By hiking the minimum wage at JPMorgan Chase, Jamie Dimon has earned his bank a reputational boost. Perhaps the best part is that it won't actually cost the bank much.
Dimon, JPMorgan's chairman and chief executive, said Tuesday the bank will raise its minimum wage for about 18,000 workers; it will increase from $10.15 an hour to as much as $16.50 per hour, depending on the workers' locations. (The federal minimum wage is $7.25.) The leading Democrat on the Senate Banking Committee, Sherrod Brown of Ohio, praised the move, saying that it is not only good for the workers, but good for the company's morale.
The largest bank by assets, JPMorgan employs about 182,000 workers in the U.S., according to its call reports. But the bank's overall employment numbers have been on the decline, dropping nearly 9% from mid-2013 through the end of the first quarter, according to data collected by BankRegData.com. Over the same time period its overall branch count fell 3% to 5,544, and salaries and benefits dropped 7% to$6.2 billion.
So the minimum-wage hike would add less than 1% to JPMorgan's labor costs, based on a rough estimate that assumes all the workers affected are full-time employees. Using the biggest raise JPMorgan will give, spread out over 18,000 employees for a full year, it equates to about $237.7 million. That's about 0.8% of JPMorgan's total labor costs of $29.8 billion in 2015.
It would be easy to write off the minimum wage hike as convenient at a time when tellers are seen as an endangered species and the future of the bank branch is hotly debated. But JPMorgan has also been something of an industry contrarian when it comes to branches and retail banking, where many tellers and other lower-paid employees work. JPMorgan has opened new branches in certain locales, even while closing them elsewhere. Other banks have taken a slash-and-burn approach to branch closings.
JPMorgan's corporate-wide thinking on the issue of branches has evolved in recent years. In 2014, Barry Sommers, JPMorgan's consumer bank CEO, said the company was moving "from a branch-build strategy to an optimization strategy." That meant automating retail offices with technology and reducing branch staffing levels.
But in February, Gordon Smith, head of JPMorgan's consumer-banking unit, said: "I'm often asked, 'Why don't we just accelerate closings?' The answer is, our customers want to go there — and when they don't we'll change the strategy." In some key cities, such as San Francisco and Miami, JPMorgan's branch count has actually grown. (Other banks have also expanded in big cities.)
That context helps explain why JPMorgan sees the pay hike as serving its financial interest. It will help the bank "attract and retain talented people in a competitive environment," Dimon wrote in a New York Times op-ed.
"We have never hesitated to invest aggressively if we thought it would improve our long-term prospects," he wrote.
Clearly, though, there was some PR element to broadcasting the decision at a time when income inequality has emerged as a national hot-button issue. JPMorgan stressed on Tuesday that lower-paid workers are in line for assistance that could lead to even-higher pay. JPMorgan will spend $200 million this year to train "thousands of entry-level employees in our consumer banking business," Dimon wrote.
The bank is "on pace to train" 30% more employees compared to last year, many of whom are tellers. The training has helped tellers get promotions to higher-paying jobs, Dimon said in the op-ed.
JPMorgan plans on funding the wage hike by implementing it over a three-year period, which will allow the bank to "plan for the additional expense," said Steve O'Halloran, a bank spokesman.
And as PR, it worked: Dimon's move was praised on Tuesday by a rival bank and by a labor advocacy group for bank workers.
"If there is one industry that can afford to give its workers an honest living wage, it's the banking industry," said Keith Mestrich, president and CEO of Amalgamated Bank in New York, which is majority owned by the Service Employees International Union.
Amalgamated last August raised its minimum wage to $15. The $3.9 billion-asset company also banks the Clinton presidential campaign, which has endorsed raising the federal minimum wage.
Additionally, the Committee for Better Banks said in an emailed statement that the increase is a "huge victory for the thousands of front-line bank workers who have been standing together for years to fight for fair pay."
Robert Barba and Kristin Broughton contributed to this article.