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(by Nathaniel Meyersohn, CNN Business) — Two years ago, Target said it would raise its minimum wage to $15 an hour by the end of 2020. The move won praise from labor advocates and put pressure on other companies to also move to $15.
But some store workers say the wage increases are not helping because their hours have been cut, making it difficult to keep their health insurance and in some cases to pay their bills.
CNN Business interviewed 23 current and former Target employees in recent months, including department managers, who say hours have been scaled back after Target increased starting wages. Many of these workers say the cuts, which come as Target’s business is in its strongest position in more than a decade, have hurt them financially. CNN Business agreed to withhold the last names of several of the current employees and the city where their store is located so they could speak freely.
“I got that dollar raise but I’m getting $200 less in my paycheck,” said one, Heather, who started in November at a Florida store working around 40 hours a week. She’s now below 20 some weeks, she said. “I have no idea how I’m going to pay rent or buy food.”
…Beyond just a drop in earnings that Target workers who spoke with CNN Business have experienced, employees who average fewer than 30 hours of work a week during the year aren’t eligible to qualify for health insurance benefits through the company….
“Target worked me hard from mid-July of 2018 to February 2019, right before my medical coverage was about to kick in,” said Caren Morales, a former Target employee in Diamond Bar, California. She was averaging around 35 to 40 hours a week, she said, and got a letter from the company in February with information about how to sign up for health insurance benefits.
“They cut my hours right then, and so I begged for hours and always went above and beyond.” She quit in May after her hours plummeted to as little as 15 a week. “I called in on May 1 and said, ‘I can’t come in today or ever again because I can’t afford my daughter’s daycare. You guys cut me really bad,'” Morales said.
A spokesperson for Target would not address specific employee records such as Morales’ but [admitted] that the store she worked at slightly decreased its payroll and workers’ hours from 2018 to 2019.
Michael, a veteran Target worker in Texas, told CNN Business he is “right at the cut off point currently” to qualify for health benefits.
He averages 20 to 30 hours a week, down from up to 40. He found a second job because his hours at Target fell. “I’m hoping going to Christmas will keep me at the average needed [for health insurance], but at this rate who knows?”
In response to this story, a spokesperson for Target said that existing staffers are working this year, on average, “approximately the same number of hours as they were last year” and the year prior and slightly more than they were three years ago. Target also said that the company’s mix of full-time and part-time workers has remained consistent over the past few years and the percentage of existing hourly workers eligible for health insurance has remained steady. However, Target declined to provide numbers for each of these points.
Target workers who say their hours have been cut have been given a variety of reasons why by their supervisors, including that there were not hours available or that their managers couldn’t fit additional hours in their budgets. Others said they received no explanation for why their hours fell.
In some cases, existing Target workers say their hours have been cut as their stores brought on new employees or their assignments changed.
Target has overhauled operations at its 1,850 US stores in recent years to create more specialized positions for staffers, who now often focus on a single department, instead of the entire store. Target also eliminated backroom shifts at some stores. Backroom teams used to unload boxes and make sure inventory was in stock, but Target moved some of those employees to the sales floor. The new model is known as “modernization.”
Target says it changed its operating procedures in an attempt to improve customer service, make stores capable of fulfilling online orders and improve productivity.
“We knew we couldn’t operate the stores anymore in the same fashion we had for the last 20, 30 years,” Target COO John Mulligan told CNN Business in an interview for this story. “We needed to change the way we operate in the store to create a better, more inviting experience for our guests.”
Target acknowledged that, as part of its store operations overhaul, it has shifted some payroll hours from the mornings and daytime hours to nights and weekends to match customer demand. That has impacted some workers’ schedules, Target said, although it said it has added millions of payroll hours in recent years.
However, several Target leaders in stores say workers’ hours at their stores are falling.
One former store director in Ohio who oversaw around 130 employees said hours dropped at the store in the past year for several reasons, including the introduction of self-checkout and elimination of backroom shifts.
“Older cashiers were used to getting 30-some hours and they were getting less and less,” the former store director said. “They really cut those hours back from them with the introduction of self-checkout.”
A department leader at a Target store in Oklahoma who spoke on the condition of anonymity said “we get fewer hours as a store.”
Target is cutting payroll hours in his store, despite sales growth at both his store and across the chain, he said. “Most of long-term team members have left,” he added.
