$20/Hr: The Impact of Big Bank Expansion on Community Banks
Bank of America announced today it is raising its minimum wage to $20/hr over the next several years, starting May 1 at $17/hr. Glassdoor reports the average base pay for bank tellers nationwide is the equivalent of just over $11/hr. Honestly, this is great news for the individual hard-working, front-line service teams at BofA. Frankly, it’s bad news for community banks.
One of the most desperate needs for banks primarily dependent upon brick and mortar (e.g. community banks without large technology budgets) is branch service staff. Bank of America’s move up the salary scale for this function can exacerbate a preexisting labor scarcity issue for brick and mortar banks, further challenging their ability to compete with mega-banks.
For as much as we want to believe that Bank of America truly wants to share its profits, which it very likely may, one collateral consequence is that they reduce the available labor pool for branch service staff. This is compounded by Bank of America’s branch omnipresence throughout every region. Both Bank of America and Chase have announced long-term branch expansion plans. They’re positioned to do this because they’re already leaders in digital and data, whereas most are still chasing. Mega-banks are far too smart for this to be a coincidence. This is likely part of a larger strategic plan that looks something like this:
(Increase Wages + Regional Expansion) x Best in Class UX = Attrition of Smaller Competitors and Accelerated Industry Consolidation
The response then from community banks are as follows: (1) Match the increase in pay scale, despite the fact that many already increased their pay scale after the Tax Cuts and Jobs Act of 2018; (2) Reduce their dependence on branch staff through further investments in technology, or reallocating of labor capital; (3) Slow branch expansion plans; and/or (4) Continue to find ways to re-envision the branch model such as Barclays is doing in the UK through shared “hubs.”
Again, this is great news for many hard-working folks. Overall, though, it can have the appearance of a larger strategic plan in a war of attrition.