Few issues are as divisive as the debate over raising the mini- mum wage. The real question is not how much it goes up and when, but how can retailers
maximize the return?
First let us all agree that the federal
minimum of $7.25 an hour is an affront to
every American worker—with the possible exception of the U.S. Congress, one of
the few organizations where salaries go up
and productivity goes down.
The truth is that the
time for debating the pros
and cons of increasing the
minimum wage is long
past, considering actions
being taken by individual
states and major retailers. California and New
York are going to $15 an
hour over the next several
years. Chicago will reach
$13 by 2019 and efforts
to increase the minimum
wage throughout the
state and elsewhere are in the works.
Everyone thought the push by activists to $15 per hour was simply a bargaining chip to get to $10. In some respects
employers are still getting off cheap. If
the minimum wage had been adjusted for
inflation over the years, it would have hit
$10 per hour long ago, according to numbers crunchers. If it had grown at the same
rate as the cost of living it would be $16.
On the retail front, Walmart, whose labor
practices have come under constant criti-
cism for years, raised the minimum wage
to $10 an hour. Target, pressured by a com-
petitive job market, also went to $10—its
second increase in a year and probably not
Even Costco, one of the better paying
retail employers, is raising its hourly wage
rate to between $13 and $13.50, a $1.50
increase. I certainly hope this does not
put the $1.50 hot dog and soda combo at
the snack bar in jeopardy, but concessions
have to be made somewhere.
Under “normal” circumstances, retailers
make up for higher labor costs by cutting
hours. I am seeing this in every segment
of retailing despite studies showing that
this only breeds discontentment among
workers who lower their productivity as
a silent protest against what they see as
unjustified punishment. This is not the act
of a precocious teenager since 80 percent
of minimum wage workers are 20 or older
and more than half of them are women.
While Wall Street and some presidential
candidates may not agree, there are significant benefits to be gained from increased
wages—a reduction in employee turnover,
higher productivity and the old trickle
down theory under which higher wages
bumps up consumer demand for goods
In the final analysis, it is up to employ-
ers to motivate everyone, regardless of
what level the minimum wage reaches. As
we pull further from the recession some
employees will focus less on the size of a
paycheck and more on job security. This
is an opportunity for retailers to focus on
short-term bumps through “gainshar-
ing,” group-based pay-for-performance
programs that have been found to more
than offset the cost to employers. These
payouts are not an entitlement. They are
extras for a set period of time that require
reciprocity by employees.
Another method may be a surprise
increase or a gift. For instance, you might
have already increased wage rates, but
then you offer an extra 50-cents or $1 an
hour—something you might have done
anyway. People have a tendency to work
harder faced with this kind of altruism. In
fact, some studies have found that “gifted”
workers show 20 percent higher productivity than other groups.
Then, there are the non-monetary
incentives like simple respect, recognition,
flexible scheduling and autonomy rather
than trying to micro-manage every step
Sometimes it all comes down to retailers simply making better hiring decisions.
We have all seen the numbers that show
replacing good people is an expensive
proposition. When you do hire someone, it
is essential that they have the kind of personality you want representing your stores
and will fit into your culture, a good work
track record and, of course, be qualified to
do the job.
Retailing has always had a problem
attracting good people and providing
those that stay with a sustainable career
path. You may find that the increase in the
minimum wage and other incentives bring
better prospects into the fold—people
who might not otherwise have considered
jobs in retailing, thereby reducing recruitment and training costs.
MAXIMIZING MINIMUM WAGE
It is up to employers to motivate employees, no matter what minimum wage reaches.
By Len Lewis
Len Lewis is a regular Grocery
Headquarters columnist and
veteran industry journalist.