How rising inflation is impacting businesses and families across the U.S. 02:22

As a result of a pandemic-fueled labor shortage, the average hourly wage increased 5.1% between February 2021 and February 2022, according to U.S. Department of Labor data — the highest pay increase frontline employees, such as grocery clerks and retail workers, have seen in over a decade. However, the consumer prices rose nearly 8% during that same period. 

Average American will be poorer this year

Those figures mean that the average American will likely be a few percentage points poorer this year, Columbia University finance professor Laura Veldkamp told CBS News. 

Even for those who received the seemingly robust wage gains, the increase amounts to only "pennies" per hour once inflation is included, according to an analysis from the Brookings Institution — as supply-chain constraints and robust economic demand, combined with U.S. sanctions on Russian businesses, drive broad increases in the price of food, energy and other items.

"You need to ask for a wage raise if you want to cut even or break even," Veldkamp said. 

Meanwhile, the federal minimum wage in the U.S. has remained fixed for the last 12 years at $7.25 an hour.

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