The American economy relies on workers who lack a college degree and earn less – sometimes much less – than it takes to be self-sufficient. Despite low unemployment, wages for workers have remained stagnant while costs for essentials like housing have risen significantly. While employees struggle, employers are concerned about high turnover and low employee engagement. A raise can help, but even a small raise can cost a low-wage worker thousands of dollars in lost government benefits. What’s the answer? A new searchable online database from the Cincinnati Women’s Foundation offers ideas for employers, as do resources from the Federal Reserve System.

Pandemic puts a spotlight on low-wage, hourly workers

As health officials urge social distancing measures such as working from home, millions of Americans are thrown into economic uncertainty because they earn so little and receive no benefits. According to the Brookings Institution, “In the United States, External Link53 million people must get by on low wages, with median hourly earnings of $10.22, about $18,000 a year. Some of the largest occupations employing these workers are also the most susceptible to the economic slowdown accompanying the virus’ spread: 5 million food service workers, 4.5 million retail clerks, and 2.5 million custodians and housekeepers. And many low-wage workers and those in sales and service industries External Linklack paid sick or vacation leave, which results in External Linkno earnings coming in at all.

While the proportion varies a bit by state, roughly half of all American jobs don’t require a college degree and pay below the national median wage, which was nearly $38,000 in 2017. About another quarter are jobs the Federal Reserve System considers “opportunity occupations,” jobs that don’t require a four-year degree and pay more than the national median (think RNs and LPNs, bookkeepers, truck drivers, police officers, retail supervisors). The final quarter are jobs that require a four-year degree and earn at or over the national median.

Workers today face stagnant wages, rising costs

While wages rose less than 4% between 2000 and 2016, U.S. per capita GDP climbed more than 16%, and major expenses such as housing, health care and college costs rose at least as fast. Benefits such as paid time off and health insurance can make a difference, but employers are less likely to provide them to U.S. workers than they once were. Lower-income workers today are much less likely to have these employment benefits than higher-wage earners, according to Maureen Conway, “Strategies to Advance Job Quality,” Investing in America's Workforce Volume 2.

High turnover encourages businesses to try new approach

Businesses have an incentive to improve life for their lower-wage employees. The Cincinnati Women’s Fund talked with business leaders, who said they struggle to attract, retain and engage their lower-wage workforce.” Turnover rates are as high as 53% in retail and 73% in the accommodations and food services industries, according to Liddy Romero in “Playing for Keeps: Strategies that benefit business and workers,” Investing in America’s Workforce Volume 2. Companies spend more than $2,000 in turnover costs per entry-level position.

New toolkit offers ideas to help lower-wage employees

The Cincinnati Women’s Fund looked for structural changes and programs that employers could put in place that could offset rising living costs without causing employees to tumble over the External Linkbenefits cliff, the rules that say if you earn even a little more than a certain amount, you lose government benefits. Doing so, they reasoned, would help employers attract, retain and engage low-wage workers. The Women’s Fund has been part of The Greater Cincinnati Foundation since its founding in 1995.

The Federal Reserve Bank of Cleveland invited the Women’s Fund to share its work at the June 2019 Policy Summit in Cincinnati. On Feb. 28, 2020, the fund announced its updated toolkit was live online. External LinkThe Employer Toolkit is a searchable database with nearly 60 workplace policies that can help businesses retain lower-wage workers.

Examples of policies that help businesses, employees

The following are samples of what is available in the Employer Toolkit.

Provide access to EITC/ tax prep consultants

Issue: Research indicates that the Earned Income Tax Credit is one of the most effective measures in improving a lower-income family’s economic security. But many low-wage employees are not aware that they are eligible or don’t know how to apply.

Possible Solution: Provide access to tax prep and EITC consultants on-site to ensure that low-wage employees are getting the most out of their tax returns. Employers can also direct employees to free tax prep services offered through the local United Way or other nonprofits.

Narrow the wage gap

Issue: The gender wage gap is present in every occupational sector and at every level of employment. In the United States, women are paid 82 cents for every dollar paid to men. People of color experience an even greater disparity. Here is the impact of the average wage gap over the course of an hour, week, month and year:

Average wage gap impact

Time Frame Wage Gap Accumulation Impact
One hour $4.26 A meal at a fast food restaurant
One week $170 Groceries for a family of four
One month $745 Rent or mortgage payment
One year $8,950 A used car or a year of child care

Possible Solution: Conduct an internal wage gap analysis to uncover inconsistencies in pay. Work to close wage gaps for individuals whose performance, education level, skill and length of tenure are similar to higher-paid individuals in the same role.

