From the employer’s and HR leader’s perspectives, there were plenty of reasons to tune in to last night’s State of the Union Address—from minimum-wage issues and gender-pay equality to the announcement of a new savings bond designed to help working Americans start their own retirement savings.
For example, President Barack Obama announced an executive order that will require all federal contractors to raise their minimum wage to $10.10 per hour. He urged private employers to take similar action, pointing to organizations such as Costco as examples of large companies that had taken the initiative to raise pay rates to more than $10 an hour on their own.
President Obama also advocated the enactment of legislation that would increase the federal minimum wage to $10.10 per hour. “I am going to call this the 1010 Act,” he said, and urged Congress to pass the bill in 2014. “Let’s give America a raise,” added the president, to rousing applause.
While “the scope of the [aforementioned] executive order is unclear,” we should expect to see movement on the minimum-wage front in the days and months to come, even if it occurs first at the state level, says Connie Bertram, a Washington-based partner in the labor and employment department at Proskauer.
“I do think we’re going to see increases [in minimum wage] at the state level,” says Bertram, who is also head of the firm’s D.C. labor employment practice and co-head of Proskauer’s whistleblowing and retaliation, and government regulatory compliance and relations groups. “I doubt we’ll see across-the-board federal increases in the near future. But very often, when the federal government can’t take action, the states step in.”
Increasing pay rates and job opportunities was a recurring theme on Tuesday night, as President Obama announced a White House initiative geared at aiding the unemployed, and later this week will meet with a group of CEOs and business leaders in an effort to open up more opportunities for the long-term unemployed. And, as HRE Senior Editor Andrew R. McIlvaine writes today, the president also shared plans for improving the nation’s economy by connecting out-of-work individuals with skills-starved employers and strengthening the manufacturing sector.
Obama called on Congress to take action on other fronts as well, reiterating his call for passage of the Paycheck Fairness Act, which would strengthen the Equal Pay Act.
“As President Obama said, it’s time to leave ‘Mad Men’ attitudes and policies behind and adopt programs that allow people to hold jobs and care for their families,” said Debra L. Ness, president of the National Partnership for Women & Families, in a statement.
“We need Congress to advance the Paycheck Fairness Act, to finally reduce the punitive wage gap,” said Ness, adding that “we need a higher minimum wage, unemployment benefits we can count on and a real chance at retirement security.”
Indeed, retirement saving was on President Obama’s radar as well, as he offered details of a new retirement savings account—”myRA”—that he hopes will aid American workers in saving adequately for retirement.
“It’s a new savings bond that encourages folks to build a nest egg,” said President Obama. “MyRA guarantees a decent return with no risk of losing what you put in.”
The accounts, he explained, would be geared toward workers whose employers don’t offer traditional retirement accounts such as 401(k)s, and would essentially function like a Roth IRA, with government backing akin to that of a savings bond. As such, the balance of a myRA account could not go down, he said, with the investments having principal protection.
An initial pilot program will include companies that agree to enroll by the end of 2014, and workers making less than $191,000 annually will be able to invest, added President Obama.
The essential concept behind myRA accounts “has been around for a while,” says Lynn Dudley, senior vice president of retirement and international benefits policy with the Washington-based American Benefits Council, who likens the new myRA bond to R-bonds.
While more details on myRAs have yet to emerge, the accounts may prove to be an attractive option for many employers, especially those with large numbers of part-time or temporary workers, or employees who are in and out of the workforce, says Dudley.
“If a large employer is already offering a retirement plan, [it's] not going to eliminate that plan and send everyone to an [myRA] bond. [It's] going to keep [its] plan,” she says. “This is really targeted to people who aren’t already participating, or aren’t eligible to participate. It’s a select population, but it’s a growing one.
“And [such an account] is relatively easy to open up and offer through an employer,” adds Dudley. “It’s easy for HR to administer, and it’s portable for workers. The one drawback is that it’s an investment with a guaranteed rate of return, so it’s a conservative investment. But it’s a good idea.”