Auburn University signs a check of loyalty to employees, but not to students — economists weigh in

On Oct. 18, Auburn University announced it will be increasing the minimum hourly wage to $14.50, taking effect Jan. 1, 2022

Although there are predictable bumps in the road, Auburn University President Jay Gogue writes in an email with excitement, "I am proud that Auburn is able to make this commitment to our employees. We recognize the crucial work our employees undertake every day by demonstrating that all members of the Auburn Family are valued and their efforts are appreciated."

In the email released to students, Gogue celebrated this victory and made sure to remind students that this decision would have no impact on tuition and fees. Many students joined in celebration while forgetting to read in between the lines: no student workers will experience the benefit from increased wages.

Although this increase will ensure that approximately 400 employees' salaries will increase to $30,160 with benefits, more than 3,200 student workers will continue to work at the federal minimum wage of $7.25 with no benefits.

A STEP IN THE RIGHT DIRECTION

Amy Bruce, a manager at Auburn’s Student and Temporary Employment Services in the Human Resources Department, explained that although some students will continue to earn only $7.25, “Student pay is determined at each department's discretion with consideration to the federal minimum wage, as well as other factors.”

Bruce argues that although this next step will only help a small group of employees, considerable strides are still being made.

“Since 2016, Auburn has implemented a series of much needed sustainable pay practices impacting our administrative, professional and staff employees,” Bruce said. “Annual funding was secured to purchase salary surveys to help inform market competitive rates for our positions.”

Auburn’s commitments that Bruce references are apparent in their participation in the STARS program, following a recommendation to senior leadership by Associate Vice President of Human Resources, Karla McCormick.

The Sustainability Tracking, Assessment and Rating System is a transparent, self-reporting framework for colleges and universities to measure their sustainability performance.

“This program encourages institutions to be responsible employers by helping the lowest-paid workers earn a ‘living wage’ whereby they can be paid above the poverty level without requesting public assistance,” said Bruce.

STUDENTS LEFT IN THE DUST

This steppingstone without a doubt deserves a large ‘War Eagle!’ However, some students beg the question, “when will we be next?”

Junior Sydney Blaxton weighed in.

“When the email first went out, honestly, I thought everyone was qualified for the pay increase because they said, ‘qualifying part-time employees.’ They didn’t necessarily specify who,” said Blaxton, a student studying management with a concentration in human resources who works in the Office of Undergraduate Admissions.

Blaxton is one of many students who perform balancing acts to keep their grades up, make some money on the side, be involved in extracurriculars and enjoy their four years on campus.

“I believe the minimum wage is fair for what we do. But at the same time, with everybody getting such a high pay increase, a little promotion would be beneficial because we are working on top of doing school and extracurriculars as well. It is a lot to handle,” she said.

Outside of the office, Blaxton is a student recruiter for prospective students and serves as the head counselor for panhellenic recruitment.

As Blaxton referenced, some expected Auburn to initiate a slight increase in pay for student jobs, given that approximately 400 workers experienced a 100% increase and student-workers still receive no benefits.

“Everyone at my work was super excited about it, especially the students. After learning we didn’t qualify, we were bummed about that,” said Blaxton.

This was an unfortunate lesson that if it sounds too good to be true, it probably is.

Another student surprised and taken back by Auburn's exclusion is sophomore Rachel Brooks.

Brooks began working at Chick-Fil-A in her hometown of Mobile, Alabama, during high school. She is one of 4.8 million workers in the fast-food industry who receive an average annual salary of $25,848 when working full time. (https://www.zippia.com/fast-food-worker-jobs/demographics/).

According to Business Insider, “The median necessary living wage across the entire U.S. is $67,690.” (https://www.businessinsider.com/living-wage-income-to-live-comfortably-in-every-us-state).

"I started making $8.50 an hour, and I now make $10.75," Brooks explained, adding that not only does she receive a free meal each shift, but there are also scholarships she can apply for each year through her employer.

Before working at Chick-Fil-A, Brooks was a hostess at Chili's. "I was getting paid minimum wage. It was awful."

"When I first read the email sent out to students, based on what I read, it led me to assume that all student workers would also be granted a pay increase," Brooks said.

What was soon excitement and surprise transitioned into disenchantment. "All of my friends that work on-campus jobs were also under the illusion that they would receive pay increases," Brooks said. "I even considered looking for an on-campus job and leaving the job I have grown to love."

As someone who works in the fast-food industry, Brooks referenced a fear that many of her co-workers share: the transition into automation and kiosk ordering.

"If they start terminating jobs like front desks, call centers or other foodservice jobs like mine, they will only need workers with specific skills. Maybe Chick-Fil-A will only need chefs, or maybe they won't even need those in the future," worried Brooks.

HARD WORK, HUMAN TOUCH AND ROBOTS

There is a mile-long list of things that bring the Auburn Family together. The fight song, Toomer's lemonade, the eagle flight and the Auburn Creed, to name a few.

The Auburn Creed may serve as a backbone to this decision, stating, "I believe that this is a practical world and that I can only count on what I earn. Therefore, I believe in work, hard work."

But the lines about human touch and skillful hands are what stick out to Auburn University economics professors and students.

The first primary concern is although this increase will help current employees, is Auburn shutting the door for future hires? According to the Auburn University Human Resources 2021 Impact Report, there were 521 new hires. Will this number be cut in half? (http://www.auburn.edu/administration/human_resources/impact-report/2021/index.html).

With varying opinions from experts, their common ground is much is unknown and knowledge is a mansion with many rooms regarding this topic.

