The tortured truth behind Wells Fargo's 'Trump tax cut' minimum wage raise

  • The partisan divide has already emerged over whether bonuses and wage increases announced this week are enough to prove tax cuts will benefit American workers.
  • Wells Fargo said it will raise its minimum wage to $15. But the bank stumbled in getting that message out, reversing itself twice on whether the tax cuts were the reason.
  • Those who really care about American workers won't see this evolving argument as blue or red. We need healthy skepticism to hold corporations accountable as a huge tax windfall awaits them.

Let's make one thing clear: It's hard to beat "Show me the money."

More money going to American workers in the form of bonuses and higher wages for the lowest-paid on the labor ladder are good things — minimum wage increases, in particular. Unlike the individual tax cuts that are set to expire in less than a decade and one-time bonuses, a wage increase is more money in the worker's pocket that's not going away.

Wells Fargo was among the corporations out this week to say it was raising its minimum wage to $15 due to the tax cuts. As the corporate PR blasts of worker generosity caught the world — and especially tax-cut critics — by surprise, one financial news site known for its skepticism tweeted, "It's raining trickle down."

People walk by a Wells Fargo bank branch on October 13, 2017 in New York City.
Spencer Platt | Getty Images
People walk by a Wells Fargo bank branch on October 13, 2017 in New York City.

A skeptic doesn't need to be a political partisan to wonder about the Wells Fargo claim that the tax cuts made all the difference.

In fact, Wells Fargo provided reason to doubt its intentions as it stumbled in getting the minimum wage message out. Just look at this Los Angeles Times story from Thursday: Wells Fargo's press department proceeded from a press release saying the tax cuts were the reason for the wage increase, to a spokesman saying it wasn't about the tax cuts, to Wells Fargo walking back those claims and saying the spokesman had misspoken, and after all, the minimum wage increase was a direct result of the tax cuts.

Still with me?

I think it's fair to say President Trump is someone who prefers to be given credit for more rather than humbly assume a lesser role as events unfold. Trump tweeted on Friday about the surprise of corporations doling out bonuses in response to the tax cuts. A little PR synchronicity between the White House and corporations on the passage of a permanent reduction to a 20 percent rate is understandable.

But there's another Trump tweet that was also in the news on Friday, though less covered, when a lawyer battling the appointment of Mick Mulvaney to head the Consumer Financial Protection Bureau argued in court that a recent tweet President Trump sent about Wells Fargo showed he was trying to exert undue influence over Mulvaney. Trump had tweeted on Dec. 8: "Fines and penalties against Wells Fargo Bank for their bad acts against their customers and others will not be dropped, as has incorrectly been reported, but will be pursued and, if anything, substantially increased. I will cut Regs but make penalties severe when caught cheating!"

That tweet had been sent in response to a Reuters report headlined "Wells Fargo sanctions are on ice under Trump." It alleged that Mulvaney might go easy on the bank rather than force it to pay tens of millions of dollars in fines for questionable mortgage fees, which Reuters reported the bank already had reached a tentative agreement to pay under former CFPB director Richard Cordray.

As the partisan divide emerges over whether tax cuts truly benefit the average worker, and blindsided Democrats try to count up the billions of dollars in share repurchases (a term most people who don't follow the stock market can't explain) to show where corporations will really spend their tax windfalls, debate is healthy.

Wells Fargo's troubled history shows why giving all the credit to the tax cuts can be a hard story to take. Corporations should be forced to work much harder than a press release to merit praise, and for a lot longer than just a day. Especially under a U.S. president with a penchant for inserting himself into battles with corporations in a very public way.

I ran some of my own questions about the bank's motivations by employment experts and a bank CEO. Here's what they told me.

1. If the tax cuts were the reason that Wells Fargo raised its minimum wage, that means the bank's management was able to read and absorb a 1,500-page document that only became available in the past few days and has multiple issues that can help or hurt banks within it, and reach a definitive conclusion to quickly raise wages across the country.

"There would be too many things moving around that affected banks for them to act this quickly," said Keith Mestrich, president and CEO of Amalgamated Bank, which raised its minimum wage to $15 in 2015. "I don't know any banks that know the impact ... It's a 1,500-page bill no one has read."

"These were plans in the works, and, again, it is great for workers, and that's a good headline," he said.

2. In fact, the plans were not only in the works but previously announced plans by Wells Fargo meant some minimum-wage workers were already receiving more than $15.