“Some workers who had open availability were only getting four or six hours,” said Jack, a former department leader in Colorado. He said he had never seen hours drop that low for employees with open schedules prior to modernization.
Chelsey, a Target department leader in Washington state, said her department has been adding new employees, cutting into existing workers’ hours.
“Hours have been cut because I have to add more people,” she said.
Target has been adding workers to help it keep up with growth. It has hired more than 35,000 new workers over the last two years and has approximately 360,000 full-time, part-time and seasonal employees, according to its latest annual securities filing. Those numbers often fluctuate during the course of the year, a spokesperson for Target said.
“The company keeps hiring more and more people part time,” said Lee Beecher, a Target staffer in Santa Clarita, California, and a member of United for Respect, a workers’ advocacy group. Beecher, who has worked at Target for more than four years, said his average hours have dropped, leading him to look for other work. “I’m a loyal employee. I’m trying to pick up a second job for the hours I’m not getting at my current job,” he said.
Beecher’s hours are volatile, he said. He averaged 20 to 30 hours a week in the spring, but his hours have picked up recently in the run-up to the holidays. He expects them to drop again after the holiday rush fades. “They fluctuate a lot. It’s not fair.”
A spokesperson for Target said the overall payroll hours at Beecher’s store have increased more than 7% year-to-date. Target declined to say whether the average hours for employees at the store has increased this year.
Desire, a Target worker in Virginia, said she used to take home around $800 every two weeks from Target when she worked up to 40 hours a week. Today, after her hours were reduced, she’s making half that. “It’s frustrating because they hired four more people. We’re begging for hours.” …
Target has gradually increased wages since its 2017 announcement. Target raised its starting wage to $11 an hour in 2017 and then to $12 an hour last year. Target then bumped it to $13 an hour in June.
Yet if Target cuts back hours for some workers as it raises wages, “most workers aren’t getting any more of what they really need,” noted Heidi Shierholz, who was chief economist at the Labor Department during the Obama administration.
As Tony, a Target worker in Pennsylvania, told CNN Business, a higher hourly wage “really doesn’t help much when [I’m] only doing 20 to 30 hours a week.”
He used to average 37 to 40 hours a week when he started in 2017, he said, but he’s struggling to make ends meet on his current schedule. He has been buying most of his food at his local dollar store and asking his mom for help paying bills. Because he’s older, he worries he won’t be an attractive candidate for other jobs.
Other current and former employees say the cuts to hours have disrupted stores and hurt morale.
“I was working 38 hours and out of nowhere they just cut my hours to 22,” said Victor Hanousek, a former Target store worker in Bloomington, Minnesota. Hanousek said he worked at Target for a year, but quit in June because of the cuts.
A spokesperson for Target said that payroll hours at Hanousek’s store have increased more than 7% year-to-date. Target declined to say whether the average hours for employees at the store has increased this year.
“A lot of loyal team members have left because of the hours being cut drastically,” said Juan, a Target employee in Michigan. His hours dropped from around 30 a week for a year to 19 in June, he said. “There just aren’t any hours available for my department.”
1. a) When did Target announce it would raise its minimum wage to $15 an hour?
b) How did this announcement impact other businesses?
2. What was Target’s purpose in raising its minimum wage to such a high amount? (Note: the minimum wage in half the states is $7.25; a few states have no minimum wage)
3. How did Target’s minimum wage increase harm its hourly employees? Be specific.
4. How did Target respond to CNN’s questions about employees losing hours and therefore making less money than they had before the minimum wage was increased?
5. a) What reasons have Target supervisors given employees for why their hours have been cut?
b) From paragraph 13: “In some cases, existing Target workers say their hours have declined as their stores brought on new employees or their assignments changed.” What do you think these stores hired new employees when their current employees did not want their hours to be cut?
6. a) Consider what the former and current Target employees and managers told CNN about employee hours. How did Target respond when asked about the cut in hours for Lee Beecher in California and Victor Hanousek in Minnesota?
b) What do you think of the company’s response?
7. This is an example of supposedly good intentions resulting in unintended consequences. The CNN article also states: “Lawmakers are starting to respond to address erratic hours and volatile weekly pay for retail and service workers. Cities like San Francisco, New York, Seattle, Chicago and others are passing “fair workweek” legislation. In some cases, laws require businesses to offer their existing part-time workers more hours when they become available before hiring additional staff.”
