As more Americans emerge from their homes and resume their day-to-day routines, there is a new casualty stemming from the coronavirus — hazard pay.
To understand why, first we need to go back in time. When the highly contagious virus first gripped the nation, there was a prevailing sense by business owners that essential workers should be compensated for continuing to show up to work, particularly as much of America was staying at home. As a result, many employers opted to increase the pay of those continuing to work in the risky environment of the early days of the pandemic, deploying a practice commonly referred to as hazard pay.
But despite the fact that companies were lauded for paying more to their employees, it didn’t change the fact that many of the those individuals who are deemed essential workers, such as grocery cashiers, transit worker, package handlers, and food workers are often paid an hourly pay rate that makes affordable living difficult. So while the marginal increase in pay was a welcome development for workers who often struggle to make ends meet, there was always a sense that the hazard pay may be only temporary.
As states reopen, increasing numbers of companies are ending their practices of hazard pay. Some of the larger companies are in the process of phasing out the raises by the end of May, with the plan to return to pre-pandemic wages in June. For example, in mid-March Amazon increased pay for its warehouse workers by $2 and doubled overtime compensation, but the Seattle-based company plans to end the supplemental pay at the end of the month. Rite Aid ended its additional $2 pay on May 16th and other retailers such as Kroger, Starbucks and Target all plan on sunsetting their additional pay at the end of May — in some cases giving final bonuses to employees in lieu of continued hazard pay.
But even as the supplemental pay disappears, the higher risk conditions that necessitated them continue. While some states have seen a reduction of coronavirus cases, there are many states that have maintained a high number of infections even as states accelerate their reopening. The expectation that cases may rise over the summer as people loosen social distancing practices is also a risk. And then there is the research that shows that the chance of contracting the virus is higher depending on your amount of exposure – which is something front line workers might not be able to avoid.
But perhaps the most enduring risk for the employees who have received hazard pay is that many of them don’t earn a living wage in the first place. Researchers at MIT calculate that national living wage — the earnings that are needed to meet a family of four’s basic needs (two working adults and two children) — is $16.54 per hour, or $68,808 per year. But that number is much greater in urban areas, and cities like NYC ($93,851) and San Francisco ($94,741) require significantly higher living wages. For those earning only the federal minimum wage of $7.25 per hour, making a living wage is almost impossible.
While many companies pay workers higher than the federal minimum wage due to higher local pay standards as an as a consequence of the tight pre-pandemic labor market, the fact remains that most ‘essential’ American workers are woefully underpaid. In fact, some are so underpaid that they can’t even earn a living wage to keep their families supported while they risk their own lives.
Which is why now is the time to ask the question, why roll back the hazard pay at all? Understandably many employers are struggling in the faltering U.S. economy, but with over $1.3 trillion of worker income having disappeared since the start of the pandemic, more and more workers risk falling through economic safety nets. By cutting back, especially at a time of greater need, employers risk increasing the financial hazard of their employees, at the same time their work remains physically hazardous.
So perhaps rather than claw back hazard pay and further deepen an already historic level of income inequality in America, now is a time for employers to sustain the hazard pay they implemented early in the pandemic and convert it to a living wage raise for their employees. In a time when many people think the pandemic is changing things for the worse, this kind of support for front line workers would be one thing that could change for the better.
And that’s the kind of healthy change that can even be done without a vaccine.