Many US workers don’t earn a living wage. Can HR help?

When it comes to wages, for many employees the bare minimum is no longer enough.

In light of heightened concerns around inflation and financial security, some companies have started to shift their focus from the minimum wage to a “living wage,” defined by the Massachusetts Institute of Technology’s Living Wage Institute as the amount a full-time worker must earn “to help cover the cost of their family’s minimum basic needs where they live while still being self-sufficient.” L’Oreal, Unilever, and Michelin are among the global organizations that have committed to paying their workers a living wage.

A large share of workers in the US still don’t earn a living wage, according to data recently published by Dayforce and the Living Wage Institute. The research found just 56% of full-time US workers earn a living wage, with stark disparities among women and workers of color. Half of full-time female workers do not earn a living wage, while 60% of Black and Hispanic or Latino workers aren’t earning enough to pay for their family’s basic needs.

“Frankly, the results are startling,” said Jason Rahlan, VP of corporate responsibility and sustainability at Dayforce, adding that he hoped the research would be a “wake up call” for businesses.

Wealth → wellness. The fact that 44% of full-time US workers don’t currently earn a living wage is a reflection of “longer term economic trends that we’re seeing,” said Kavya Vaghul, chief product officer at the Living Wage Institute. Some of the fastest-growing jobs in the US, for example, are concentrated in sectors that tend to hire low-wage workers, such as retail, caregiving, and leisure and hospitality. Perhaps unsurprisingly, these industries also showed the highest concentrations of workers not earning a living wage, according to the data.

Even as some employers have raised their minimum wage to $15 or even $20 an hour in recent years to compete for talent, “the challenge is that cost of living has increased at a fundamentally faster pace,” Vaghul said.

Rahlan drew a direct connection between workers’ wages and wellness, citing a separate survey Dayforce conducted in partnership with SSRS that found employees making less than $50,000 a year were more likely to rank their overall health as “poor or very poor.” These respondents were also more likely to report experiencing certain mental health conditions, including anxiety (46%), stress (32%), and depression (32%).

How HR can address concerns about the living wage. Given the potential impact of inadequate wages on employee well-being, employers could benefit from analyzing living wage trends among their workforces, Rahlan and Vaghul suggested.

HR leaders can start this journey by simply asking, “Are your workers making a living wage?” Vaghul said. “Unpacking that question can really help leaders identify who might be most at risk in their workforce and where they should target their initial efforts.” This might involve comparing employees’ payroll statements against living wage figures, and assessing which workers are seeing the biggest gap between their earnings and the wages necessary to cover their minimum basic needs.

Organizations are starting to see financial wellness benefits—in addition to cash compensation—playing a role here, too, Vaghul said. Employers may consider offering childcare subsidies, commuter benefits, tuition assistance, or emergency savings accounts to help offset the high cost of living for their workers. Such benefits “are also something that play a really critical role in curbing the high cost of basic needs for workers,” she said.

Employers in low-wage sectors are increasingly leaning into benefits to attract talent, HR Brew previously reported. In some cases, such perks are tied to financial security, with companies like DoorDash and Grubhub piloting programs that allow workers to save for healthcare or retirement—benefits gig workers don’t typically receive through their jobs.

Of course, benefits aren’t a substitute for wages, acknowledges Timothy Flacke, co-founder and CEO of Commonwealth, a non-profit that works with employers to help workers build financial security. Employers investing in financial wellness benefits may face questions about why they can’t simply pay their workers more, though Flacke said the calculation isn’t always simple.

“Employers are under very real pressures,” he said. Many of the organizations Commonwealth works with “would like to be able to pay lower wage workers the best possible wage that they can, and...it’s not always as easy as just deciding to do it.” The non-profit sees benefits such as emergency savings accounts as a low-cost way to help workers achieve financial security.

“We think it would be a missed opportunity if the conversation became exclusively about wages, without recognizing that really, all of us need tools and opportunities to turn those wages into the outcomes that we want.”