There was a time — seemingly a very long time ago — when employee raises weren't big news. They happened most years, with an almost clockwork rhythm, as bumps in salary were doled out with the turn of each calendar year. Companies "didn't talk about it," says Peter Cappelli, a professor at the University of Pennsylvania's Wharton School who studies human resources and public policy related to employment. "I don't imagine it was really that newsworthy, because everyone was doing it."
Yet now, it seems, it is. Over the past year, several companies have made waves by offering across-the-board raises for their lowest paid employees, with some establishing minimum wage "floors" that are higher than federal guidelines. In early 2014, Gap said it would pay its U.S. employees at least $10 an hour by this June, drawing a visit from President Obama to its stores. Last summer, Ikea said it would raise the average minimum wage for its U.S. employees by 17 percent, to $10.76 an hour. And in October, Starbucks promised to increase its starting wages and boost the pay of all baristas and shift supervisors.
Now this week, health-insurance giant Aetna has promised to raise wages, too. On Monday, the company said that it would be increasing its U.S. minimum wage base to $16 an hour as of April, a change that would help some 5,700 employees. Aetna expects the average wage increase to be 11 percent, with some workers seeing as much as 33 percent. The company will also introduce a health-care plan next year that covers more costs for its workers.
Aetna said it made the move in part to better attract and retain highly qualified workers, as health care increasingly becomes a more consumer-oriented industry. The decision generated headlines in the Wall Street Journal, the New York Times and Bloomberg, among many others.
Why all the attention paid to a few companies' decisions to hand out raises? Part of the answer is that people are hungry for tangible signs that the economy has turned around — and that includes long overdue hikes in pay. After years of sluggish growth in wages (last week's good unemployment numbers actually showed a slight dip in hourly wages), it's encouraging that some companies are actually increasing salaries, and substantially.
Another reason, of course, is that these companies haven't done so quietly. Gap launched a broader "Do More" campaign to draw attention to its higher minimum wage and equal pay practices, and the company has spoken candidly of trying to brand itself as a progressive employer. Ikea and Starbucks released press releases on their raises. Aetna shared the news prominently on the news section of its Web site.
And perhaps the biggest reason these raises have generated attention is that some of them really are pretty unusual. For years, companies haven't set their own "floor" for what their employees would earn — the floor was simply the minimum wage, whether at the federal or local level. While companies used to ask what they should pay, Cappelli says, over time it has become: "What's the bare minimum we can get away with?" and "How low can we go?"
With higher wage floors, however, companies are again trying to show they're interested in paying more than just the lowest common denominator. When Gap announced its wage bump, it gave a nod to its founders, saying it wanted to "do more than sell clothes." Ikea, meanwhile, said in its press release that "we are basing our wages on our co-workers and their needs, rather than what the local employment market dictates."
And Mark Bertolini, Aetna's CEO, told the Wall Street Journal that "it's not just about paying people, it's about the whole social compact [sic]." He added, “Why can’t private industry step forward and make the innovative decisions on how to do this?”
Bertolini asked his team of executives to read Thomas Piketty's nearly 700-page treatise on income inequality, for one. He speaks openly about introducing mindfulness and yoga at Aetna. And he talks candidly about how "one of my goals has been to help re-establish the credibility of corporate America," as well as how he wants to "bring everyone along instead of just a few."
Cappelli says that context is what makes Aetna's decision more noteworthy. "It comes with a statement of principle rather than just 'we had to raise wages because of a tightening labor market,'" he says. Though, of course, that was cited as a reason behind the decision as well. "In an age of shareholder maximization, everything had to be couched in the language of how this pays off for shareholders."
Ultimately, such raises should be beneficial for these brands, notes Paul Argenti, a professor who studies corporate communications at Dartmouth's Tuck School of Business. "Trying to please consumers is a good thing, but trying to operate in society's best interests will help you more," he says. "It's part of the bigger picture of how companies present themselves at a time when the attitudes about business are pretty negative."
And there's an economic argument that it should help the bottom line, too. Aetna does need to attract the best talent and reduce turnover as it increasingly moves into the consumer industry and has to rely more and more on the quality of its front-line staff. Raising wages should help them do that. After hearing about Aetna's move, two economists wrote a review of academic literature that showed higher wages for low-income workers can indeed generate higher productivity and company savings.
So will more big businesses follow the lead? It's too early to tell. But if they do, we're likely to hear about it.