What unintended consequences do you think will be the result of such government regulation?
8. What do you think is the purpose of a “minimum wage job” (cashier, stocker…) – Do you think minimum wage jobs are meant to be permanent full-time jobs that allow a person to support a family? Explain your answer.
9. Read and watch the commentaries under “Resources” below. What ideas do each present that you hadn’t considered? Explain your answer.
Advantages and Disadvantages of Minimum Wages
Minimum wage laws are designed to stamp out exploitation of workforces and ensure that a country’s working population does not fall below the poverty line. As the prices of goods rises, so too should the minimum wage.
However, critics point out that companies, not the government, should decide how much staff deserve to be paid. Among other things, they warn that a minimum wage does not always boost the spending power of a population and can instead lead to higher unemployment.
There is a high elasticity of demand for low-skilled labor. This means that a small change in the price for low-skilled labor tends to have a large effect on its demand. As a result, too high a minimum wage can lead to increasing unemployment among the low-skilled.
In modern times, the proliferation of improved technology also increases the rate of technical substitution for low-skilled labor. When the cost of labor increases, companies find it increasingly profitable to switch to labor-replacing technology, such as the decision made by Wendy’s Co. (WEN) in 2016 to introduce self-serve kiosks in response to higher minimum wage laws. (from Investopedia)
More from the CNN Business article above:
Target has said it plans to hire more than 130,000 temporary employees for the holidays, around an 8% increase from last year. Target picks up around a third of its revenue during the holiday stretch and needs additional help during peak season, according to the spokesperson.
Retailers often want to have a larger pool of part-time workers making the minimum wage, instead of a smaller group of full-time staffers with benefits and guaranteed hours, said Lonnie Golden, professor of economics and labor relations at Penn State University-Abington.
This strategy gives companies more flexibility to adjust workers’ schedules based on store demands and helps them labor costs, Golden said.
It’s often cheaper for retailers to employ part-time workers, rather than full-time employees, because health insurance costs are going up, because full-time workers get more paid time off and because, if there is extra work on short notice full-time workers would likely become eligible for overtime premium pay for additional hours they work above 40 a week, Golden said.
A spokesperson for Target said this was not the company’s strategy and stressed that Target’s mix of full-time and part-time workers has remained consistent over the past few years and the percentage of existing hourly workers eligible for health insurance has remained steady.
It’s not just Target:
Target isn’t the only retailer where some workers say their hours have declined.
Retail employees at “general merchandise stores” such as Target worked an average of 28.5 hours in August, compared with 30 hours a week in August of 2018, according to the most recent data from the Bureau of Labor Statistics. Close to 30% of America’s more than 15 million retail workers worked fewer than 35 hours a week last year, according to the Bureau of Labor Statistics. Nationally, 17% of workers work below 35 hours a week.
At Walmart, the nation’s largest private employer, around 40% of the workforce is part time. Walmart CEO Doug McMillon said recently that the company has been increasing its share of full-time positions.
Although part-time jobs can give workers flexibility, many part-time workers say they want more hours. 69% of part-time Walmart workers said they would prefer to work full-time, according to employees surveyed last year by two workers’ advocacy groups, the Center for Popular Democracy and United for Respect.
In the retail industry, there were 851,000 workers last year who were classified by the Bureau of Labor Statistics as “involuntary part-time workers”— that is, workers who want to work full-time but can’t either because their hours were cut back or they could not find a full-time job. The rate of involuntary part-time workers in the retail and service industries is well above that in the health care, construction, manufacturing and transportation sectors.
Lawmakers are starting to respond to address erratic hours and volatile weekly pay for retail and service workers.
Cities like San Francisco, New York, Seattle, Chicago and others are passing “fair workweek” legislation. In some cases, laws require businesses to offer their existing part-time workers more hours when they become available before hiring additional staff.
Read a commentary by economist Thomas Sowell: Minimum Wage Madness
Watch a video The Minimum Wage.
Watch an Oct. 15 KARE-TV news report:
Daily “Answers” emails are provided for Daily News Articles, Tuesday’s World Events and Friday’s News Quiz.