Jamie Dimon’s blinders
JPMorgan Chase’s Jamie Dimon is really proud about giving his employees a raise, heartily patting himself on the back in a New York Times op-ed. JPMorgan will raise its lowest wage to $12, but over the next three years, and only starting in 2017. That’s a roughly 3.2 percent annual boost after taking projected future inflation into account. This hardly seems to deserve a parade.
Has it really come to this? Has providing a modest wage increase really become breaking news that corporate chieftains send crowing press releases about? Let’s be clear about this—this is not the way it’s supposed to be. Wages rising faster than the rate of inflation should be the norm in the American economy and should occur all the time, without fanfare and self-congratulation from employers. That wage increases are newsworthy even while unemployment is below five percent is quite telling. Even at such a low unemployment rate, all the power in the employment relationship still rests with employers.
Dimon points out that some of his current employees earn $10.15 an hour, and brags that this is $3.00 over the current federal minimum wage. Left unsaid is that the current minimum wage of $7.25 is roughly 25 percent below the inflation-adjusted value of the minimum wage in 1968, despite the fact that productivity has more than doubled since then. (Of course, the bank’s employees in New York City will be receiving $15.00 at the end of 2018 because of the recently passed minimum wage legislation that applies to the city.)
It’s clear that JPMorgan is far from the worst employer in low-wage labor markets. The bank does seem to provide decent benefits for these low-wage workers, at about $5.00 an hour according to Dimon. But banking is a very lucrative industry, and leading banks such as JPMorgan have done very well. An article by New York Federal Reserve Board economists last year noted that “from 2009 to 2014, the combined net income of JPMorgan, Citigroup, Bank of America, Goldman Sachs and Morgan Stanley annually averaged $41.73 billion, up from annual average of $25.08 billion from 2002 to 2008.” We should expect leading firms in our most profitable sectors to be leaders in providing better compensation. Further, it seems that banks that were bailed out by the federal government just eight years ago should feel some particular obligation to be good corporate citizens.
Dimon’s self-congratulatory op-ed only demonstrates the blinders that key business leaders wear, reflecting their perch and their privilege. They are not asking why employees make such low pay and how that hinders their families’ living standards and the economy overall. And they too often treat boosts to their rank-and-file workers’ compensation as gifts that can be handed out when the primary claims on the firms’ income (profits to shareholders and pay packages for managers, naturally) are fully taken care of—gifts that somehow deserve applause from society at large.
Workers’ living standards should not depend on how generous firms’ managers feel in any given year. Instead, workers should have the economic leverage and bargaining power to demand decent wage growth even in leaner years. But they don’t have this leverage in today’s economy. Instead, we have a collective, policy-driven crisis of bargaining power, a crisis that robs them of the ability to effectively demand broad-based wage growth, even with unemployment under 5 percent. This crisis has been with us for a long time now, as evidenced by the growing gap between compensation of the typical worker and our economy’s productivity. What this divergence means is simply that the economy could have afforded much higher wages for all workers over this time, but instead we have seen high profits, exorbitant CEO compensation, and huge growth in top one percent wages and incomes.
Business leaders who genuinely want to address the crisis in American pay should come together with labor and community leaders to make wholesale changes in our policy approach to wages. This new approach should prioritize full employment and provide a decently paid job to anyone who wants one, raise the minimum wage in steps to $15, rebuild a system of collective bargaining, and undertake policies to restrain the growth of executive pay and the financial sector, both of which have made gains at the expense of the rest of the nation. EPI has highlighted such policies in our Raising America’s Pay project and I laid them out recently in testimony to the Democratic National Committee platform committee. I suspect we will not be able to rely on the good will of leaders like Dimon to adopt such policies. Rather, it will take mobilization by an aware citizenry and strong leadership from politicians and policymakers wishing to accomplish these goals.