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Saturday, December 14, 2013

More On The Minimum Wage

Business (Fortune Section)
In all the sound and fury over the minimum wage, and the current boom in low-paying, dead-end jobs, nobody is questioning a crucial assumption: More investment in labor would have to come out of consumers' and shareholders' pockets.

Make that almost nobody. Zeynep Ton, who teaches business operations at MIT's Sloan School of Management, spent 10 years traveling the U.S. talking with workers and their supervisors in retail. She scrutinized the day-to-day details of how things get done (or don't) in the trenches at retailers like Wal-Mart (WMT), Costco (COST), Trader Joe's, and QuikTrip, and inside other employers including UPS (UPS), Toyota (TM), and Southwest Airlines (LUV).

The result is a forthcoming book, The Good Jobs Strategy: How the Smartest Companies Invest in Employees to Lower Costs and Boost Profits, that stands the conventional wisdom on its head. Ton makes a convincing case that better pay and benefits -- and giving workers a clear shot at career advancement -- yield higher customer satisfaction (including competitive prices and stellar service) and fatter shareholder returns.

This argument would be far less persuasive if it were built on mere theory, but the four-part strategy laid out in the book is drawn straight from what a few companies have quietly been doing for years.

Consider Costco. Ton writes that average pay for workers at the company is $20.89 an hour, more than 40% higher than pay at its closest competitor, Sam's Club (owned by Wal-Mart). Costco offers benefits to all employees who work more than 20 hours a week. Workers also see the chance to move up, since 98% of store managers, and many Costco executives, started out as stock clerks or cashiers. ...

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