PayPal Answered the Call for Fair Pay, Now Others Are Following Suit

Originally featured in Strixus Magazine

If you could pull out a timeline of capitalism, one of its most dramatic shifts would be pinned in the year 1981 as Reginald Jones stepped down as CEO of General Electric, allowing Jack Welch to take his place. Welch went on to devote the next 20 years of his life to reshaping the company — and the economy — with his stark display of iniquity. 

In his book, David Gelles dubbed him “The Man Who Broke Capitalism” because Welch went down in history as the first CEO to use offshoring, outsourcing, and mass layoffs as a tool for growth. His management strategy could be summed up as “cheap labor at all costs” and — at the expense of every generation of working-class citizens since — his method became the de facto corporate model. 

Forty years later, while Welch’s imprint is a long way from disappearing, it is beginning to fade. Amid the cost-of-living crisis, a handful of executives remind us that the country’s wealth is becoming increasingly concentrated amongst one small slice of the population — and they’re actually doing something to disburse it.  

Why the Minimum Wage Isn’t Enough

Had the minimum wage kept up with increases in economic productivity, it would be set to $26. Instead, it hasn’t budged since 2009, when it was locked in at $7.25 an hour. That means a minimum-wage job at 40 hours per week adds up to a measly $15k per year, putting those workers scarcely above the poverty line.

Recognizing that the federal minimum wage simply isn’t enough to live on, more states have begun enforcing their own minimum wages. California has the highest at $15/hour (which adds up to $31k annually), but the difference in pay is nullified by extra expenses since the state’s cost of living averages $46,636 a year. 

Even for states like Connecticut and Massachusetts, which plan to match California’s minimum wage starting in 2023, the increases barely keep up with workers’ expenses. Still, these attempts are ever so slightly better than places that aren’t trying at all — like in the 32 other states where the minimum wage remains less than $10.50/hour. 

So if the minimum wage isn’t enough, what is? More private corporations are beginning to take it upon themselves to answer that question. Leaders like Dan Schulman, CEO of PayPal, say they would have acted a lot sooner if they had only been more in touch with the everyday worker. 

Giving New Definition to the Living Wage

Traditionally, the term “living wage” has been used to describe a pay rate high enough to cover health care, child care, taxes, housing, and food. However, the calculation leaves no room for eating out, entertainment, or savings. 

What’s more, since the actual cost of living ranges widely from one region to the next, it’s nearly impossible to peg down a true living wage. These reasons are precisely why Schulman, who became CEO of PayPal in 2014, decided that he needed a metric much more practical and transparent. 

At a company that’s now worth roughly $93 billion, Schulman assumed everyone at PayPal was being fairly compensated but he soon became aware that some 10,000 employees could hardly make ends meet. So in an attempt to define a healthy wage, Schulman collaborated with a handful of nonprofit and academic groups to create the NDI or “net disposable income” metric. 

Through months of research and surveys, Schulman and his colleagues determined that an NDI of 20% was an acceptable standard to cover all essential expenses (including clothes, school supplies, and healthcare) while still leaving enough for a household to save for the future. Now Schulman is challenging other companies to do the same. 

Using Data to Inspire Action

When Schulman first used the new NDI metric to assess PayPal’s compensation data, it revealed that roughly half of PayPal’s employees had an NDI of just 4%. In response, the company immediately raised wages for employees with low NDIs and introduced a program to help workers learn the ins and outs of managing, saving, and investing their money. 

PayPal then went a step further, giving every employee an opportunity to own PayPal stock. Schulman also introduced a $5 million fund to help workers cover unexpected expenses like car repairs and medical bills. Then PayPal cut healthcare costs by 60% for its lowest-paid workers, allowing them to take home bigger paychecks. 

Some months later, PayPal sent out its survey again to find that the lowest NDI had quadrupled to 16% and most targeted employees had successfully topped the 20% mark of financial security. With that, Schulman approached Brian Niccol, CEO of Chipotle, and encouraged him to measure his employees’ financial health with the same marker.

Upon discovering that many of Chipotle’s workers were also living paycheck to paycheck, Niccol didn’t hesitate to act. Employee wages were increased by nearly 20% to an average of $15/hour, plus the company bolstered benefits, introducing education reimbursement and debt-free degrees. In the months to follow, Niccol’s report was enthusiastic. “We’ve seen just a dramatic change in people’s retention as well as their confidence in their future,” he said.

The Shift in Corporate Thinking

Given the initial success of Schulman’s program, PayPal partnered with JUST Capital last year and, in collaboration with the Financial Health Network and the Good Jobs Institute, they established The Worker Financial Wellness Initiative. 

Within months, major corporations like Chobani, Even, Prudential Financial, and Verizon joined the initiative. Earlier this year, Synchrony also jumped on board, which means the initiative now represents over 800,000 American workers. 

Outside of the initiative, other corporations also say they are taking strides towards improved compensation but public outcry says it is far from enough.

Years ago, Amazon bumped its starting wage to $15/hour for all positions and they have been lobbying Congress to match it ever since. However, recent accusations against the retail giant cite unsafe working conditions, union-busting tactics, and exhausting productivity targets.

Following union complaints, walk-outs are now happening at Amazon facilities around the world. Stateside, protesting employees are demanding paid breaks, better medical leave, and a $30/hour minimum wage. 

Amazon workers have even been joined by the “People Over Prime Coalition,” which consists of 70 TikTok Creators with a combined 51 million followers. 

Until changes are realized, the coalition has sworn to prevent Amazon from monetizing their personal brands and — they hope — all of TikTok, a platform that generated millions in revenue for Amazon last year. 

An Outdated Ideology

Public movements such as this one in combination with the growing roster of companies joining Schulman’s initiative evince one thing: There is little room left for ideologies like Welch’s in today’s America. 

Whether business leaders are inspired by their own ethics, or forced to change their ways amid worker shortages and retaliation, wages are now rising at their fastest rate in decades and it seems the public is prepared to fight for more.

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