Higher wages good for business | Arkansas Blog

Sunday, January 5, 2014

Higher wages good for business

Posted By on Sun, Jan 5, 2014 at 12:34 PM

HIGHER PAY/BETTER RESULTS: Coscto pays its hourly workers far more than Walmart. They're unionized, too. But its stock performance routinely beats the Arkansas retailer.
  • HIGHER PAY/BETTER RESULTS: Coscto pays its hourly workers far more than Walmart. They're unionized, too. But its stock performance routinely beats the Arkansas retailer.
The Republican/business talk machine is already gearing up to oppose the initiative to increase Arkansas's tied-for-last minimum wage of $6.25 an hour. It'll kill business, they say, despite abundant evidence to the contrary. How else has Arkansas been an economic leader than through rock-bottom wages, a punishing workers comp law and anti-union legislation dating back decades?

A timely article on the topic appears in today's New York Times magazine. Adam Davidson writes about "TheGood Jobs Strategy," a book about making low-paid jobs more rewarding, a strategy that has benefits for employers.

The author, Zeynep Tom, makes sense.

Her central thesis is that many of those big-box retailers have been making a strategic error: Even the most coldhearted, money-hungry capitalists ought to realize that increasing their work force, and paying them and treating them better, will often yield happier customers, more engaged workers and — surprisingly — larger corporate profits. This sounds Pollyannaish, sure, but a study co-authored by Marshall Fisher, a Wharton professor who specializes in retail-management studies, backs it up. For every dollar of increased wages, one retailer that was studied by Fisher brought in $10 more in revenue. For more-understaffed stores in the study, the boost was as high as $28.

I wrote recently about similar work in fast-food, where a stable work force and a reduction in the need for constant training, more than pays for marginally higher wages.

Better-paid workers are happier, more helpful workers. This increases customer happiness — and sales.

More employees can ask customers questions about what they want to see more of and what they don’t like, and then they are empowered to change displays or order different stock to appeal to local tastes. (In big chains, these sorts of decisions are typically made in headquarters with little or no line-staff input.) Costco pays its workers about $21 an hour; Walmart is just about $13. Yet Costco’s stock performance has thoroughly walloped Walmart’s for a decade.

Davidson writes about the retail giant IKEA, which he'd fled for its poor service and impenetrability years ago. He made a return trip and found helpful employees at every turn. Plus the traditional low costs. What had happened? It had undergone workforce management changes inspired by Ton's work. More workers was part of the formula. Spending more to make more.

But let's not confuse anyone with facts. Cheaper is better. Just ask a Republican political candidate this year. How could they be wrong? Costco isn't in Arkansas is it?

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