As controversy swirls around the notion of increasing the minimum wage to $15 – a topic that's bound to be a hot one during the presidential election – two credit unions are already ahead of the curve.

In October 2015, the $144 million St. Paul Federal Credit Union in St. Paul, Minn., began paying $15 an hour minimum wage for its non-exempt employees. And in June 2016, the $2.1 billion University of Wisconsin Credit Union in Madison, Wis., announced plans to increase its minimum hourly wage to $15 by September 2017.

CEOs at both credit unions said raising the minimum wage made good business sense for several reasons. But others warned minimum hourly hikes will only force businesses to reduce the number of employees they hire to control or reduce labor costs.

Although St. Paul FCU serves 10,594 members and a majority of them belong to a labor union, that wasn't the reason the cooperative decided to increase the minimum hourly rate.

“No. 1, we wanted to provide a living wage for our people,” St. Paul FCU President/CEO Thomas A. Glatt said. “They work hard. They do a good job for us. Our members are very happy with the service they get and we want to keep the people we have. No. 2, even though we are small, we want to attract the best employees that are out there with our previous $12 minimum hourly wage, we just couldn't do it.”

At $12 an hour, it was difficult to find qualified people who had previous financial services experience, had strong people skills and knew how to handle and manage cash, Glatt said. What also contributed to the problem was that the unemployment rate at St. Paul is about 3%, making the local labor market very competitive for employers.

In 2009, when the national and international financial crisis was still boiling, UWCU implemented a foundation wage, the name for the credit union's internal minimum wage.

“We've increased that over the years and we started looking at what we would do this year and realized that we were getting close to $15, so why not make the commitment to get there,” UWCU President/CEO Paul Kundert said. “One of the aspects of our credit union is that we really do try to differentiate ourselves in levels of member satisfaction. And we just believe having a very engaged workforce is critical to that.”

Kundert noted that in January, UWCU was the only credit union in Wisconsin that received top rankings in customer service, customer communication and fees from Consumer Reports magazine. UWCU received a score of 93 out of 100 from Consumer Reports readers.

He also noted the credit union has positioned itself as a member advocate. For example, in 2010, UWCU adjusted its overdraft policies, which substantially reduced its fee income.

“We're foregoing about $18 million a year on overdraft income,” he said. “And I think those changes like that have had a key motive effect over time of really boosting our member advocacy for us, and we just see a lot of organic growth as people talk about their experiences with us.”

UWCU's foundation wage will increase from its current $12.60 to $13.80 an hour in September 2016, and in September 2017, its foundation wage will jump to $15. That is double Wisconsin's minimum wage of $7.50 an hour.

“By the time it's fully in place in 2018, we're projecting it's going to add 0.6% to our operating expense budget overall,” Kundert said. “And that was something that was interesting to me when we were crunching the numbers. The incremental cost to our whole budget wasn't that significant. The reason for that is because we had a foundation wage for seven years. We're not starting at $7.50 and going to $15 an hour.”

The foundation wage, which affects about 25% of the credit union's more than 500 employees, is being phased in to ensure equity among the job groups that are similar in pay.

“We don't want to have the situation where people who have a couple of years of experience here are earning no more than those who just started,” he said.

UWCU's productivity and efficiency is also enabling it to provide employees with a higher minimum wage.

“For me, it's really about productivity and efficiency,” Kundert said. “We have a very strong performance culture here, and as an example, we added more than 60,000 checking account members in just the last five years, so that was an increase of about 55% while the number of our employees grew by just 29%, so that's an increase in productivity and efficiency.”

Productivity and efficiency is also helping St. Paul FCU provide its employees with a $15 an hour minimum wage.

“We actually make a profit from our operations,” Glatt said. “If we didn't make a single dime in noninterest income fees, we'd still be profitable. We have an ROAA of about 1.85%, so we're a highly profitable credit union.”

Glatt also said the $15 an hour wage has improved employee retention. Since increasing the minimum wage in September 2015, not one has left.

“From our standpoint, when you look at it economically, if I increased an employee's hourly wage from $12 to $15 that costs me $6,000 a year,” he explained. “But if I was paying someone $12 an hour and they left to land a job that paid 50 cents more an hour, it would cost me about $10,000 to $12,000 a year in turnover costs.”

What also helps retention is that St. Paul FCU pays 100% of health care insurance for employees, including for their spouses and children.

“Except for deductibles, our employees pay nothing,” Glatt said. “That and increasing to $15 an hour doesn't mean that we've got to cut back a person or two. We've got a really good staff and we want to keep them.”

But others argue the $15 minimum wage will do more harm to the labor market.

“A problem with a $15 minimum wage is that it will reduce the amount of part-time and more casual jobs available,” Alex Reichmann, CEO of the New York City-based iTest Cash, said. The company provides security and retail products to financial institutions.

“By having a minimum of $15 an hour, the job market will become a lot more competitive and many businesses will cut down on their labor to reduce their expenses,” he said. “This includes hiring less people and instead of having more workers, they will hire workers with stronger qualifications, creating more competition even for minimum wage work and making it harder for people without a reputable work history able to find a job.”

The nonpartisan Congressional Budget Office that researched the effects of raising the minimum wage from $7.25 to $10.10 found that total employment would be reduced by about 500,000 workers, or 0.3%.

“As with any such estimates, however, the actual losses could be smaller or larger; in CBO's assessment, there is about a two-thirds chance that the effect would be in the range between a very slight reduction in employment and a reduction in employment of one million workers,” the February 2014 CBO report noted.

Within the credit union industry, some do not think the $15 minimum wage is controversial, in part because many cooperatives are paying their minimum wage employees above the federal minimum wage.

“I do not think it's controversial. I actually think it's smart, and a way to get ahead of the market,” Ben Rogers, managing director of research at the Filene Research Institute in Madison, Wis. “Because of the trust and the skills required, even entry-level credit union jobs have usually hovered above the minimum wage. And as the needs of credit unions get more sophisticated and sales-oriented, progressive credit unions can attract a higher caliber candidate with a higher starting salary. And if they can garner local goodwill along the way, publicly announcing this commitment is a good thing.”

Rogers said he doesn't buy the argument that the $15 minimum wage will reduce the number of jobs in the industry.

“Those jobs are already going away, and it's not because of wages,” he said. “Online and mobile banking plus ATMs have been the biggest drivers pushing lower wage workers out of credit unions. Member-facing staff is still essential, obviously, but it's fewer of them at each branch. And those that are left are generally paid more because they have sales expectations in addition to their service expectations.”

Rogers continued, “As with so many things in credit unions, this will further expose the rift between growing and lagging credit unions. Employee costs already make up more than half of all noninterest expenses at credit unions. Growing organizations will find ways to make that higher wage pay in increased productivity. Lagging ones will not be able to keep up.”

Some states and cities have passed legislation that will gradually increase the minimum wage to $15 an hour over the next few years.

In California, for example, where the minimum wage is $10 an hour, it will increase to $15 an hour in 2022. In New York where the minimum wage is $9 an hour, it will jump to $15 an hour in 2018, according to the National Conferences of State Legislatures. More than a dozen big cities such as Seattle, San Francisco, Los Angeles, San Jose and Washington have also passed laws that hike the minimum wage to $15 an hour. More cities are expected to follow suit.