Employers are underpaying hourly workers, and it's costing their business

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While the cost of living in the U.S. increases year after year, wages have struggled to keep up — and workers may be reaching a breaking point.

The federal minimum wage has remained at $7.25 per hour for over a decade, making it an unlivable wage in a country where the average American pays around $1,300 per month on rent alone. Even the District of Columbia, which has the highest minimum wage in the U.S. at $16.50 per hour, has not kept up. According to finance resource SoFi, the average money needed for rent, utilities and food would swallow a minimum wage worker's monthly pay. 

If hourly workers cannot make a living wage, does that mean they are not valuable? Rahkeem Morris, founder and CEO of HourWork, an hourly employee recruitment and retention resource for employers, believes employers need to overhaul how they compensate employees or risk a loss in talent and productivity.

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"Minimum wage should match the productivity of workers, and it's out of whack," says Morris. "In terms of where the wages need to go next, it simply needs to be correlated to how much value workers are providing employers."

Given that the industries struggling the most in today's labor landscape are industries dependent on hourly workers like food service and hospitality, there seems to be a connection between hourly workers being underpaid and which businesses are struggling the most to retain talent.

In an ideal world, employers would compensate workers according to how much profit the business makes as a whole, Morris explains. Since employees are vital to whether companies are able to increase revenue and minimize unnecessary costs, they should benefit since their place of work is benefiting from them. 

For Morris, this is not only a way to help workers see better pay, but give employers a sustainable business strategy. 

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"Profit is revenue minus expenses," says Morris. "If employers gave a percentage of their profits to hourly workers, it informs them that increases in revenues and decreases in expenses are part of their job responsibilities. It incentivizes hourly workers to do the right thing and think about their [workplace] as a business."

A common saying among hourly workers in the last few years is to "act your wage" — there's no need to go above and beyond if one's wage doesn't reflect that effort. Morris believes this kind of thinking ultimately harms employees and businesses, creating a negative feedback loop. Employees do not find value in their workplace because employers do not seem to value them financially. So, employees quit, and employers are forced to spend more money finding new talent while finding themselves short-staffed and generally less productive, explains Morris. 

In order to keep employers accountable, Morris suggests leveraging technology. Employers could use an app or daily text messages to notify employees on day-to-day sales, as well as quarterly check-ins on overall growth. Morris, who dropped out of high school at 14 and worked at Taco Bell, recalls being amazed by how much a fast-food restaurant would make on a given day.

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"That is something all hourly workers would want to know about their employers," says Morris. "There should be a way to leave a trail record over time that will create accountability."

Since the government seems hesitant to meaningfully adjust the federal minimum wage, it's likely the responsibility will fall on employers to make a change for the sake of their workers and businesses. At the end of the day, paying workers the bare minimum may not be a sustainable business model. 

"Employers are in the worst labor economy of our lifetime," says Morris. "Employers and employees have come together."

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