Maximizing Minimum Wage

Few issues are as divisive as the debate over raising the minimum 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 criticism for years, raised the minimum wage to $10 an hour. Target, pressured by a competitive job market, also went to $10—its second increase in a year and probably not the last. 

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 and services. 

In the final analysis, it is up to employers 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 “gainsharing,” 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 they take.

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.      


Full article can be found here.


Marks Take :


Issues revolve around raising minimum wage in that more responsibilities need to be placed amongst you get and greener employees.  Adjusting for inflation we are well behind when we should have hit the 10$ an hour mark so that being said raises the bar to basically any job starts at that.  Cutting costs means cutting hours.  But this may only breed discontentment amount workers that it also lowers their productivity.  This becomes a sort of quite protest being is the vast majority of this market are that of teenagers.  Significant gains are made when turnover is low and paying people on a pay-per-performance basis meaning reward your good and great workers.  Workers feeling compensated show 20 percent higher production rate when it comes to production work.  Simple respect and recognition along with a flexible schedule and autonomy rather than micro managing every step.  Replacing good people is an expensive proposition.  Finding workers to fit into your particular culture is not an easy task but one you need to be able to perform and excel in.