Bank of America (BAC) announced on Tuesday that the hourly minimum wage for its US employees will be raised to $25 by 2025.
“It costs us a few hundred million dollars a year … but it’s an investment,” bank CEO Brian Moynihan told CNN’s Poppy Harlow on Tuesday, adding that it’s about maintaining a “great standard of living for our teammates.”
Paying more helps employees develop a “career mindset” which breeds loyalty, he adds. This, in turn, is how shareholders will be compensated in this initiative.
“The key is for big companies like ours to set a standard,” Moynihan explained. “We think it’s part of sharing our success with our communities.”
It is not the first time that Bank of America has increased the minimum wage for its employees. The bank increased its minimum wage to $15 per hour in 2017. Two years later, the company announced that it would raise that level to $20 over the next two years — and did so ahead of schedule, with an increase affecting more than 200,000 employees.
It’s another step in the national debate over minimum wage, which has resurfaced in the aftermath of the pandemic and the inauguration of President Joe Biden, who supports raising the federal minimum wage to $15 per hour. In his address to a joint session of Congress on April 28, the president reiterated his support for this.
Last month, Biden also signed an executive order raising the minimum wage for federal contract workers from $10.95 to $15 in early 2022.
Along with the employee changes announced Tuesday, Bank of America will require its vendors and suppliers to pay their employees at least $15 per hour. This affects over 2,000 vendor companies and 43,000 vendor employees. According to Moynihan, 99 percent of vendors are already paying a minimum wage of $15 per hour.
In the meantime, other banks are raising wages as well, albeit not as aggressively.
JPMorgan Chase (JPM) announced in 2018 that it would raise the minimum wage for 22,000 employees from $15 to $18 per hour, depending on their local cost of living. The bank committed to $18 per hour in Washington, DC.
In 2019, Citigroup (C) increased its minimum wage to $15 per hour. JPMorgan CEO Jamie Dimon said in an interview in April 2019 — a year before the pandemic derailment of America’s strong labor market — that raising minimum wages was “not an arms race” for the private sector, defending his bank’s decision not to raise its minimum wages. Dimon went on to say that the banking industry was doing well in terms of employee pay.
