As it did everyone, 2020 threw us off. Typical for January, we’re reflecting on where we were a year ago, and looking forward to an unwritten future. Last year at this time, we were welcoming our friend Ari Weinzweig from Zingerman's, who gave a talk at Heath San Francisco in early 2020. As he poignantly noted, when we spoke a few days ago, that was the last time he traveled outside his home state of Michigan.
How do we take what we've been through and allow it to inspire what’s to come? We began this roller coaster in survival mode. With time, we’re being bold again. It’s the boldness that’s critically important.
Between the pandemic and the summer’s social and racial unrest, 2020 put focus on our people and the many jobs at the heart of Heath. The economic impact that shuttered our factories and stores led to painful layoffs, which resulted in a smaller company. As we re-opened in the summer, our teams led our rebuilding efforts.
Following 2020’s Plan B, much of which involved adjusting on the fly, many leaders emerged from our factory floors, warehouse, showrooms, and kitchen tables. We learned new lessons about adaptability, and our team of teams brought us through the year in much better shape than we ever could have imagined.
The protests around racial justice got us thinking deeper about the company we are. Simultaneously, our employees were asking “What is Heath going to do?” One of the paradoxes of a year replete with uncertainty, is that it led us to commit to the Living Wage Initiative (LWI), the focus of this letter. This accomplishment has us proud, but by no means covers it all.
Actionable commitments are vitally important. Given the landscape, we understood it was time to seize change, and in this case, make things tangibly better in socio-economic equity, by ensuring our lowest paid employees had, at least, their basic financial needs met. In practical terms, a living wage is defined as one that covers food, housing, healthcare, education, and transportation, as well as some discretionary income.
The Living Wage Initiative is emblematic of hardships and silver linings, resilience and perseverance, and ultimately “Paying as much attention to our employees as we do our customers,” as we promised we would at the start of 2020.
We discovered parallels between pandemic injustice, jobs, and socio-economic inequity. Pay disparity builds on itself, bringing larger societal issues, like access to good schools, adequate housing, and basic banking services.
Pay disparity itself wasn’t a new topic for us. The diversity of jobs and people that make up a company like ours—that designs, makes, and sells—serves as a microcosm of society and what makes it so complicated. For 18 years, we’ve built a culture that recognizes these challenges enough and works to make the right decisions, even while competing to hire great people in the Bay Area. It’s no easy feat.
For there to be equity in manufacturing, we must commit to the true cost of making products, beyond a line item on a spreadsheet. By committing to higher pay for those at the lower end of our job scale, we lessen the pay disparity and socio-economic inequity that societal and market pressures tend to create.
The Living Wage Initiative meant raising our starting pay from $16 per hour to no less than $20 per hour, the average Bay Area Living Wage.* This impacted 28% of Heath’s employees.
Beyond the numbers themselves, we wanted to understand the growing pay disparity in the Bay Area, and wondered if anyone had shined a spotlight on this. It was surprisingly hard to find analysis on a topic that seemed fairly important and obvious, given the area’s continued tech-heavy economy.
We turned to old colleagues at the Oakland non-profit Inner City Advisors, who were able to take raw labor statistics and provide us with analysis for the questions we were asking. Here are some of those findings:
Between 1990 and 2014, middle-class blue collar jobs dropped by 11% of the total job market with comparable increases going to both higher paying jobs in new information industries (tech) and lower paying service jobs (think restaurant workers, baristas, cleaners, delivery services), to both support those industries and serve that growing group of high earners.
Disparity has also increased as a result of the mean pay for white-collar jobs growing faster than that of blue-collar jobs. In the 19 years between 2000 and 2019, the mean pay for office/managerial jobs grew 88% and that of “top executives” by 95%, while pay in manufacturing grew 65% and in retail by 61%. We don’t trust the “market” to correct this balance on its own. This new knowledge firmed up our commitment to take a proactive stance towards pay equity.
One of the biggest challenges we faced was how to pay for the Living Wage Initiative.
The money had to come from somewhere, and manufacturing is not a high-profit business. Our Finance Director, Roger, shined a light on equity in our benefits programs and, in particular, our 401K match program.
We’d always been proud of this as ostensibly a benefit for everyone. Upon a closer look at participation, it became very clear that this benefit—where the company matched up to 3.5% of an employee's contribution—was only benefiting the higher earners that could afford it. In essence, it was “free money” for those that had the extra funds to contribute, as opposed to those who needed every part of their paycheck to make ends meet. With that, we decided that the matching funds would be better spent towards pay equity, with smaller 401k contributions where all employees receive the same amount based on longevity.
Bold moves create momentum. Committing to a living wage minimum and canceling our 401K matching program affects nearly everyone at Heath. Forty-nine percent of our employees (primarily those in manufacturing, warehouse, and retail) would be seeing a pay increase, while most of our higher earners would be saying goodbye to the 401K matching benefit. We knew we had to discuss this plan with the entire company.
Over the course of several weeks, we spoke via video, due to COVID, with all 160 Heath employees. Meeting in groups of 4-8 people, we explained the reasons for the change, how it would work, and requested feedback.
Company-wide, enthusiasm was strong. We heard incredibly thoughtful comments, many from those we don’t hear from often. From start to finish, this change was truly a unifying experience. We’re so grateful to work with incredible people who recognized the importance of this initiative for the collective good.
The Living Wage Initiative rolled out in November 2020. The benefits have been immediate and profound. As a tangible step towards socio-economic equity and societal benefits, it’s brought our teams closer.
In many ways, the LWI is a response to the year we’ve experienced, where headlines loomed large, and we often felt too small to change them. That said, as we looked closer, within our own community, we found ways to take bold, meaningful steps forward.
One year ago, as we wrote this very letter, we laid out our path forward with confidence, and, it turns out, naiveté. We had no idea what we were in for; no one did. Today, as we write again, we’re humbled and proud. What we set out to accomplish has, in large part, been put into motion, despite the outrageous circumstances our world has weathered.