Banks raise their minimum wages
New tax law, tight labor market help lead to increase
While Associated Bank’s pledge to boost its minimum hourly wage to $15 when President Donald Trump signed tax reform legislation was good public relations for both the bank and Republicans, it also appears to have been a wise strategy in a very tight labor market.
With bank tellers in demand in a state where the unemployment rate is only 3.2%, an increase in Wisconsin bank employee wages likely was inevitable and already seems to be spreading.
On Tuesday, U.S. Bank, which has the third-most branches in Wisconsin after BMO Harris Bank and Associated, announced it, too, would jack is minimum hourly wage to $15. Wells Fargo was the first to boost the minimum to $15.
“The higher wages reflect increased skills and a labor shortage,” said Russell Kashian, a University of Wisconsin-Whitewater economics professor. “Associated Bank — and now U.S. Bank — is responding proactively to the market with an eye on attracting and retaining talent.”
For large banks that will see their corporate income tax drop to 21% from
35% under the just-signed tax bill, handing over less of their revenue to Uncle Sam makes adding to payroll easier.
Associated, which is the largest bank based in Wisconsin, was the first major state firm to announce it would join the list of American companies saying their employees will directly benefit from the tax reform legislation.
In its Dec. 21 statement, Associated said it would raise its minimum wage to $15 an hour from $10 — a 50% boost — and distribute a one-time $500 bonus to all hourly, non-commissioned employees once the tax legislation was signed into law.
The company said the moves, which took effect Tuesday, would affect about 55% of its workers. Associated has around 4,400 employees, with 3,400 of them in Wisconsin.
Associated Chief Executive Officer Philip B. Flynn said in an interview Tuesday that in addition to acknowledging the impact of tax reform, the decision to increase the minimum wage makes sense in a very tight job market.
At Associated, tellers, call center employees and some back-office workers are the main beneficiaries of the increase to $15.
Until this week, the average hourly teller wage at Associated was $12.14. Statewide, the average basic teller rate in 2017 was $12, according to the Wisconsin Bankers Association.
“The shareholders are going to have a very significant increase in the after-tax earnings of Associated Bank, and this was a way to share some of that with a lot of our colleagues,” Flynn said. “It’s nice to be able to do something like that.”
In its announcement Tuesday, U.S. Bank said it would raise its minimum wage for all hourly employees to $15, pay a special bonus of $1,000 to almost 60,000 workers, and enhance health care offerings for employees starting next year.
Andy Cecere, U.S. Bank’s CEO, cited tax reform as “positive for the U.S. economy because it provides an immediate opportunity to benefit our employees, our communities and our customers.”
Marquette University professor Kent Belasco, who is director of the commercial banking program, said the corporate income tax cut frees up money for other initiatives at banks, with pay increases being one of them. Belasco said “the tax reduction will definitely offset” a pay hike for hourly employees at a large bank such as Associated, and probably will force smaller banks to raise their pay to hire and keep good tellers.
Rose Oswald Poels, president and CEO of the Wisconsin Bankers Associated, noted that not all banks are taxed the same. Some community banks, she said, are analyzing the impact of the legislation “and trying to determine what true savings they are going to get before they make some changes.”
WaterStone Bank isn’t planning to make news with a wage hike, but will strive to ensure its employees don’t want to work elsewhere, said Doug Gordon, CEO of Wauwatosa-based Waterstone Financial Services Inc.
“We won’t come out with any announcements, but we’ll stay competitive with our overall package,” Gordon said.
Gordon said factors such as the cost of health care coverage, 401(k) plans and other benefits figure into where a person chooses to work. He said WaterStone pays bonuses to its employees annually, and workers vested in the bank’s employee ownership plan will receive 20% of their pay in stock this year. In addition, he said, the bank tries to be flexible about work schedules to accommodate family events and other personal needs of workers.
“With the tighter employment, people are going to be paying more anyway,” Gordon said.
While it’s too soon to say how many other Wisconsin banks might raise their minimum hourly wage to $15, Oswald Poels said she likes what the moves so far seem to illustrate.
“I think all of this is a very positive example of how the marketplace can do very good things if left on its own and government gets out of the way,” she said.