Chris Vickers, associate professor of economics, said, "It is difficult to say. Since Auburn appears to be doing this voluntarily, it's probably unlikely to reduce employment in the short run. In the long run, however, it may reduce employment via greater reliance on contractors or through the automation of some tasks."

Automation has slowly crept onto campus. First was the installment of the Grub Hub app, where students could order food without having to wait in line and order with the cashier.

Many of the dining options are entirely grab-and-go. Au Bon Pain, a popular cafe on campus, no longer offers made-to-order sandwiches or salads. Einstein Bagels now only allow orders to be placed on the app. No cashiers are present.

Is this where Auburn starts to lose a sense of their creed? "I believe in the human touch, which cultivates sympathy with my fellow men and mutual helpfulness and brings happiness for all?"

Professor and economics department chair, Hyeongwoo Kim, explained that although there may be some budgeting issues at first, the improved economy will be all the proof needed for this adjustment.

"If the economy has some unused resources and excessive profit to employers, raising the minimum wage should have more benefits than cost, because workers will be able to earn more and consume with low profitability," Kim said.

Vicker showed Kim support by explaining spending multipliers. "The increase in minimum wage can potentially reduce inequality, which some may see as desirable. There will also be macroeconomic effects through channels of spending multipliers that will affect and improve a wider range of demographics," he said.

Another example of Vicker’s was Henry Ford’s ‘Five-Dollar Day,’ when the Former President revealed that Ford Motor Company would double its workers’ wages to $5 a day. Soon, other automakers boosted their own wages to keep peace with Ford, which improved the standard of living for all employees.

The efficiency wage model of Ford prompted employees to adopt efficient and productive habits at both the factory and the home.

In contrast to Vickers, Russel Spears, a fellow economics lecturer, said he believes "the short-term effect is less hiring and employment, almost right away… and getting the press off your back."

Before explaining to Spears that this impact would leave student workers in the dust, he said, "Student jobs are great as they provide more spending money for students at local bars and restaurants, which helps stimulate the economy and strengthens responsibility,” reflecting the effects of Ford’s initiative from over 100 years ago.

Shocked, Spears turned to stone. Afraid of the possible effects, he was not sure what to say.

"OK, maybe Auburn might need to make another adjustment to get the press off their back again,” Spears said about the exception of students.

HARM AT THE HANDS OF A PAYCHECK

Stepping aside from the debate of student workers and university employee compensations, many are worried that raising the federal minimum wage is a double-edged sword, with the potential to cause a much larger wound.

According to the Bureau of Labor Statistics, “1.6 million workers, or 1.9% of all hourly paid, non-self-employed workers, earned wages at or below the federal minimum wage in 2019.” (https://usafacts.org/articles/minimum-wage-america-how-many-people-are-earning-725-hour/).

Earlier this year, President Joe Biden issued an executive order to raise the federal minimum wage to $15 an hour with plans to roll out in January 2022.

The Congressional Budget Office released a report that provided insight on the Democrat's $15 minimum wage proposal. The report was devastating. (https://www.cbo.gov/system/files/2021-02/56975-Minimum-Wage.pdf).

The CBO estimates the nation would lose 1.4 million jobs as a result, with a chance of reaching 2.7 million.

The national sky-high jump in wages would leave 500,000 more jobless than it would pull above the poverty line.

This argument is called ‘The Killing Jobs Argument,’ to which Vickers noted is "unfortunately strong and there is weight to the evidence."

If not monitored and treated with caution, wage expansions could become a loose cannon.

This argument begs the question, what will happen to all unskilled workers once companies cannot compensate them for their duties?

"If unskilled jobs can pay a higher minimum wage, you won't have an influx of people who want the unskilled job, but I do think you will have to start giving these simple service jobs more responsibilities because now the employer cannot afford to hire that second person," Spears explained.

Professor Vickers echoed Spears' statement explaining the need to maintain the hierarchy of wages. "A further increase of hourly wage is politically likely, but it is also historically unlikely too. Skilled jobs will see pay retention and salary increases. Unskilled jobs will not. Although it may seem a large number would rather pursue a less demanding job with the wage increase, it is a natural desire to want to climb the hierarchy and to keep it steep."

SKILLFUL HANDS

After the impacts of COVID-19, many workers across the country chose not to return to their jobs after increased unemployment benefits and stimulus checks.

To put it simply, Spears said unskilled workers will be forced to "step up or step aside."

Spears referred to Amazon brick-and-mortar stores as an example. These stores have what looks like no employees. Customers enter the store and pick up a barcode scanner and start shopping. They checkout using their card on file and just like that, shopping just got easier.

"Although the unskilled job of scanning items at the register may have just been "killed," there is someone skilled in monitoring those transactions, making sure the skews line up with the purchases," said Spears. "I don't see companies laying off the unskilled, but I see them training those to be skilled. If you are paying $15 for someone just to sit there, it is a terrible investment for any company."

According to the World Economic Forum, the Society for Human Resources noted that “By 2022, 54 percent of all employees will require significant upskilling, according to the World Economic Forum.” (https://www.shrm.org/hr-today/news/hr-magazine/summer2020/pages/upskilling-benefits-companies-and-employees.aspx)

"So, step up or step aside, become a more educated market. Trust me, I am not saying that it has to be a degree from a university," said Spears.

Although an institution believes in higher education, will Auburn start a revolution of training their low-skilled workers to step up, without the prerequisite of obtaining a degree?

Time will tell if Auburn not only believes in hard work, but if they follow a crucial and timely line of the creed, "I believe in education, which gives me the knowledge to work wisely and trains my mind and my hands to work skillfully."