Bank of America is jumping ahead of the $15 minimum wage movement. Beginning May 1st, it will hike its minimum wage to $17, and to $20 by 2021. Other big banks like JPMorgan Chase have already announced plans to hike the minimum wage to $18.
As of 2017, Bank of America was the fourth largest employer in the banking sector in the US, with more than 142,000 employees.
BankNumber of EmployeesWells Fargo232,321JPMorgan Chase191,929Citibank169,092Bank of America142,412
Source: Statista.com
What drives Bank of America’s generosity to its employees? Several things. One of them is a tight labor market that has companies competing for a smaller pool of qualified employees.
“ In recent months we've seen Target, Amazon, Walmart, McDonalds and others all indicate they're willing to pay a $15 an hour minimum wage as the price to hire good workers from a steadily shrinking labor pool,” says Jeff Yastine, Senior Equities Analyst at BanyanHill Publishing . “So it’s not surprising that Bank of America would as well. In fact, given the need for bank workers with strong math ability and other specialized skills, it’s more surprising that the bank didn't commit to paying $15 a year or two earlier.”
Then there are the layoffs and the bad rap banks have with the millennial generation, according to Yastine.
“Given the number of layoffs in past years as banks closed branches, and the overall ‘bad rep’ that banks have in general with millennials, my prediction is that BofA and other institutions may find themselves playing catchup, and upping wages still further, in order to attract the necessary people to offset retirements from baby boomers,” he adds.
And there’s the rising profitability of big banks, following a string of interest rises by the Federal Reserve, which boosted the “interest rate spread.” That’s the difference between what banks receive on the interest they charge borrowers and the interest they pay depositors.
This week, Bank of America reported strong financial results -- as did JPMorgan Bank last week. Both banks cited the favorable interest rate environment as the driver of profitability.
BoA and JPM Sharers YTD KOYFIN
BoA Revenues KOYFIN
BoA Net Income Margin KOYFIN
“ The Bank itself is doing pretty well from a balance sheet perspective and also wanted to reinvest into their business, outside from the common stock buy-back we've seen from the bigger companies,” says Jordan Awoye, Managing Partner at Awoye Capital.
Lastly, there’s a public ploy issue by celebrity executives to reform capitalism w ith the richest man in the world, Jeff Bezos, “calling out its competition to raise its minimum wage in his annual shareholder letter,” adds Awoye. “From the public's eye, Bank of America is part of this push to tip the scale for the employee market, which ultimately can be amazing PR for the bank.”
Awoye sees these wage hikes as being positive for banks and for labor as a whole. “ Slowly but surely , this will start to change the minimum wage landscape,” he adds . “As more and more employers raise their wage levels to keep up with the changes that are happening, the wages for the industry's ground level position will increase across the board.”
Provided, of course, that the economy continues to grow for years to come, defying historical norms.