Amidst a national movement calling for a boost in the minimum wage to $15 per hour, one credit union has already planned to carry out this pay hike.
The University of Wisconsin (UW) Credit Union, a $2.2-billion institution based in Madison, Wis., said that by September 2017, it will boost the minimum wage paid to its employees to $15 an hour—more than double the $7.25 minimum wage currently mandated by state law.
It is believed that UW CU is the first credit union in Wisconsin to commit to paying a minimum hourly salary of $15.
UW CU said this policy will affect about one-quarter of the company's more than 500 employee-strong workforce. The CU has long been committed to paying above minimum wage. In 2009, UW CU established what it calls its "Foundation Wage"—aimed at providing all of its workers with a "good living wage, even when prevailing market conditions would provide less." The Foundation Wage currently stands at $12.60 an hour. The pay rate will jump in September 2016 to $13.80 an hour and subsequently to $15 an hour by September 2017.
The Foundation Wage, UW CU noted, has made it possible for full-time employees "to earn a sustainable income without adding an additional job." The Foundation Wage was also created for part-time employees, providing them with "a quality job that allows better balance in student activities and/or other family obligations."
"We have increased the Foundation Wage every year," said Paul Kundert, president and CEO. "This action is very consistent with our business philosophy. As a credit union, we don't charge our members the highest price possible and we aren't trying to pay people the lowest wage possible. We think virtuous cycles work."
Fairness also enters into this discussion as well—and not just related to wages. For instance, Kundert explained that the credit union made a business decision that its overdraft practices would be "consumer-focused."
"Annually, we give up about $18 million in overdraft income on our checking accounts compared to the bank average," he said. "While we can't predict what is going to happen in the next decade, we do believe that organizations that are fair will have the best employee talent, most satisfied members and will discover sustainable success."
Indeed, improved levels of productivity are also what make this pay increase possible, he indicated. "We've seen significant increases in member satisfaction in the past five years," he said. In fact, the January issue of Consumer Reports ranked UW CU as the top financial services firm in Wisconsin and among the top 15 in the nation.
"At the same time our efficiency has soared," he cited. "Over the past five years, we've added 60,000 checking account members through organic growth (a 55% increase). Over the same period our employment FTE's [full-time equivalents] increased by 29%."
Kundert pointed out that the total combined cost to the organization arising from the wage hike will result in an increase in its annual operating budget of 0.6% by 2018. Since the Foundation Wage is already $12.60 an hour, the move to $15 represents a 19% increase. In addition, the credit union has doubled in size since formulating the Foundation Wage concept in 2009.
By 2018, Kundert noted, some full-time employees at UW CU will see a combined annual pay increase of nearly $5,000 "which will allow them to spend more money in the local economy, increase their savings and standard of living for themselves and their families."
However, for now, while the hourly pay increase affects about 25% of the credit union's workforce, it will not directly affect the salaries of other employees.
Although the state of Wisconsin has yet to approve a $15 minimum wage by law, Madison may be an ideal place for this to occur, given its long history of progressive values.
"Madison is an educated, connected city and home to UW-Madison," commented Kundert. "This community is focused on the big issues happening today and is committed to making a difference. Being a well-educated community, people are not just engaged in what's happening locally, but what's happening across the U.S. and globally."
Kundert added that the commitment states are making to implement a $15 an hour minimum wage is not new "and in fact, is something I think many businesses in Madison and across Wisconsin are discussing. "
Moreover, with unemployment in Madison at just under 3%, the business community is looking to continue to attract and maintain highly engaged talent, he added. "We believe one of the benefits of this change will help us increase the number of applications for open positions and reduce employee turnover," Kundert noted.
He also commented that raising the minimum wage aligns perfectly with the credit union philosophy of people helping people. "Edward Filene, who is considered the father of the U.S. credit union movement, strongly advocated for fair wages as a way to stimulate economic prosperity," he said. "In fact, he was very outspoken on the concept of a national minimum wage. So the philosophy of fairness in access to financial services and fairness in pay certainly co-existed in his mind."
As such, Kundert believes more credit unions will eventually raise their minimum wages.
Ben Rogers, managing director-research at Filene Research Institute, commented that minimum wage is not a big issue at credit unions. "Most credit unions pay even their entry- level employees more than minimum wage because of the skills and trust needed to work in a financial institution," he said.
However, Rogers, who is also based in Madison, noted that the debate about "minimum" versus "living" wages has been a hot topic locally and nationally. "As cities like Chicago and Los Angeles boost their mandatory minimum wages, smaller cities like Madison take note," he stated.
If the lowest wages are increased at a credit union, Rogers noted, rising wages will "probably float" more than one or two boats in the harbor. "They won't have to, but it will tend to put upward pressure on salaries across the board if you want your people to have opportunities for advancement," he said. "But an attractive minimum wage could have the added benefit of attracting better candidates and employees and getting them to stay longer."
Indeed, there is clearly a national movement afoot to increase minimum wage. So far this year, the state of New York passed a law that calls of raising the minimum wage to $15 per hour by the end of 2018. Earlier in the year, California passed a similar law, where the minimum wage will rise to $15 by 2022.
According to the U.S. Department of Labor, a total of fourteen states began 2016 with higher minimum wages.
In addition, the City Council of District of Columbia has just passed a resolution to increase the minimum wage in the city from $11.50 to $15 per hour by 2020.
John Bratsakis, president and CEO of the MD|DC Credit Union Association, commented that, generally, credit union employees working full time in the D.C. region make more than the current minimum wage and that there is expected to be "minimal impact" when the $15 increase if fully phased in.
However, he added, credit unions are looking at the potential for a "ripple effect" and the possibility that some salaries will have to be realigned to correspond with a higher minimum wage.
As for the near future, Rogers of Filene believes that more credit unions will likely seek to hike their minimum wages. "As you saw with Walmart raising its own minimum to $10 in 2016, all employers are taking stock of the tight labor market. Some are moving more quickly to snatch up and keep the best workers," he concluded.
