Watching Wages Rise
Credit unions in the state of Washington may be the test case to watch as minimum wage hikes begin to spread from state to state.
Because their jobs typically pay above mandated minimums, credit unions there don't expect an immediate and direct impact on payrolls, but will a higher minimum wage boost those already above the minimum? Will some members’ paychecks grow to where they may be able to afford a loan they couldn't qualify for previously?
Washington currently has the nation's highest state wage floor at $9.32 an hour. Voters in the Seattle suburb of SeaTac approved a jump to $15 an hour, but the U.S. Supreme Court is now deciding whether that should apply to workers at the airport run by the Port of Seattle.
A court challenge has also been filed against a vote by the Seattle City Council to raise the minimum wage there to $15 an hour.
Anne Shannon, SVP for human resources at the $12 billion BECU in Tukwila, pointed out that Washington has one of the nation's lowest unemployment rates, about 6%.
“Right now our economy is pretty robust,” she said.
“Metro Seattle, along with a handful of other cities, has seen a huge boom in technology,” added Todd Pietzsch, the credit union's manager of public relations. Economics 101 suggests high demand for workers means employers must offer attractive wages to lure staff.
Shannon noted passage of the $15 minimum in Seattle has drawn a lot of media attention.
As for BECU, “Our lowest-paid workers earn around $13 or $14 an hour,” she said. “That reflects our local market here in Seattle. When the $15-an-hour law is fully in place, we might have to raise some people, but by then they would probably be over $15 anyhow.
“When I was thinking about the effect of the $15 minimum wage, I looked at what we would have to do if it impacted the bottom wage earners. We did make a recommendation that we would actually increase some other positions to higher pay rates to reflect the job complexity and to keep relative pay in place. “
Another factor is job benefits. Shannon believes a credit union would be challenged to hire and retain employees without a significant benefits package. She said the credit union pays about 38% beyond the hourly rate in benefits including paid time off, medical insurance, dental and vision coverage, life insurance, retirement and long-term disability.
To educate employees about this, BECU issues a Total Rewards Statement showing the value of such benefits to the employee and his or her family.
Looking beyond the credit union's employees, let's assume some BECU members see minimum wage hikes boosting their paychecks. Does that suggest the credit union will gain as those members qualify for loans they couldn't previously afford?
“Net income is obviously something that's looked at,” Pietzsch responded. “If somebody is making more money that's certainly going to increase the probability they’re going to qualify for a loan or possibly a larger loan. That's true for anyone whose income increases over their lifetime.”
Shannon offered another perspective. There are many wage-based programs that provide benefits such as food stamps. If the minimum wage increases, some people could see themselves no longer qualifying for certain assistance, leaving them with higher costs at the grocery store or elsewhere and less income for other expenses such as loans.
Jeff Adams is president/CEO of the $601 million Horizon Credit Union in Spokane Valley. Although his credit union isn't affected by the SeaTac or Seattle minimum wage laws, it does fall under Washington State's new $9.32 minimum.
Adams sketched a mixed outlook regarding employment in the Spokane area.
“The economy has moved in the right direction over the past couple years,” he observed. “There are a couple things that have impacted jobseekers. There are more jobs available because unemployment is lower. But in our area a couple of larger companies have closed and there have been some mergers.”
Jodie Olson, vice president of human resources, confirmed HCU entry-level jobs start above minimum wage and agreed with comments from BECU that a total compensation package is important.
As for the impact of minimum wage hikes on members, there are many variables.
“Some people may be able to go out and get loans,” Adams said. “But if you get a $2 or $3 an hour raise, you usually don't run out and buy a car right away. You’re going to see costs in other areas increase.”
Just as all politics is said to be local, evidently the impact of minimum wage hikes varies from Seattle to the eastern side of the state.
Suzy Fonseca is president/CEO of the $64 million Lower Valley Credit Union in Sunnyside, Wash. It's a rural area, relying heavily on agriculture.
“Like many employers, we have always strived to pay higher than minimum to attract and retain the best possible talent,” Fonseca said.
“With that said, the as minimum wage has increased our spreads have decreased, and although we have managed nicely, it has made it a bit more challenging to stay ahead of the pack in this respect.”
Fonseca, whose credit union was the 2014 winner of the CU Times Trailblazer Award for Outstanding Service to the Underserved, also doesn't see a minimum wage increase affecting LVCU's members to any great extent.
“We serve a unique membership mix,” she explained. “Since we are agriculturally rooted we support our farmers as well as our farm laborers. Their buying power is relatively unchanged due to the volume of the workforce.”