Workers are struggling to make ends meet, with new data finding that nearly half are not making a living wage.
Only 56% of full-time workers in the U.S. are making a living wage, while 44% are not earning enough to cover their family’s basic needs, according to the inaugural Dayforce Living Wage Index, developed in partnership with the Living Wage Institute, an organization that launched last year.
The report used data from 600,000 full-time U.S. workers and analyzed it using MIT’s Living Wage Calculator.
The results, said Kavya Vaghul, co-founder and chief product officer of the Living Wage Institute, are “startling” and serve as proof that employers need to evaluate wages. The findings come as pay increases are slowing after years of more substantial raises—despite the consistent financial pressures facing employees.
“There’s an open ocean of opportunity for employers to start addressing living wage gaps in their workforce, especially because when workers aren’t able to meet their basic needs, it introduces risks for both their personal lives and business outcomes,” she said.
Certain workers are especially feeling financial pressures, their precarious positions exacerbated by economic and labor trends.
Only 31% of full-time workers in leisure and hospitality, 36% of those in retail, and 46% of those in health care make a living wage—generally defined as having enough cash flow to cover their monthly bills, the data found. Those jobs also happen to be among the fastest-growing in the U.S., Vaghul said.
Minimum-wage policies, along with survey data on market competitors, typically guide how employers set their entry-level wage rates for these jobs, Vaghul added, but the federal minimum wage has stagnated at $7.25 per hour since 2009.
The gap is even more pronounced for women and people of color.
According to the report, men (62%) are significantly more likely than women (50%) to make a living wage. And 60% of full-time Black and Latino workers do not earn a living wage, compared to 32% of white workers.
“For these workers, a pernicious legacy of societal biases, unequal labor market policies, and discriminatory hiring practices continue to perpetuate the disparities in living wage earners we see by gender, race, and ethnicity,” Vaghul said. “Occupational crowding and the systemic devaluation of work—predominantly the caregiving work shouldered by women—all add to the problem.”
Employer Impact
Workers who earn a living wage are significantly more likely to achieve financial stability. Financial instability, on the other hand, can have a detrimental effect on workers’ physical and mental health.
Other Dayforce research found that workers making less than $50,000 a year are significantly more likely to rate their wellness as poor or very poor compared to their higher-earning counterparts. They are also three times more likely to choose this rating for their overall health, two and a half times more likely for their mental health, and three and a half times more likely for their financial health.
That in turn has a negative impact on organizations.
Workers experiencing financial instability can create volatility in employee retention, attendance, engagement, and performance, all caused by short-term liquidity challenges, Vaghul said.
“This volatility has an added impact of increasing workforce-related risks to an employer’s operational efficiency, productivity, and ultimately, revenue,” she explained.
Jason Rahlan, vice president of corporate responsibility and sustainability at Dayforce, said that making investments to close living-wage gaps within an employer’s workforce “is both the right thing to do for their employees and the smart thing to do for their business.”
Closing the Gap
There are steps employers can, and should, take, Vaghul said.
“It starts with being able to answer the question: ‘Are your workers making a living wage?’ ” she said. “Unpacking the answers to this question can help leaders identify who might be most at risk in their workforce and where they should focus their initial efforts. Employers can look at available living-wage data and insights so they can navigate challenges like balancing cash compensation with benefits offerings, forecasting wage growth scenarios, and tracking the worker and business impacts of evolving compensation approaches.”
Although closing gaps is complex, Vaghul said, offering competitive wages and benefits is an obvious solution.
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