Hospital Uses Executive Bonus Money to Give Its Workers a Raise

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This post first appeared in ThinkProgress.

In this Friday, June 8, 2012 photo, nurses walk under dimmed lighting during "quiet time" at the Newborn Family Unit at the Massachusetts General Hospital in Boston. (AP Photo/Elise Amendola)

(AP Photo/Elise Amendola)

Parkland Health & Hospital System in Dallas will raise its own minimum wage to $10.25 an hour next month, paying for the increase with money originally devoted to executive bonuses.

The lowest-level employees at the hospital currently make $8.78 an hour, and the increase will give about 230 workers a raise. Those workers were already making more than Texas’s minimum wage, which is the same as the federal $7.25 an hour rate. The move also means that every worker employed by Dallas county, inside and outside the hospital, will make more than $10.25 an hour.

The wage increase will cost the hospital about $350,000 a year. The expense will be covered with money from the upcoming quarter’s bonus pool for the hospital’s 60 vice presidents and top executives. That pool was between $750,000 and $1.2 million in the most recent quarter, and it’s between $3 million and $5 million for the full year.

Dr. Jim Dunn, the hospital’s executive vice president and chief talent officer, told Modern Healthcare that the decision was made in the hopes of improving workers’ morale and to provide a living wage. “We really want, in any way possible, to break down any gaps or anything between the top leaders and those who are closest to our patients,” he said. “We feel like it’s the right thing to do.”

Raising wages can help businesses’ bottom lines, as it can improve efficiency, make it easier to recruit workers and lower turnover. Losing employees to turnover is particularly expensive, as it can cost as much as 20 percent of a workers’ salary to replace an employee. Other companies have voluntarily raised their minimum wages lately, including the retailer Gap, which boosted its lowest pay to $10 an hour.

Funding a raise with executive compensation also makes sense, given the growing disconnect between pay at the top and the bottom. CEO pay is now 295.9 times the pay for their own workers, far higher than the 87.3-to-one ratio in the early 1990s. Average pay for a chief executive last year was $15.2 million, a 21.7 percent increase over 2010, while workers saw their pay fall by 1.3 percent in the same time. Corporate profits have also hit record highs as workers keep increasing their productivity, but they haven’t shared in that growth. If the minimum wage had kept up with rising productivity, it would be nearly $22 an hour, and if it had simply kept up with inflation since the 1960s it would be over $10 an hour.

President Obama and Congressional Democrats have pushed to raise the federal minimum wage to $10.10 an hour, but have been stymied by Republicans. In light of that inaction, some states have taken matters into their own hands, and three have passed a $10.10 minimum wage while Vermont put its at $10.50.

Bryce Covert is the economic policy editor for ThinkProgress and a contributor for The Nation. Follow her on Twitter at @brycecovert.
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