Early in 2017 the bank said it was raising its minimum wage to a range of $13.50 to $17. And there's a good reason some of the bank's lowest paid are already making $15 or more. Amalgamated Bank isn't the only one in the banking industry already ahead of Wells Fargo on wages. J.P. Morgan said more than a year ago that 90 percent of the employees affected by a new minimum wage policy would see an increase to between $13.50 and $16.50. Workers in major cities would see a minimum of $15, more in some cities. Bank of America raised its minimum to $15 in December 2016.

"There's no way this was just done as a result of the tax bill getting passed," Mestrich said. "I'm glad they are doing it, but the market for talent is tightening. We've been seeing a bit of wage demand across the board at all levels of banking, and I can't imagine we're the only bank."

Wells Fargo told CNBC on Friday that it had nothing to add beyond its press release issued on the afternoon of Dec. 20 after the tax reform bill passed, in which its CEO, Tim Sloan, stated: "We believe tax reform is good for our U.S. economy and are pleased to take these immediate steps to invest in our team members, communities, small businesses, and homeowners."

But others find an irony in the bank's "quick" response to the tax cuts.

"We're glad to see Wells Fargo ... following in the footsteps of companies like Amalgamated Bank and C1 Bank, which raised starting pay to $15 in 2015 without tying it to top-heavy tax cuts," said Alissa Barron-Menza, vice president of advocacy group Business for a Fair Minimum Wage.

The fact is that wages should be rising as the market for workers tightens. "Unemployment is low, and the labor market is tightening up, and entry level banking is competing with retail and even competes with fast food, whose workers are most vocal about $15," said Anastasia Christman, senior researcher at the National Employment Law Project.

3. The overall environment for banks is a good one, with interest rates likely to continue to rise, and that would have been a boon to bank profits regardless of tax cuts.

"Banks should do well next year and want to keep staff," Mestrich said. That's because the Federal Reserve has clearly indicated a continued desire to raise interest rates and most banks have "interest rate sensitive assets," meaning they will do well with rising rates.

Mestrich said the impact to Amalgamated financials was not substantial as a result of the $15 minimum wage and it will get even more modest with interest rates going up, as that creates an increase in the bank bottom line.

4. Many of the worker complaints related to the predatory sales and fake account allegations that still surround Wells Fargo attribute the pressures workers faced to wages that were so low it compelled them to take questionable steps to open more accounts.

"Wells Fargo has been fined hundreds of millions of dollars and is in danger of losing lots of public contracts [it has already lost some], and the critique was workers felt compelled to make sales quotas and hit high numbers in order to get incentive pay and bonuses because wages were so low," Christman said. "Wells Fargo has been dealing with that PR fallout since 2015, so the logical thing to do is to raise base pay. They have any number of challenges on wages."

That last point is really the most troubling in terms of the bank attributing the minimum wage increase to the tax cuts. I am willing to give Wells Fargo a partial benefit of the doubt. It had already announced the wage increase to a range of $13.50 to $17 — likely to deal with both labor market pressures and its scandals — back in January. Maybe the difference between $13.50 and $15 is the tax cut. But Christman said for a company under such intense scrutiny, being "better than the bottom of the previously announced range but worse than the top," may not be enough.

"It's important to acknowledge that a pay raise is a pay raise, and these workers have been struggling for a long time," Christman said. "And it's great when they see a raise, but it should be based on an index of cost of living, not mandated by a tax cut."

Loud partisan critics such as Sen. Chuck Schumer, D-N.Y., can scurry to add up all of Wells Fargo's recent stock buybacks — Wells Fargo returned close to $8 billion to shareholders in the second and third quarter of 2017 — as a way to show that it's only chump change going to the lowest rung of workers. But to Wells Fargo's credit, this wage increase is permanent, unlike the one-time $1,000 bonuses also being offered by some corporations in the wake of the tax bill's passage. And Fifth Third Bancorp, without any of Wells Fargo's baggage, announced both a minimum wage increase to $15 and a bonus plan this week.

As more corporations roll out bonuses — and let's hope more permanent wage increases as well — cutting through the tax cut talk is the only way to start getting a real picture of the American worker's fair shake. Given its recent history, instead of applauding Sloan and Wells Fargo's "immediate steps" to pay workers more, one has to ask: What took so long, and, if true, why were tax cuts the only way to motivate the bank to reach a minimum wage some of its own peers were already paying?