On-site Health Clinics

Issue: The high cost of health care can deter many employees from seeking preventive care, so doctor visits tend to be reserved for emergency situations, which are costly to an employer health care plan. Additionally, foregoing preventive care can perpetuate an unhealthy workforce.

Possible Solution: Consider partnering with your insurance provider or a local hospital to have on-site health clinics for employees. Many health-care providers offer mobile preventive care resources that employers can utilize for free. These health clinics provide screenings, health risk assessments, immunizations and other health services. If a health clinic is not an option for your organization, add a tele-doc option (where you can Skype with a physician or nurse to get a prescription for common ailments) to your health offerings.

Workforce development is central to Federal Reserve System

The Federal Reserve works to promote a strong U.S. economy. One of the External Linkthree goals that Congress set for the Fed is maximum sustainable employment. (The others are stable prices and moderate long-term interest rates.) To that end, the Federal Reserve has long had an interest in workforce development.

The Federal Reserve System launched the External LinkInvesting in America’s Workforce initiative to improve outcomes for workers and employees. One product of the initiative was a three-volume book, published in 2018, that offered research, best practices and resources from a range of respected sources on workforce development.

WorkLife Partnership offers ideas for overcoming barriers

Liddy Romero is one of those respected sources. She is executive director of WorkLife Partnership in Denver, Colorado, and a member of the Kansas City Fed Community Development Advisory Council. WorkLife Partnership is a nonprofit workforce development organization, with the mission to engage employers to invest in their frontline talent.

Romero shared some of what she learned in a chapter of Investing in America’s Workforce, Vol. 2, called “Playing for Keeps: Strategies that benefit business and workers.” Romero considered three talent challenges facing business – turnover, engagement and productivity – and offered solutions that are consistent with those in the Employer Toolkit. This is a sample.

Reduce turnover due to financial crises

To meet the challenge of employees experiencing unexpected financial crises that result in missed work, lost productivity or terminations … “Businesses can explore partnerships with credit unions to allow employees a one-time borrowing of up to $1,200 annually against their paycheck.” Connecting with the credit union means they can improve their credit scores as they pay back their loans.

Increase engagement by developing frontline workers

Businesses scoring in the top quarter for engagement had 41% less worker absenteeism, 70% fewer employee safety incidents and 21% higher productivity.

If employees become disengaged as a result of ineffective management practices, employers can provide a third-party career coach to work one-on-one with all employees to help them understand how to advance their careers in the company. Another resource is Upskill America’s “Upskilling playbook for Employers,” a tool for employers who want to do a better job of developing frontline workers.

Increase productivity by slack and cross-training

One of the most serious stressors that low-wage workers face is unpredictable shift schedules. Romero cites MIT researcher Zeynep Ton, who suggests businesses operate with slack and cross-train staff members. Cross-training creates flexibility, and operating with slack is necessary “because the costs of understaffing are steep, especially when looking at customer satisfaction and loyalty.”

Kansas City Fed offers additional resources for workers, employers

Steve Shepelwich is the senior community development advisor responsible for workforce development at the Kansas City Fed. “Improving the job quality of low-wage workers is central to the Kansas City Fed’s engagement in workforce development,” Shepelwich said. “Employers can make a difference in both their business and their employees’ lives by reimagining how lower-wage work is organized and valued.”

Putting Your Paycheck to Work

The Kansas City Fed developed fact sheets for employees to understand and make the most of their paychecks. The Fed also provided additional resources for employers that they could use to reinforce the information provided in the fact sheets. Materials are available in English and Spanish. And another set of resources for educators can be used with high school students and young adults to help them understand and manage their paychecks and income. The resources include a complete activities guide and materials.

The Workforce Development Web Page

The Kansas City Fed offers a webpage devoted to resources for employers and for banks wishing to meet CRA obligations by investing in workforce development.

For more information about workforce development, contact Steve Shepelwich at


Jennifer Wilding

Community Development Specialist

Jennifer Wilding, a community development specialist for the Kansas City Fed, provides communications, engagement, and research for the community development department.

Wilding e…